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Building Durable e-commerce Brands

| August 22, 2014

The disintermediation of the traditional retail industry is no longer speculation, but reality. Fragmented supply chains are being disrupted as a result of emerging direct to consumer business models, which are thriving. Declines in brick and mortar retailers are likely the result of early-adopters turning to online counterparts, such as, True&Co, and StitchFix. Additionally, retailers have too many physical stores, with too much inventory, creating a dangerous degree of operating leverage. There is a reason why a full service mall hasn’t opened in America in more than four years. Legacy infrastructure is a serious impediment to retail progress.

The new winners among retail companies look to be direct to consumer brands being built online – yielding superior unit economics and controlling all aspects of the customer experience. These models allow brands to drive predictable margins with proprietary merchandise. Modern day e-commerce brands have shifted the competition from price to supply chain and customer experience.

In the world of e-commerce, customer experience is king. The winning companies in the industry are those creating a better shopping experience for consumers. Categories are being revealed that we have never seen before as a result: subscriptions based businesses, marketplaces, mobile commerce businesses, and vertically integrated brands, to name a few. All of this stems from a great online presence and the ability to capture consumers with a trusted, well-built brand. Each brand must tell a unique and valuable story in order to acquire consumers. Instead of immediately ramping marketing spend to acquire consumers like their offline counterparts in the past, modern e-commerce businesses look to build a brand around customer delight. Whether it is free shipping, fit or personalization, the opportunities to build the base of brand affinity are endless.

Here at Crosslink, we have been fortunate enough to be a part of this industry shift through our investments in Casper, Jack Erwin, and True&Co. These are each powerful, authentic brands that tell stories and truly capture customer affinity.

How will these brands evolve over time? The proliferation of Internet access via mobile devices has caused consumers seamless access to commerce. As appification proliferates, these brands need to be more aggressive in the mobile space. We believe that share of iPhone home screen will soon be synonymous with share of wallet. In order to be successful, brands will need to deliver a strong customer experience on mobile. The ubiquity of mobile devices will drive even more shopping in more instances and places.

We have seen hundreds of companies disrupt traditional commerce supply chains in the past few years, but the ones who will prove scalable and sustainable are those that completely capture the consumer through brand affinity.

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