What do we mean by eCommerce Brand? A brand is a company that produces content and products for a specific community of people. Brands create value for their community through their products. eCommerce to us means DTC on our own websites. Sure, we sell on multiple channels but our focus is on direct customer relationships.
To understand our thesis around our target market today it helps to travel back in time to post WWII America. As the US emerged as the leading world power our economy surged with the ensuing baby boom. This period of time gave rise to American consumerism and is the basis upon which the eCommerce industry of today is built. In the 1950s and 60s consumers discovered new products and brands through print, radio, and TV advertising. They went to local retailers to buy these products and those retailers evolved from main street mom and pop stores into super markets, shopping malls, and department stores.
The internet has changed this framework completely. The attention of consumers today is not on ABC, NBC, and The New York Times. It is on Facebook, Google, and TikTok. Instead of heading to the grocery store or mall we open the Amazon app or check reviews on YouTube. This paradigm shift unlocks our Micro Brand Thesis. This belief is simple. Consumers used to buy products from a few large brands in a few defined channels. Today we buy products from many smaller brands in many new and evolving channels. Habits around product discovery, selection, purchasing, and even delivery are evolving rapidly.
Let’s use socks as an easy example. Today’s consumer doesn’t want to drive to WalMart to buy the same hanes socks that their grandparents wore. Today’s consumer wants their sock brand. Maybe the brand has a charitable cause, maybe the socks are made from a special fabric, maybe they fit differently or come in new colors. It doesn’t matter why a consumer falls in love with this new sock brand. What is important is that this is even possible. 20 years ago it wasn’t. Today we have Stance, Bombas, Happy Feet, and dozens more.
The target market for 365 Holdings are businesses that fit our Micro Brand Thesis. In today’s world these companies have some common characteristics:
- eCommerce - can a brand that fits our thesis sell in a big box store or on Amazon? Sure, but, the primary channel for the brands of the future is always the DTC channel where the brand owns the customer relationship directly.
- Brand - by definition these Micro Brands are in fact brands. Actual humans type the name of the company into a web browser to find the company. When a friend asks them what they buy in a given product category the name of the company is their answer. The products the brand sells are differentiated from commodities.
- Attention - customers want to hear from the brand directly and give it their attention. Sure social networks and email apps and search engines support the communication but they are just the plumbing. The attention of the consumer is held by the brand itself, not by a middle man.
To further refine the universe of companies that are a good fit for 365 there are a few criteria that we look for in a good fit:
- Market Based Company - there are only two types of companies: companies built around a product and companies built around a market of customers. We want companies with easily identifiable target markets and customer avatars. The key to a market based company is a group of consumers experiencing shared common experiences. Product based companies may have customer avatars and they may have unique selling propositions for their products but what they lack are marketing hooks. Marketing hooks are the demographics and psychographics of end customers that can be turned into persuasive storytelling and selling messages based on the needs, wants, goals, desires, and fears of those end customers.
- Economic Moat and Durable Competitive Advantage - these concepts were popularized by Warren Buffett and harken back to his training as a value investor under Ben Graham. While the concepts are similar they are distinct. A durable competitive advantage means a business has an edge over it’s competitors. Over time this edge, if maintained and not competed away, becomes an economic moat that protects the business long term. The best way to know if a business has either is to ask yourself “why does this business deserve to exist?” Additional frameworks that help answer this question include SWOT, the Business Model Canvas, and Porter’s Five Forces model. We want companies with clear Economic Moats that are easily identified because of obvious Durable Competitive Advantages.
- DTC eCommerce and Direct Response - Many successful brands have been built using third party distribution such as a big box retail or marketplaces like Amazon.com. Likewise many successful brands execute large brand awareness campaigns. Neither of these approaches are our focus. We believe in owning the customer relationship through direct marketing and fulfillment on our own channels. We also feel that the more things change in marketing the more that they stay the same. Some of the best principles and techniques used in advertising today are largely unchanged from the direct response marketing practices used 100 years ago.
- Owning Revenue Generation and Product Development - We want to control our own destiny. This means we have to own revenue generation and product development in house. Both of these activities keep us focused on our end customer. We need to understand them, what they want, their goals, their fears, their problems, and their dreams. Only through this understanding can we drive innovation with new products and grow our business by better serving our customers with more solutions that meet their needs.
Influences: Web Smith at 2PM, Ezra Firestone and Molly Pittman at SmartMarketer, Perry Belcher at Olympus Peak Media, Gary Vaynerchuk at VaynerMedia