Golden Times for Niche Brands?

Get to know the reasons why niche brands are small but great - and in extreme danger.

You know the David vs Goliath story. And all our sympathies are with…. Why? Because we are not Goliath. But on the other hand most of us put our faith in Goliaths hands: Amazon, Google etc. Strange? Maybe. But very human.

It changes when we are not talking „life“, but „life-style“.

The rule nowadays says: no David small enough to become the hero. And all the „Davids“ are poppin up. Food-Davids, Tech-Davids, Fashion-Davids, Equipment-Davids. They appear in travel, consumer goods, even in finance. And they are growing big – fast.

Mass-market brands are under attack

The previous rule has been: there are small brands – and there are big brands for the masses. Both of them not able to tackle each other. And not willingly as business models differ. That rule is dead.

Here are some of the observations where niche brands make life difficult for the big brands.

a)  A specific „old“ market segment starts to raise by new demand.

  • Look at all the new baby boomers of around 2014. The big difference: parents are not 25 but rather 35. Well educated, sophisticated and with a demand in terms of product and brand (organic, cool, ….). All the established winners of typical market growth situations don’t win anymore. Even worse: they loose. German #1 baby food brand Alete does not gain a dime. Their revenue is not even half compared to baby boomer generation around 1970s.

And guess what: the new organic baby-food-brands have conquered the office desks of mum and dad as well!

  • Example #2: the bike brands. The market is growing. Again and for good. Daily commuting by bike has become a premium statement. And getting on the road bike at the weekends is a must for the new generation of top executives. And for the old generation as well. Who is the winner? Giant, Trek, Kalkhoff,  Kettler, Löffler, …? They are called Schindelhauer, Canyon, Rapha, Everve. Providing  premium products with premium style AND with a statement: I don’t belong to the old establishment. I dont care about established market rules.

b) A new market within an established market.

  • Wanting a credit? Don’t choose your bank for it. Rather go for smava, check24 etc. The entire fintec/finsurance market is one of the best examples.
  • Wanting a pizza? You know the answers: Lieferando, foodora and so on – not pizza hut and call a pizza.

c) An „new“ market that formerly has been a sub-market of established markets.

  • Look at all the brands dedicated to woman. Are they part of an old market or do we observe a new market? I rather vote for new market. Because the buying group has changed. Women don’t depend on others money anymore. And the perceive themselves as woman in a different way their mothers did. One could endlessly write about that. I don’t do it here.

Why is that possible?

  • Finance. Todays small brands are able to pick up investment money in a way that did not exist some years ago.
  • Sales channels. You can easily work around all the offline channels that are controlled by the Goliaths. Just do it yourself. Online. And reach the globe as a market if you like. Now!
  • Distribution channels. Imagine all the new brands without DHL, UPS or their own fleet.
  • Communication channels. Forget about the ads in TV or magazines. With all your funding money you can have that as well (and yes, the new ons are amongst the biggest spenders.) You know the answers: all the social-media.
  • Last but not least fundamental shifts in attitudes and behaviour of Consumers. On one hand there is that „fight for individuality“ we want to win. On the other hand we are used to the new world of shopping, advertising, instagramm etc  – players who still don’t play by these rules will be dead soon. But there is something more to that:

Consumers are actively seeking for something meaningful. It is not just about the product: it is about something with a good story to enrich their own story. Something with the keyword purpose.

  • Purpose. I would call it the ultimate key to survival. It may not be the reason for early market success but definitely it is the reason for sustainable growth. And it is the overarching factor of differentiation. It always has been – and it always will be. Because people seek for a connection to a greater idea. Why does the church still exist? For about 2000 years? How many brands on the globe can say that? All of those who define purpose as THE key aspect. Find out more about key elements of purpose branding.

The big risks for niche brands.

  • Live fast, die fast. Did you know that in a city like Berlin about 140+ startups per day create a new business? Let’s say: try to. As quickly as people can love you – they can turn their back on you for another alternative. Find a way to keep them with you. And I am not talking all the subscription models. (Do you know how many „Netflix-style“ subsciptions you own?)

Some of the new players don’t manage to establish a loyal user base! All the more demanding, because customer loyalty is becoming increasingly fragile today.

  • Omni-Competition. It’s not David versus Goliath. It is David versus David versus Goliath versus David versus Goliath versus ………………. On a global scale.
  • Omni-Communication-Overload. Well, some wish the world of brand communication would still be limited to TV and magazines. The new world is everywhere around you and in your pocket and in your hands as well.
  • Slow shark. Well, old brands are not sleeping. They can easily imitate you, copy you and kill you. Because they might have something you don’t have. A name everybody knows and a home everybody might return to. Most of the new brands are very good with products. But they are not good with growth. And the long tail of service and support thats required to keep customers happy.

Final question:

Are the Davids about to win? Yes. But to win sometimes you have to become the next Goliath. Funny? Not at all.

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