The “micro brand” is the new embodiment of commerce.
The Consumer Goods market is getting barbell shaped with the 1 ends representing SELECTION and VALUE.
At one end, 1000s of niche, customer-facing, highly innovative and culturally relevant micro-brands command a premium price for their products and control the lion’s share of product profits
At the other end of the spectrum, large institutional players aggregate economies of scale in home-grown private label, vertical brands that produce 1000,000s of products at very low COGs and sell direct to consumer for razor-thin margins to entice customers to shop their proprietary selection of niche brands.
The VALUE barbell is ever-present — AMAZON, GAP, H&M, UNIQLO, ZARA, FOREVER21, GROUPON GOODS are all examples of such marketplaces that produce large volumes of basic products that are utilitarian — tank tops, phone chargers, etc. These products act as entry points, gateways if you will to more niche, selection-driven, consumer brands that are where all the profits are locked in.
However, the SELECTION barbell competes and wins against the VALUE barbell every day. These “micro brands” are the profitable future of consumer goods commerce — Their buying behavior is quite unique and is something we wish to target as the growth of the industry depends on the diversification of brand portfolios to suit the highly demanding consumer.
These microbrands have one or more unique attributes:
- Unique Insight / Approach to product or audience.
- Unique design / aesthetic / function in product
- Unique audience / reach to distribute product.
- Unique materials / technical insight / advantage to product.
- Unique business model / distribution.
- Unique value — economic, utility, personal.
These micro brands are run / started with a design / product / go-to-market focus. Usually this focus arises from:
- A Gap in current products in the Market observed from personal experience / past experience / emerging trends.
- A lack of availability in current market.
- An opening in a product space due to the exit of a large player.
- A unique problem that needs a product to solve.
- A lower barrier to entry to either raising funds (crowdfunding)
- Consumer Demand that doesn’t fit the economics for a larger player (too niche)
Driven by a design / marketing / product focus, these Micro brands are run by small-ish teams to begin with — usually 3 or less.
Often the initial gestation time for the first product to be launched is between 3–18 months. Often it can be more as the founder struggles to either validate their thesis, procure the product for a cost-effective price, develop the product successfully or has to learn a lot of technical details before the product can be created.
The team can be supplemented by outsourced web developers, graphic designers and sometimes salespeople as well. Core functions like sourcing, manufacturing, and product development are often overlooked when creating the company.
Founders in micro brands often undergo a steep learning curve detailed here as they first discover the need, then evaluate the need and finally have to validate the need.
Micro Brands are also established by personalities who have built up proprietary audiences — Influencers, Celebrities, and Entertainers who want to monetize their reach by selling physical products. Licensing, and Advertising are soon reaching their sell-by saturation date as sources of income.
Most Micro Brands buying and sourcing behavior is mostly similar. SKU creation and expansion Characteristics include:
- Month 0–8: Hero products starting with 1–3 SKUs as test projects.
- Month 8–14: Expansion of Hero products on successful launch into 8–12 SKUs.
- Month 14–24: Addition of other categories / products by end of Year 1 after launch, doubling SKU count to 25–30.
- Month 24–36: Increase in Revenue, Sales and Demand coupled with Financial growth leads to adding more products and categories — often leads to exponential increases in SKU counts to 100–150.
- Month 36: Doubling / Tripling of SKU counts every year.
Usually the average qty per SKU also goes up over time — size wise, color wise, and product wise.
Micro Brands can exist Independently, under Agency Umbrellas (Influencers, Celebrities, Talent Agencies, License Deals, Entertainment Studios), and are now increasingly being created in Enterprises that ran large monolithic brands — Forever21, Zara, H&M, Gap, etc.
These brands source between $100k and $15M of product annually and can carry revenues of $350k to $50M annually.
To power their supply chains, these Microbrands are looking for some combination of:
- Expertise / Knowledge / Education on where, when, how and why to source and manufacture product.
- Trust, Visibility and Transparency on Sourcing Product.
- Hands-on management and Concierge-level service for the first 8–12 months.
- Ability to understand, research and plan strategies, tactics and products.
- Evaluation, Validation and Vetting of Vendors, Partners and managing risk.
- Communications, Transaction management for a fixed low cost.
- Automation and ability to scale into lower cost structures over time with volume increases.
- Data Analysis, Safety and Compliance with standard Security guidelines.
These Micro Brands are often the ANTITHESIS of low-margin, high-burn Consumer Brands since they’ve been built either online or offline through word of mouth, efficient marketing, and strong customer experiences.
This leads to great unit economics. Often Micro Brands are wildly profitable — 60%+ GM, have a strong demand because they employ LTO / FOMO type sale events / “drops” and usually cannot keep up with consumer demand due to their uniqueness. The brands are distributed online and offline and are increasingly omni channel and use Facebook, Instagram, Twitter and other social media channels to boost their reach and sales.