Maureen Mullen - The Innovation Class

[Music] I'm just jumping in so I'm going to summarize some key themes for stuff I think if one thing has come through bigger is no longer better now there's I think one major exception to the rule and the number one kind of most talked about platform kind of over the course of the last day and a half of obviously been Amazon but a really weird thing is happening and everybody's kind of talked about it on technology the big guys get bigger everybody else is struggling more than they ever have and there's a couple of industries I know represented in the room that are you know in unregulated monopolies or what-have-you but for the most part everyone's getting getting kind of bitten on the heels by a lot of these littler brands you also see this move to kind of the death of brand and this is actually a new site that recently launched called the brand list which i think is very indicative of what's happening kind of overall in the consumer economy everything is priced at $3 and everything is generic that's said when you look at the fonts on the site the white background even the packaging there's still a sense of identity that kind of carries through all of these products but I think you're going to see more and more brand is no longer in particularly big trusted brands are no longer kind of the lens by which we make decisions and then have talked a lot about cheap capital and I think probably the single biggest challenge that traditional organizations face and a number of our speakers have talked about it is the fact that you guys still have to make money everything would be a lot more fun if you could play the game of some of the smaller brands and just fight for top-line growth or if you had kind of D access to capital as we've talked about extensively around Amazon now what we would like to point out you know it feels like sort of the future belongs to the bold and that startups are taking over the world I would argue right now there's more indications in the marketplace around how difficult it is to be starting a company and particularly if you're not a Facebook a Google or an Amazon in today's economy than it is showing kind of the you know the the great pastures and the bright sunlight so here's just four examples with Nasty Gal Birchbox blue apron and One Kings Lane all kind of darlings back in the day that were seen to kind of disrupt industries many of them either going bankrupt being sold for pennies on the dollar and for the most part you know the sad thing here is there's been a ton of sweat equity put into these companies and the majority of employees are just not making any money so you do see I think a cap on the growth and we're going to talk a little bit about that kind of over the course of the next several minutes so just to kind of understand some of the the pieces of disruption um we would argue disruption happens throughout the entire supply chain so you look at consumer demand the supply chain itself so how you actually bring products to market awareness and marketing and then distribution going to talk a little bit about how companies have kind of exploited these various areas so let's start first with consumer demand the most most companies that are capitalizing on consumer demand are capitalizing on one big Delta the fact that prices have increased at a rate faster than inflation for all of the cool things Netflix has done around personalization and original content the reason the business is as successful as it is today is because cable prices got absolutely out of whack without any underlying innovation and Netflix kind of really kind of smelled blood in the water we would argue Warby Parker in licensing from luxury eyeglasses same exact thing Dollar Shave with Gillette which we'll talk about a little bit more adore me in the underwear space taking on an incredibly concentrated industry in this case Victoria's Secret and able to undercut from a pricing perspective by about five to ten dollars on the average kind of bra or panties if you are in an industry that's concentrated if you are in an industry where the primary value driver for your brand is by raising prices you should be very concerned about a new economy company coming in and disrupting you easier access to kind of supply or what we say excess capacity and this is you know if you look at the underlying dynamics of uber and airbnb kind of the sharing economy effectively effectively you have latent supply homes when people traveled cars when people weren't using them that were exploited if you look at a business like Birchbox came in there's all these samples that beauty companies wanted to get in the hands of new consumers Birchbox was able to kind of look at that excess supply and build a business model slow speed to market so this is more on the weakness side we've obviously seen huge disruption on the fashion side of the business and I would argue the biggest disruption in beauty husband because brands have come in with much faster supply chains when we look at awareness and marketing obviously companies that have been overwhelmingly dependent on traditional forms of media we would argue are at risk of new entrants because you now have a cohort of consumers we simply cannot be reached using traditional television I think Red Bull is a fantastic example of this you look at coke you look at Pepsi totally different platforms Red Bull came in they kind of built a media empire and were extraordinarily successful and then you have a lot of new brands that has effectively exploited new customer acquisition strategies if you're talking about Kylie cosmetics and kind of the power of celebrity with social media we look at a brand like ASOS who's just incredible at search and we would argue that these these brands who are kind of forward looking at shifts in the marketplace are able to come in and build pretty big businesses relatively fast at a very low cost of capital and then we look at some of the new channels so obviously we've talked a lot about Indies and Amazon you see a brand like art Naturals who's grown extraordinarily for our every art natural there's about ten others that kind of follow in there they're awake in every single industry Tesla is about a lot of kind of new go to market model as much as it is around product innovation and then you also see a number of brands that have basically taking advantage of the fact that retail distribution is pretty shitty so if you look at Apple and kind of where they where they distributed their products fifteen years ago versus kind of the temples to the brand they've built today Lululemon is arguably an attack on kind of footlocker in the entire wholesale distribution within the athletic wear complex Sephora kind of took on the fact that the department store model was out of date and then you look at Casper and kind of the experience of buying a mattress in a traditional furniture store furniture store absolutely terrible and when you look at this chart what's interesting is we get through almost every one of the top consumer company disruptor disruptors with actually out getting to that top box which is around serving unmet needs the majority of these companies are innovating around a product a service that's already in the market and just exploiting where there's kind of excess capability now we do have a handful of these we'd argued TripAdvisor some of the brands we've kind of within the natural space which not exactly serving new needs but kind of serving them in a different way and then businesses like rework who are changing who are taking advantage of kind of some of the changing demographic concepts around how we work so what we want to kind of focus on today is what can you learn from these disruptors because there's something that you can replicate but a lot of things that you can the first we would argue is kind of the need for speed and we would say underlying kind of the most successful companies in today's today's era it's absolutely speed from a go-to-market standpoint so when we look at that it actually plays out from a social media standpoint some of you may have seen this slide in the social media briefing that we did yesterday this is looking specifically at Instagram interactions of some of the new fast fashion guides that have entered kind of the multi-brand retail space versus traditional department stores and you see brands that are 10 years old like revolve ASOS and even have shorter lives like a boohoo or a misguided but in many cases have about 10 times the number of interactions that you see from kind of the historic department store brands which is absolutely kind of I think a forward-looking indicator around where these consumers are going for inspiration from a shopping standpoint what's even scarier is when a lot of those brands with short supply chains add a Buy Now button to their Instagram posts engagements skyrocket when traditional department store brands add a Buy It Now typically their engagement is about five to ten times off what their average engagement is on a post what you've seen is kind of their ability to exploit supply chain their ability to create scarcity value around their products has effectively allowed them to exploit new channels from a distribution standpoint and social media which hasn't worked for most traditional retail organizations works brilliantly for businesses when you know that the inventory is always shifting over search we talked a little bit about this with ASOS this is looking specifically at organic search visibility in the apparel space ASOS has a team of content folks that are all about designing product detailed pages that effectively are more visible than anyone else within the fashion industry now this is not easy to do but if you think about the size of a CSS business here in the US its PC tiny the fact that they have higher visibility than Amazon is a huge competitive advantage and what's even more striking is they're actually able to extend that across market so they've been able to take a centralized content engine extends that content in those editorial stories that fit on their product detail pages and they're good pages and effectively drive a sustainable competitive advantage in every single market that they operate social so it's a lot of debate around social media but we would argue that every time a platform comes into popularity and you see a shift in the way that consumers are interacting with social media and other media platforms a few or a handful of brands take a disproportionate benefit here we're looking at the haircare space which very much kind of follows what's happened in color cosmetics and you see brands like olaplex Pravana Y that have disproportionately seeing Instagram interactions taking advantage of trends taking advantage of kind of this visual medium and driving huge kind of growth for their businesses and you see Instagram I think as a whole is becoming almost a brand equity measure around how much you have to advertise and it's disproportionate if you have huge Instagram interactions you're effectively a brand that doesn't need to rely on the traditional advertising industrial complex and not surprisingly the biggest brands oftentimes under index switching gears I know we spend a lot of time talking about beauty which can be a little bit alienating to some of our male members so we decided to get even further down and talk about the feminine Kerastase which has actually seen a lot of innovation this kind of Pink's underwear for your period as well as Lola which is a start up kind of in the feminine care space that has app free and natural products that are free of dyes similarly to what we see in really sort of high engagement categories like Beauty like fashion you see in a very low engagement category but heavily online research category and think about the feminine care space the number one time to kind of capture consumer value is when women are between the ages of 12 and 15 and Instagram is kind of a great place to capture those guys the folks that are winning on Instagram are these startups that have new products and very visual marketing and just like the video guys are leveraging influencers so are able to kind of use influencers to build out their audiences and this in this sense a little bit different than you know some of the beauty influencers more micro influencers in the lifestyle space but nonetheless on no reliance on traditional advertising even when we look at Alexa you see speed to market favors the independent players so here we're looking at two very different industries household cleaning the kind of low engagement category very much dominated by the big guys Indies with 16 percent share of Alexa preferred products and then we switch to beauty and these have 62 percent share and in skincare and overwhelming 75 percent what these independent brands have been able to do is they take big focused bets on new platforms that are in transition and in a lot of cases that first mover advantage is paying off it also a lot of the inherent nature of their products the fact that they're new that they're different but they're oftentimes kind of very much branded with the Millennial or Gen Z consumer in mind helps I think lend to their success on social but also on a platform like Alexa which is interesting you know Amazon's algorithm is actually starting to look more and more like instagrams in the sense that it's very much prioritizing new and different kind of within the market this one seems basic kind of what can you learn from some of these innovators but I think it's a it's you know we all think about our consumers and our marketing every single day what's shifted in the digital economy is traditionally the way we got insights on our consumers as we go out and we do a survey or a focus group and consumers would tell us what they wanted or tell us what they were you know the behaviors that they were acting on in the digital economy we don't need to ask consumers they're really voting with their browser and I think what you see from a lot of independent players is rather than doing kind of a ton of focus groups and traditional consumer research they're looking at search behavior they're looking at click behavior and they're looking at where there are gaps in the marketplace and I think a great example of that this is looking specifically at growth in the Beauty category and you can see this is just two ingredients retinoid and marula oil up substantially so this is actually a behavior that we see really crossed category consumers are getting much more sophisticated as these platforms like Amazon kind of push their behavior further and further into search their searches are getting longer and they're getting more specific and in beauty kind of one brand that's taking advantage of that has been Canadian brand to be ordinary and so the ordinary is going to mark it with retinol retinyl and other active ingredients products that are oftentimes selling for a third to half as much as we see from kind of traditional both drugstore and luxury players you can see how they're optimizing kind of their pages for search so very similar to the brand list example that we saw kind of up front very lightly branded a ton of this language kind of makes most most marketers kind of cringe a little bit but you can see on those products detailed pages on their advanced retinoid 2% product they mentioned the word retinoid 17 times in retinol 16 you can say well a for effort but what you see what's happening kind of with the ordinary site 79% of the top search terms that are driving to their site are ingredient based terms and using those ingredients base terms they're actually able to drive more traffic than a lay more traffic than Kiehl's in about traffic on parity with Clinique so huge organic traffic they've also gotten a ton of PR and earned media kind of across the ecosystem and have been extraordinarily successful here compare that to those three brands so this is looking at the split of the top 100 search terms driving to a lake lanique and keels you see heavily branded so when the consumer knows they want a life they're going to end up on the site when they know they want Clinique three steps they're going to end up on Clinique but then it becomes incredibly dependent on driving top of the funnel awareness using traditional media or kind of supplementing that with a ton of paid advertising and in the case of Clinique and keels still heavily branded to kind of compete head-to-head with a lot of retail distribution from a DTC perspective Olay a little bit more forward-looking in their strategy a lot of the top paid terms that are driving to their site are more problem solution oriented or more unbranded so they are capturing some of that top of the funnel with search but this is about significantly more expensive than kind of how the ordinary has branded their products you see that even more accelerated on Amazon and a lot of these indie players are taking advantage of gaps in the marketplace and we'll talk about that in a moment and they even their packaging kind of screams ingredients brand is uh current to the active ingredient that's kind of in their product and you can see again kind of similar to the ordinary from merchandising perspective packing in all of those words that really cater to how consumers search to really again target some of those holes within the marketplace this is not a new strategy if we look at the haircare space one of the biggest disruptors of the last ten years has been a company called those international with their brand o GX and this is a drugstore brand kind of through and through good very little traditional marketing in the form of TV or print really exploited trade based strategies around getting outside shelf space for ingredient based products and you know Walgreens Duane Reade Rite Aid what-have-you and many of you probably know but this company recently sold for 3.3 billion to Vogue internationals sorry to J&J excuse me a different reality so there's different industry shop in different ways and when you look at pet food very similar to baby care we're obviously we're all very loyal to our pets much more highly branded activities so when you look at search behavior both on Google and Amazon about 80% of searches are actually have some brand or brand modification so naturally this kind of tells you where to play now one player to e.com is absolutely kind of capital sizing on the market they're one of the few retailers that's been able to outbid Amazon in a core high penetration ecommerce category you see their organic visibility on the x-axis there are paid visibility on the y-axis and what's super smart about chewy strategy you can see them right here is they also exploit second-order search so the number one site on this chart for organic visibility is dog food advisor not surprisingly when you switch to the non branded side that's very expensive to optimize for dog food advisor is absolutely off the charts and how chewy was able to really piggyback off of that high visibility for an editorial site is all of the dog food reviews that fit on dog food revise it advisor actually click through to an affiliate link to purchase that product on to e.com so rather than purchasing a ton of those non branded keywords they actually exploit the natural editorial destination that's non branded for that consumer and get that second-order search visibility and many of you know kind of chewy was just recently one of the largest e-commerce acquisitions in history the value of focus and kind of clear identity and I think one of the things that we see time and time again from independent players is they are get good because they have no other choice they don't have kind of the ability to spend on television they don't have the ability to purchase ads in vogue they don't have the ability to necessarily go to market at Walmart or at Macy's so they have to be focused in terms of the punches that they can pick what they also are very good at and this is kind of I think one of the scariest pieces is building brands and I think everybody can all kind of shout out who are going to talk about right now because you see a kind of a pair of dark rimmed eyeglasses and we all instantly know that this is Warby Parker and ignore me Parker is a really good example one is if you look at kind of the wave of consumer companies that were started in 2008 2009 2010 kind of on the axes a recession you always see a ton of companies that start during a recession because frankly people don't have jobs and they need something to do but a lot of these companies have kind of lost their way because they've entered these segments they've entered new categories they've tried to be something that they're not and I think one of the smartest things that we're V Parker has done we haven't seen them despite the fact that Mickey Drexler's on their board and all indications otherwise expand into lifestyle categories and clothing and luggage and all sorts of you know brand extensions that they naturally could I'm also phenomenal creative and you see that you disproportionately a lot of these guys that make it they find a clear niche and then they over invest in kind of the look in the field and overwhelmingly its internal this is their annual report that dates back to 2012 but something that they do every year and I think just a sense of how they think about branding both internally to their employees externally to investors into the marketplace and then also more broadly to consumers and there's no one that could run a balance sheet and say that the investment in this creative made any sense but it's gotten more kind of goodwill across the entire ecosystem then then anyone would ever expect anastasiya we can't leave an l2 event without talking about anastasiya I feel like I spent the last two years kind of breaking apart anastasiya and everyone Beauty companies in particular always want to know just tell me how Anastasia is organized and we've done a lot of research on this and frankly it's just not that interesting but this is looking at their digital marketing team and not to take anything away from these folks because they have done a phenomenal job but Tom Cooley who runs their entire digital marketing and e-commerce operation before he was at Anasazi I ran an events business in LA there's nothing to suggest that he was going to be any more successful than anyone else and you can see this is his huge team of five that kind of support him and their senior director of marketing the majority of these people graduated from college after 2014 and most have been hired in the last 12 months so when you look specifically at kind of what has been the secret sauce of a lot of these companies success I would argue it's been much more culture than it has been organization but it's also and you see kind of similar to the Warby Parker example disproportionately investing in a lot of the creative and the content to kind of build brands they have a bigger video department at honest Asya than they do e-commerce department I mean here and which makes sense because they're in LA tons of freelance talent that's coming in that shooting influencers that's doing post-production and this is kind of just a handful of those folks when you've kind of scour LinkedIn for folks that work at honest Asya the vast majority of them are makeup artists and sales people the executive team is only kind of five people strong although they are kind of as they've grown invested kind of in more executive talent gross businesses need growth channels we say this all the time it's kind of one of those moments but I think nonetheless you still see people kind of pushing rocks up a hard place and really trying to grill market share or grow the top-line when you're really kind of distributing through channels that are in structural decline the other thing that we see really starting to impact the ecosystem is when brands or groups of brands draw a hard line decisions around where they're going to distribute and where they're not it actually oftentimes creates an opening for a whole new set of players to enter the marketplace so let's look at kind of the difference in visibility and this is late 2016 visibility on Macy's and Sephora so the top brands from a visibility standpoint on Macy's Clinique mac lancome Estee Lauder a lot of the usual suspects when you switch to Sephora not surprisingly you see a ton of LVMH brands so Sephora collection benefit make up forevers but then you see a lot of the Indies that we talk about all the time tart Urban Decay Too Faced Anastasia the interesting thing is when you start to break this down the average age of a brand on Macy's 42.6 years in the top ten on Sephora that's twenty two point seven but the two oldest brands in the top ten on Sephora benefit and makeup forever both brands that actually LVMH acquired in 1999 after they took the Sephora business to the US if you look at what happened with Sephora this is looking at those top ten brands all of these brands were born kind of in the mid to late 90s NARS was founded in nineteen ninety-four Urban Decay there are minerals in 95 Smashbox in 96 anastasiya most people don't know it's actually almost twenty years old now two-faced founded in 1998 Tarte in 1999 and then we see the two acquisitions effectively what happened when Sephora entered the US market this was not a certainty at any point LVMH nearly pulled out of this investment several times in the early 2000s but by with Estee Lauder saying we're not going to distribute an L'Oreal kind of slowly treading the waters because it was an LVMH property it opened up a gateway for a retail space to build and incubate this whole host of of smaller brands and what you see today the majority of the businesses that are on this slide are now doing over 500 million in sales and it's really kind of Sephora and these brands have kind of grown up together now the scary thing is is Amazon is doing the exact same thing to the beauty industry you have a whole host of people saying we're not going to distribute an Amazon is absolutely similar to what Sephora did it in the late 90s saying we're going to play the long game on luxury beauty we love the high margin we love the low ship to weight ratios and frankly we don't really care if it's a whole host of brands that nobody knows if they're buying products on our platform we're going to continue to make the investment this is looking what happens when you search for Lancome serum and you see brands like art Naturals Rada beauty and a whole host of others that are advertising using headline search ads and using a lot of Amazon media group buys specifically on these terms and what you see popping up in beauty today particularly in skincare but we see the same thing to a lesser extent happening happening in color cosmetics is that basically the fact that again you know brand thing we're not going there has entered kind of opened up an entire ecosystem for a new round of entrance and you can see a handful of these brands that are just growing extraordinarily we don't have the 500 million dollar businesses yet but a lot of these businesses are safely somewhere between 50 to 150 million borrows from the best as you saw in a lot of kind of the disrupter scenarios the majority of brands that are great innovators aren't creating completely new ideas they're extending ideas that are already in the marketplace and one of our favorites here if we look at kind of the screen shot this instantly kind of calls to mind uber I think if you look at this like well it's orange it's not kind of that weird turquoise that they use but otherwise this looks exactly like you're ordering kind of a car on uber what this platform actually is this is a program by tide where they're exploiting excess capacity in laundromats and now have basically a mate which doesn't seem that weird for us here in New York but a tap to order laundry delivery service sponsored by the tide brand in Chicago where you can order you can click have your laundry picked up and within eight hours actually have your laundry returned cleaned folded you can do dry cleaning like all with tied products all tied branded pretty much putting P&G into the services industry of cleaning clothes versus the detergent industry of consumers kind of buying a package good which we think is a great kind of extension but there is times also when you shouldn't just copy and I think what we see in a lot of instances is when big incumbents are kind of start to get nipped at by some of these by some of these ankle-biters the natural reaction is to try to kind of pound them down by doing exactly what those little brands are doing and I'm going to give you a couple of examples so we just kind of had it'd be a on the back unfortunately Gillette is sort of the the perennial whipping boy today but I think this case study is interesting and has residents beyond kind of the shave care category so this is looking specifically at the demand from June 2014 to November 2015 for the term shave club and I think most people in the audience know this is kind of a heyday when Dollar Shave had introduced kind of their presence on the marketplace we're starting to scale harry's had entered and he saw a host of little guys as well so not surprisingly you see consumer search demand going from about six point six thousand searches in June of 2014 up almost kind of fivefold to twenty seven point one by November 2015 through a pretty healthy increase in demand now what happened to search term prices over that same time they went from 16 cents in June 2014 to 2553 and November of 2015 so absolutely exploded and the scary thing that happened was that the the number one branch that caused them to explode was Gillette saying you know we need to take these these innovators kind of head-on so naturally what Gillette did is they launched a shave Club it advertised behind a lot of these shave club terms really aggressive actually got a lot of kudos in the marketplace including from us in terms of kind of the competitive response on to a lot of the investments that they made and on first blush this looks brilliant if you see kind of the search volume for Gillette razor Club it only gets 880 searches as of November of 2015 on Google people just don't think of Gillette as any part of a club or subscription program shave club got about 27 point 1 as we just saw so 31 times the number of searches of Gillette razor Club the scary thing is is that while Gillette razor clubs got 880 searches shaves clubs got 27 point 1 Gillette only the Gillette brand term only got about thirty three point one and Dollar Shave Club got 450,000 searches so effectively Gillette was going after this PC tiny piece of the market and willing to just play extraordinarily to wipe Dollar Shave out but they weren't actually going at the core of the problem which was that at that point Dollar Shave had created such extraordinary kind of brand recognition that they were willing to kind of feed that shave club term or invest ridiculously because all their VCS cared about was kind of top-line growth but they had already sort of become the player in the marketplace when somebody wanted a subscription program many of you have seen this slide on dollar shades had made the transition at this point from low-cost customer acquisition to ridiculously high-priced television and actually outspent Gillette in 2015 on television by almost 12 million dollars I'm in action this actually included kind of an ad in the Superbowl today you see that that's reversed a bit Dollar Shave continues to spend kind of Post Unilever acquisition and will spend about 43 million from March 2016 to March 2017 hairy's also spending on television and Gillette as many of you have heard is actually doubled down on a lot of the traditional Mecca where nough smacking isms that we've seen when you look at kind of eventually what ended up happening and this was in April of this year Gillette actually had to reduce price by about 20 percent in response kind - these disruptors by going after the very same business model that Dollar Shave had and trying to kind of replicate that it ended up costing the brand an extraordinary amount of money and kind of they lost their way around what kind of some of their core competencies were so now let's look at another example one that L too has popularized I think anybody who's been to an event in the last two years has seen this chart which looks at the extraordinary kind of market share from an interaction standpoint on Instagram of anasazi of Everly Hills and WWE has written about this this really has been kind of the story of the beauty industry for the last couple years and for those of you not in the industry on associate Beverly Hills has effectively taken two to three points of market share nearly every quarter kind of since 2015 now a lot of that was being kind of in a growing category brow but also kind of capitalized and some trends like lip kits and what have you and really now is over a five hundred million dollar business and that's just grown extraordinarily on the backs of very little traditional media now here so this is kind of the strategy that Anastasia Beverly Hills they've taken a ton of user-generated content can somebody in the audience pick out which one at which handful of these posts are honest Asya does anyone know yes she'sa blonde which posts extras it's not honest Asya be the influencers which of these was posted by anastasiya all of them none of them virtually every brand within the industry has effectively copied anasazi of strategy so we like to make fun of the beauty industry five years ago because he'd flipped through the pages of the magazine and if he took off the brand names you literally couldn't tell the difference the same thing has happened in social media and what's crazy we speak to a lot of leadership teams at beauty organizations everybody's like what is our Anastasio strategy well effectively they found it it's just repost pictures that Anasazi I would post I mean these are brands ranging from easy breezy beautiful covergirl to Urban Decay which has completely different equity and DNA from kind of an Anastasia that are effectively just kind of copying and reposting a lot of that content I think the reality is that the tactic has to be extended in a very specific way for your brand the tactic is interesting but it's not profound and I think there's ways for beauty companies and kudos to Clinique kudos to Estee Lauder kudos to keels who I couldn't find any pictures within the last three months of anasazi alike looking girls but you really do you do need to have kind of clearly defined equity if you're going to find your path forward with influencers or without and then what's interesting I mean not surprisingly with all of the noise within the marketplace as of q1 of 2017 it's actually the first time we've seen honest Asya starting to see that tremendous kind of Instagram share so you see huda beauty and Kylie cosmetics both kind of with the backs of run their own influencer in in Kylie's case celebrity platform you've had so much noise from an Instagram perspective in color cosmetics interactions have literally increased fivefold but it becomes more and more difficult to really sustain this as a point of competitive differentiation the final point is just around the importance of storytelling and we spend a lot of time talking about small innovators he wanted to spend the kind of the last part of my session talking about big companies that are starting to change the game and I think a lot has been said about Walmart lately I think many of you probably saw these headlines in May you know less than a year post.com acquisition Walmart's sales from an e-commerce perspective up a staggering kind of 63% and the street concentrated on it now granted kind of with the acquisition of Whole Foods and they kind of had bonobos as sort of their their retort which is not really apples to apples I think they've lost a little bit of heat but nonetheless I think it's really interesting to look at a company like Walmart not because of their numbers but culturally what they've been able to do kind of over the course of the eight months since the acquisition and what we really wanted to track is the storytelling of the Walmart brand this is the number of announcements that Walmart has made and I'm going to break these down I know they're difficult to read around ecommerce publicly to the street since that jet comm acquisition they really didn't get started - about January they gave mark Loring team about three months to kind of assess the situation and literally they are going to Wall Street every single day talking about acquisitions and as we know they've kind of really tried to diversify their customer base one of the biggest challenges that the Walmart business sees is that frankly their customer is just not an e-commerce shopper so they've acquired a lot of affluent customers through some of the acquisitions that they've made organization this has been huge for Walmart they have made huge shifts to their organization and the shifts to their organization have been done quickly and they've been and they've created just a tremendous amount of cultural change so this is looking at just what the what the e-commerce leadership looked like in August of 2016 they brought in mark obviously huge aqua hire as well as kind of an Athens house put them elevated them immediately into the role of president and CEO of Walmart comm and then the SVP of e-commerce but they didn't stop there the at with the Moose Jaw acquisition that the founder there became the head of outdoor programs another jet employee became the head of store number eight which is their store incubation a lab they created a position of chief revenue officer for yet another jet employee chief technology officer for another one and then most recently with the bonobos acquisition appointed Andy done kind of the head of digital brands this is just a handful of changes but when you see leadership positions at a company as large as Walmart in this much transition this quickly very rarely are companies like Walmart able to hang on to kind of talent from new and emerging startups but it doesn't stop there huge omni-channel initiatives which was kind of a subject that Walmart surprisingly had kind of touched relatively lightly so they began offering discounts for clicking collects in April and June actually started an employee delivery service a bunch around incubation and innovation so filed a patent for in-store drones kind of trying to out some out innovate Amazon as well as kind of store number eight which is their new store concept that's really kind of piloting a number of these innovation initiatives and they've also been very vocal when they've killed things most notably kind of their shipping path program but they also have been they're not afraid which is really really hard for a company that's trying to tell a story of profitability to tell the street when things aren't working and that's a huge shift kind of for their organization and I think the interesting thing and also some online innovation when we look at all of these announcements collectively the most impressive thing about Walmart hasn't necessarily been there sixty-three percent growth it's been the fact that they're able to start to play the Amazon game and start to tell a story to the street around the but they're making not only to new technology not only to e-commerce but frankly to initiatives that don't make a whole heck of a lot of sense but paint them as a visionary that should begin to have access maybe not to the same level of cheap capital of an Amazon but a lot higher valuation than they kind of would otherwise so click kind of wrap up on what should you do and then we're going to going to turn it over to Scott so what can you learn from the innovation class one focus overwhelmingly I think exceeds breadth I mean particularly if you are not the biggest brand in the category you should not be investing behind every platform you just can't be successful you have to focus on where you're going to kind of pick some of those key wins speed to market is obviously that's a big statement and means a lot of different things I would argue speed needs to be effectively in any consumer company that expects to be successful kind of over the course of the next five years speed has to be somewhere kind of within your mission statement identity is as important as ever these well you know you do see to a certain extent the death of brand you do see a lot of these new companies with their go to market strategy have over invested in creative so there's a little bit of dissonance there we would argue sticking to that identity and really knowing who you are and that authenticity comes through to kind of consumers loud and clear exploiting data around how customers behave versus what customers tell you and I think this is a big one new economy companies do not run focus groups new economy companies are really allowing consumer data from a behavior standpoint to dictate a lot of their strategy and decision making we see this with Anastasia we saw this with ASOS from a search perspective you see this with some of the Alexa winners every time you see a shift from a media standpoint from a platform standpoint or from a channel standpoint the Sephora example is another one there are a handful of players that disproportionately benefit but you have to be kind of a first mover there I think with the Walmart peace culture is this important as strategy and then I think the final point is just extending innovation concepts versus copying a lot of what we see from bigger brands they kind of get over themselves and recognize that not everything needs to be new then they revert to the reverse they just copy what a Dollar Shave or copy kind of what an honest Asya has done what's not replicable and I think it's equally as important to recognize this one you have to recognize that a lot of the VC funded players that you compete against a lot of VC funded retailers are playing a different game so to try to beat them in a game of out spending makes absolutely no sense they're only kind of after the top-line nine times out of ten and what we see actually like one of the the ones that succeed are actually where you do see the incumbents kind of go into battle with them oftentimes you know whether it's the birch boxes it's the Reds the runways it's the One Kings Lane it's the it's the guys that are spending a ton of money that don't have an incumbent player oftentimes will kind of run out of VC funding and you see that time and time again it's really difficult to kind of have the new and different factor you can reposition you can relaunch you can launch new products but there's something that's cool right now about being small and recognize that when you're being small which goes kind of hand in hand with the next piece you know you look at a lot of these small teensy tiny ankle-biters they acquire customers at an incredibly low cost using social media and we hear all the time we'll just kind of show us all birds strategy on Facebook and we can replicate it at a six or can you kind of explain how how Lolo is acquiring consumers in the tampon space and we at Tampax will kind of replicate that strategy the reality is is when you have low awareness and you have that cooler it factors socialworks a whole heck of a lot better so while there are tactics that work we would argue that they actually bifurcate between big and small brands you do see a little bit of some of these smaller guys also playing by other rules particularly in categories like beauty and fashion were kind of recklessly making claims around ingredients some of the merchandising even on their Amazon product detail pages would definitely be not held up to the snuff of the majority of your legal departments and rather than kind of belittling that just move on and then finally kind of business model I would argue you want to take the best of your business model and flex it versus try to kind of replicate or copy what some of these other players are doing three bigger bets I mean so one I would be thinking very hard across your company around how you can participate create or access the long tail of growth now that doesn't mean going out and making a bunch of acquisitions before a strategy whether kind of by design or happenstance was brilliant they were able to basically incubate all of these brands grow with them without having to pay kind of the extraordinary multiples that we've seen in the beauty industry truly actually did a very similar thing in pet food if you look at the assortment on chewie comm one of the reasons why pet smart acquired them was because they had access to all of these teensy tiny pet food brands that were spending a ton of money with them because they saw them as kind of an alternative to more scale distribution distribution is one of those ways incubation and investment is another way also kind of thinking about if you do have a mono brand retail model how do you maybe start bringing some of these cool innovators into your stores but be thinking about how across your company you can access their growth identify some of the disruption pain points so with that framework lights wind-up up front if you know where the threats to your business are and start addressing them first now that's always the hardest thing to do to kind of look at it kind of from the outside in and say we really you know in the time you have to do this is when things are going really well then the final one I think is what we see specifically from Walmart which is storytelling it's confidence how do you begin to paint a vision for the financial community paint a vision for your employees painting vision kind of for the consumers of your brand around where you're going we've all heard kind of time and time again throughout the course of the last day and a half Amazon has done that better than anyone but the companies that are going to kind of come through this next stage might not have as lofty goals as Amazon that are going to have a truer north's than they've ever had and they're going to be able to continue to kind of tell that story to the street and we would argue that's the same for big companies as well as small companies so I'm going to turn it over to Scott to take us home [Music]

Channel: Gartner for Marketers

Views: 25,608

Rating: 4.7449665 out of 5

Keywords: L2inc, Digital marketing, Social media, Ecommerce, Mobile marketing, Marketing news, Business news, Internet news, Tech news, Social Media news, Digital research, Business intelligence, Digital trend, Market trend, Brand strategy, maureen mullen, digital disruption, brand innovation, digital leadership academy, brand strategy, nyu stern, kellogg school of management, harvard business school, business

Id: k59jPtE92Wo

Length: 51min 29sec (3089 seconds)

Published: Wed Jul 26 2017