UrbanDaddy, lululemon, and Fab. These brands represent lifestyles. For UrbanDaddy, it’s the high fashion, epicurean male of the night. For lululemon, it’s the active, environmentally conscious yogi. And for Fab, it’s the interior designer with impeccable taste. All three brands have experienced major growth this year. They are the cream of the crop and the crest of the current eCommerce wave: curated lifestyle eCommerce.
My running thesis in this post is that lifestyle eCommerce brands represent the most effective way for new entrants to succeed the eCommerce arena, whether it be VC-backed, bootstrapped, or even a big established corporate brand.
Let’s talk about why.
Lifestyles as Hyper Segments
First, let’s look at what lifestyle eCommerce brands have done well. The concept they’ve nailed is creating hyper focused, niche customer pockets. I’m not talking about simple customer segmentation, i.e. 25-35 year old females in big cities. I’m talking about new levels of granularity. Not just females in big cities, but females who are single, who are Ivy-league educated, who are southern debutantes, and who maintain a bit of hipster edge. By the end of describing the lifestyle, you should be able to picture the exact customer.
Hyper segmentation engages customers. It strikes an emotive chord when a customer can say, “They get me.” And again, “This is me.”
Psychologically speaking, a significant part of our personal identity is our lifestyle – what we wear, where we live, and where we go. Even more, our personal communities are stereotypically people who wear what we wear, live where we live, and go where we go. So if your brand rings true with one person, it probably rings with their entire community.
Lifestyles create loyalty.
Loyalty is the Starting Point
Before we talk about loyalty, let’s briefly check out Porter’s Five Forces model to get a sense of why this is so important. (Porter’s model evaluates the competitiveness of a market, and is almost always my starting point). Using the Five Forces, we see the following at play:
- The Bargaining Power of Suppliers is moderate
- The Bargaining Power of Customers is very high
- The Threat of New Entrants is very high
- The Threat of Substitute Products is very high
- The Intensity of Competitive Rivalry is very high
In sum, the customers have all the power, barriers to entry are very low, the threat of new entrants very high, and competitive intensity is staggering.
I craft the simple maxim: in the eCommerce space, if you have no loyalty, a (very hungry) new entrant or substitute can easily steal your customer.
How does one earn loyalty in such a remarkably saturated space?
If you’re a new player, you’ll have a hard time providing incentives (the Groupon model doesn’t typically work for unknown brands as well as it does for established ones); you’ll have a difficult time “gamifying” your business model; and if you take a hint from Google shutting down Boutiques and Hunch not IPO-ing, you probably won’t be able to personalize your inventory. Rather, my suggestion on how to earn loyalty starts with your product strategy.
Curate a lifestyle.
Lifestyles as Blue Oceans
While strategists may argue the validity of Blue Ocean Strategy from a market standpoint, it’s clear that the Blue Ocean framework taught a valuable lesson in marketing and branding. Innovative companies don’t have to create innovative products; they can also create innovative ways to position products. (Think Yellowtail wine. Not an innovative wine, but a very innovative spin.)
I argue that a lifestyle brand can create blue oceans by changing the conversation. UrbanDaddy was combating a whole host of luxury brands, such as Armani and Gucci. But, UrbanDaddy went more granular and said, “Sure, we’re high fashion. But we’re high fashion for libertine man.” They made high fashion, sultry (and very appealing). This opened up a new market within men’s high fashion, and they were able to disrupt.
Lululemon did the same thing. Coming up against huge fitness giants like Nike, lululemon said, “Sure, we’re active wear. But our active wear is for the free spirit, for the creative types that use movement for more than exercise.” That positioning, and the hi-tech fabrics employed in the product design, allowed lululemon to surge forward.
Lifestyles, to Take On Mass Merchants
Mass merchants and well established brands have had a foothold in retail (and will continue to have one) for quite some time. Amazon, eBay, Macy’s, and Overstock aren’t going anywhere soon. Their price points, bargaining power, and depth of products allow them to penetrate virtually every eCommerce market.
But they’ll never own a specific lifestyle segment. They don’t want to. It’s not their business model or their strategy. And, I would actually argue that we’ll see mass merchants acquiring lifestyle eCommerce companies to get deeper footholds within (the most) profitable customer pockets in the next two to three years.
Etsy has done a spectacularly good job at becoming a lifestyle mass merchant (which may seem paradoxical). They’ve said, “Sure, we’re a marketplace. But we’re for artistic, vintage folks with good style.” And Etsy has slowly stolen market share away from the aforementioned competitors.
5 Conclusions and Tips
Some parting remarks.
1. New entrants in eCommerce must adhere to hyper segmentation and build a lifestyle brand around it. It’s the only way to make a splash in a saturated, red ocean. Another good example of a new entrant doing this is Logsdail Classic. Think Brooks Brothers, but for hunters of wild game, and you get Logsdail. This is hyper segmentation at its best.
2. Tenaciously evaluate your competition’s brand. In order to hyper segment effectively, you must know the lifestyles your competition targets – and then differentiate. And, if you choose to acquire the same lifestyle as them, your acquisition strategy needs to be airtight. But first thing’s first: know the very specific consumer you want to acquire, and know if anyone else currently has sway over her. (If someone does hold sway, see if you can partner up!)
3. Hyper segmentation can focus on lifestyle, or activities, or location (and the best merge all three). Really, it’s anything that community is built around. A hyper segment can be focused on preppy hunters (Logsdail), or on free-spirited yoga (lululemon), or on buy-happy techies (Woot). In its best cases, it merges a lifestyle, an activity, and a location. Here’s where UrbanDaddy hit a homerun. New York City subscribers to UrbanDaddy receive their own deals for lifestyles, products, and activities, and these deals are different for the Chicago subscribers.
4. Don’t be afraid to go international. If, as a new entrant, you are able to lay a stake in a particular lifestyle, don’t be surprised if there are pockets of that lifestyle in other countries. 28% of UrbanDaddy’s traffic is international! And, as the world’s only blog dedicated to international eCommerce, we are well aware of the treasure of customers that await abroad.
5. Big, established merchants can play, too. Although this post is targeted towards new entrants and burgeoning players, established brands should particularly take note. After all, Innovator’s Dilemma points out that not paying attention to the new entrants and their innovation sets you up for failure. So, as a big merchant, be scrupulous about the lifestyles you’re curating. You, more than most, have the capital and the existing brand equity to pick a particularly profitable lifestyle segment and blitz it. For instance, Saks focuses on the chic New York woman, currently. But what if they launched an internal venture that said, “Sure, we’re chic. But we’re southern belle, dinner party chic.”
I’m not a chic, high fashion expert, but I think big fashion companies should take the time to evaluate their core assets and brand leveragability. Perhaps there are hyper segments that one of your business units is poised to penetrate.
The world is yours to curate.