A hundred years ago, consumer products were a symbol of democratization – everyday items became available in large quantities at an affordable price as people didn’t need to make their own soap, sew their clothes or knead their bread.
Convenience and the new-found joy in being able to buy things without making them led people to believe slogans like “the best canned tomato soup” and buy it in scores. It worked in those early consumerism days before society started to change faster than products on the market.
People now realize “best” doesn’t mean anything when the soup makes you sick. That whatever the marketing massage of a clothing brand is, if it doesn’t fit your style, it’s not worth your money. That if the shampoo doesn’t help your hair, you are not buying it again.
Innovations in all aspects of life make us realize there is certainly a way to create better hygiene products, better food, better clothing and so on.
And so when traditional consumer product companies don’t keep up with current trends, new players take the stage to fill the gap. Confidence in conventional brands is on the decline as people realize the power to vote with their wallets.
New and smaller companies have the flexibility big corporations lack to offer small-batch products and cater to very specific niches. They are created to provide new alternatives for concrete customer groups, for which conventional products don’t do the job.
The consumer product market is seeing greater and greater fragmentation because blanket solutions don’t work when we all have different needs and requirements for our food, cosmetics, clothing, hobby gear, etc.
The modern consumers want functional products that express their personality and values – and that’s something that cannot be produced by the billions.
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That’s how niche brands appealing to customers with specific needs and wants come to thrive.
Most of them are digitally native or also called direct-to-consumer because that’s the easiest way to reach narrow segments of dispersed customers.
Here are the top reasons for the success of DTC brands:
Niche products are created for niche customers. They literally have no other option but to communicate closely with that handful of people because building a viable business with a limited customer base is hard.
These brands cannot appeal to the mass market so every customer is hyper valuable and needs to be truly nurtured to stay for as long as possible.
More on this: If your product is not niche, change it now
The ultra successful natural deodorant brand Native attributes its exponential growth to its constant communication with customers and involving them in the product development.
The brand established a feedback loop to get customer opinion on every small iteration they made in the formula of the product until it was perfect. Customers obviously loved it since half of all sales weer coming from repeat buyers when Procter & Gamble bought the brand for $100 million in cash in 2017.
Here’s how they did it: The Native success story
Now that people have realized the products they need can be invented, they are not easily satisfied with mass available options. More and more specific use cases emerge and the future belongs to companies that take notice and provide working solutions.
New products finally solve serious problems for people previously disadvantaged – like Zanderm, a heavy-duty concealing makeup brand that literally gives new life to people with vitiligo.
Often modern brands are created by people trying to solve a problem they personally have. That gives them first-hand understanding of the need and deeper connection to the target audience that’s easier called community than customer base.
Catalina Crunch, for example, is a low-carb breakfast cereal that came to existence because founder Krishna Kaliannan couldn’t find a tasty and suitable cereal after being diagnosed with diabetes. And EasyBaby Travelers was born out of Danielle Dalgin’s wish to put her baby’s things in order so she created a system of organization accessories for diaper bags.
Such brands limit themselves to selling one thing but develop it to really live up to expectations.
Niche brands don’t try to be everything for everybody. They concentrate on solving the problem for their ideal customers and try to do it well. They are not spreading themselves thin in segments they cannot cater to.
When going in business to serve a particular customer segment, a brand inevitably has to know what it’s talking about. Otherwise, it just sounds flat and that small target group is alienated – because they very well know what they want to hear.
Your brand needs to be transparent and authentic, true to the values you share with your customers. This is a sharp contrast to traditional corporations that have robbed things like company mission, vision, values and corporate responsibility of meaning in the eyes of the public.
Grrrl is one such brand that goes against all conventions in workout and women’s apparel branding and states boldly:
So we will fight to break the cycle of competition, smash the fake realities of photoshop, break down the realities of discrimination, kick open the doors that exclude women on the grounds of color, beliefs, body type, ability or sexuality and provide an environment for women to realise their potential and help the world move into a new age.
They have a innovative approach to sizing where the customer compares her measurements to those of the Grrrl athletes (not models) and picks the one that represents her body type and size for the piece of clothing she’s buying. This way the brand doesn’t discriminate on sizes and customers feel included.
Grrrl is a perfect example of a niche brand with very narrow appeal, but the raving support of its customers shows that when you hit the right nerve, people can be crazy loyal.
As if the fragmentation and democratization of the market is not enough, ever smaller niches are popping up and finding their customers. It seems like one product category gets almost personalized to penetrate even where it did not exist before.
Take X-gamer for example, which sells performance supplements for gamers, a segment that surely none of the big pharmaceutical companies intend to cover. Or Pure Pet Food that offers raw, dehydrated quality food for cats and dogs. Bet that is a niche incumbents ruled out as unprofitable.
The power of those brands is that they come as saviors to their target market and are able to push all traditional and non-specialised options out of the way because when the need is there, the market is ready.
It is expected that a small niche will eventually be exhausted, meaning all potential customers are reached and as many as possible are converted and retained.
The first step is adding products to your range to give existing customers more reasons to shop and draw the last ones standing who haven’t bought your flagship products for some reason. Native, mentioned before, introduced toothpaste and body wash since customers already love and use regularly their deodorant.
Since widening the niche to appeal to a bigger market goes against the very idea of a niche brand, the way to expand is to launch a new brand with a different target, products, etc. This is what Bonobos did, incubating a women’s line, Ayr, under their wing.
Giant H&M Group’s strategy is also based on nine separate brands for very different customer groups. With this move, the company shows understanding of the modern consumer and adaptability many other incumbents have not been able to match.
Metrilo‘s CEO Murry Ivanoff estimates that the future successful consumer companies will be very niche and making about $10 million in sales.
“$10 million means the brand has 100,000 customers who spend $100. That’s not a lot at all and with proper retention strategies, easily achievable. Our customers selling food items, sports gear, cosmetics or clothing use customer insights and data-driven engagement to boost their customer lifetime value and repurchase rates so I am confident more DTC brands will turn profitable and successful,” says Ivanoff.
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