Years ago, Kevin Plank, the storied founder of UnderArmour, spoke to us about the minimum amount of time it takes to build a brand. It made sense. Intuitively, building a brand, a company recognizable by a large number of consumers, must take time. People need to be exposed to the product or service multiple times and in multiple settings in order to create strong (and hopefully positive) associations. We saw this to be true when we built our liquor brand, VEEV. Until recently, we thought Kevin's rule held true. However, a lot has changed in a short time and we believe that the game is changing: there is clear evidence suggesting the time it takes to build a brand has been dramatically reduced.
As Mary Meeker pointed out in her 2016 Internet Trends Report, it took Nike 14 years to reach $100M in sales, LuLulemon 9 and UnderArmour 8. At the time, these brands were seen as some of the fastest most cutting edge consumer brands around. While these brands have stood the test of time, in the last few years, we've seen tech-enabled consumer brands like ClassPass, Dollar Shave Club, Casper and Honest Company reach the same heights ($100M in sales) in less than 3 years! So, what are the forces driving this? We think there are six main factors fueling the rapid scaling of consumer brands and we see these factors as a flywheel, compounding and fueling an accelerating cycle.
Most of us now have personal computers in our pockets
What we used to call "smart phones" are now just phones (i.e. the norm) and it's easy to take for granted the extent to which these little computers have worked their way into most moments of our waking (and now sleeping) lives.
We use these personal computers to purchase a growing number of goods and services
For the purposes of this post, the notable fact is not just that we have smartphones, but that we are shopping on them at ever-increasing rates. People are purchasing goods and services both on mobile-enabled websites and even more, within apps. We believe this trend is in only its nascent stages as text-based e-commerce just begins to take shape.
We share what we buy on social channels
As important as buying on our mobile phones is the culture that Millennials have led the charge developing, sharing. While the "sharing economy" often refers more to peer-to-peer platforms, there is no doubt that social media provides a medium for people to express the goods and services they like and those they don't. Brands have taken advantage of this cultural habit and we now regularly see growth hacks where brands offer everything from discounts to cash when we share a product or service with people in our network. If you haven't noticed, brands are speaking less to consumers and more through consumers.
Tools are available to market in an increasingly targeted way
In the old days, billboards and previews dominated our concept of advertising. Today, with the huge amount of data being collected about us, brands are increasingly marketing to very specific groups of people. Platforms like Facebook, SnapChat and Instagram are a brand's dream, as they provide ample information to literally know what a given individual 'likes'.
(Online) traffic is cheap
Cheap is of course relative, but to consider that mom and pop brands can now reasonably afford to advertise to specific consumers is a massive change in the marketing world and for larger, well-capitalized brands, this means they can afford to go national or international at a fraction of the historical cost and in much less time.
Abundant capital is available
Fueling the fire, there is more capital available for venture growth than any time in history. Angels, corporates, and individuals (through crowdfunding) have joined the venture capital game and the abundance of capital has made it common practice for brands to grow at significant operating losses in order to scale faster and acquire market share (though not always advisable!). The capital available to be deployed into the previous 5 steps completes the virtuous cycle that is leading to brands scaling much faster than any previous precedent.
It's clear that technology, changing consumer behaviors, and new sources of capital are driving a revolution in brand building. There is a temptation to take this information and think that building a brand today is easier than it has been in the past. We actually believe that these forces, by breaking down the traditional barriers to entry and scaling, are making the world much more competitive as an increasing number of brands compete for our limited attention and share of wallet. Certainly, the brands we mentioned above that are scaling at previously unprecedented rates like ClassPass and Honest Company are not doing so as a simple result of these factors. Rather, these are the companies recognizing the changing market conditions and the resulting opportunities. Most importantly, these companies are showing us what's possible when you strategically and forcefully execute on the new opportunities available to emerging brands. These brands are leveraging the aforementioned forces to separate themselves from the pack at a time when the difference between "good" and "best" is growing, something we talked about in our last post.
There's still plenty to learn from Kevin Plank who was one of our earliest mentors. Though one thing is clear, the game is changing and those that adapt fastest will win.