The Rise of Transparent Commerce (or no more mono-this + dextro-thats!)
Note: Ryan Caldbeck, CEO and Founder CircleUp, provides a guest post.
By Ryan Caldbeck
We live in a beautiful time for consumers — the age of Transparent Commerce. A world in which consumers have access to almost unlimited information to help us decide not only what we want to buy but what we want to experience, for ourselves and our family. Whether buying a snack or a sofa, we no longer have to rely on a company’s marketing department to tell us the supposed benefits or value of a product. We can find out from fellow customers on social media. Transparency has become a differentiator. Increasingly, an absolutely necessary one.
Power of social media
Social media and the internet have changed how consumers shop. At CircleUp, an investment platform for consumer products and retail businesses, my colleagues and I have seen a consistent trend in recent years: Consumers crave information. How are a company’s products made? What exactly are they made of? How are employees, partners, and suppliers treated? What is the brand’s raison d’etre? Brands that provide answers to these questions are gaining consumers’ confidence and market share.
The brands that value transparency are also the ones that are telling their stories directly to consumers through social media. These brands are less reliant on third parties to disseminate their stories.They are talking directly to consumers and building trust.
Look at Everlane, the online retailer that is educating consumers on the real costs of products, like a cashmere dress. The company discloses the production costs, as well as its own margin on the sale of that dress compared to the markup consumers can expect from a traditional brick-and-mortar retailer selling that same item. The consumer sees all the costs. As a result, the consumer sees the benefits of a purchase through Everlane. The disclosures establish trust, reduce uncertainty in the buying process, and encourage consumers to make purchase decisions quickly and with confidence.
“Consumers want transparency because transparency removes stress. In today’s market, product differentiation generates the initial trail, but it’s the trust behind that differentiation that drives the repeat purchase behavior,” says my (CircleUp) colleague Zach Grannis.
Zach and I have looked at trends among consumer and retail companies that have successfully raised capital through CircleUp, and we consistently see increased transparency. Emerging brands — and not just those on CircleUp — are connecting directly with their customers, revealing more information, and helping consumers make smarter purchasing decisions.
Transparent commerce — food and beyond
Transparent commerce is taking many forms in food categories and beyond. We have emerged from decades of obfuscation that made food labels nearly impossible to understand, with type that got smaller and smaller as more and more mono-this and dextro-thats were crammed into our foods. As ingredients became more artificial through the 70s, 80s and 90s, labels grew more uninformative and even misleading, often more akin to legalese than a genuine effort to inform.
But newer brands are changing all that. As snacks company KIND says, “We believe if you can’t pronounce an ingredient, it shouldn’t go into your body.”
The 11-year-old company has been a leader in the transparent commerce movement, with labels that are clear (quite literally in fact as a first mover in utilizing see-through packaging) and easy for shoppers to understand.
Back to the Roots is a young company that allows consumers to grow their own foods, such as mushrooms and herbs. The company’s Mushroom Kit, Water Garden and Garden-in-a-Can are compact and designed to fit in a kitchen or in a school classroom. What could be more transparent than enabling families to produce their own food at home?
Back to the Roots makes it easy for families to know exactly what they are eating, and aligns with growing consumer preferences. In fact, 49% of all parents surveyed say their children take an active role in choosing the types of food the family eats, according to Food 2020, a new global study from public relations agency Ketchum.
Other industries including beauty and homegoods are seeing the benefits of transparency. Stowaway cosmetics, with its “right-sized” approach to beauty, is delivering products that consumers are finally able to finish safely. They’ve shed light on how legacy beauty brands manufacture makeup optimized for the biggest markup, which is typically at the expense of convenience and safety. The brand asks “when was the last time you finished a lipstick?” to help consumers realize that they can avoid using products filled with scary preservatives by simply purchasing items that are sized to be finished.
Benchmade Modern is taking the anxiety out of ordering furniture with its “follow it through the factory” experience. Tagged, framed, sewed, upholstered, packed — customers can track their sofa or chair each step of the way through the company’s Los Angeles factory. Information removes anxiety and makes it easier for the consumer to buy the product.
Similarly, mattress company Casper shares high fidelity videos to explain the design and production process and put shoppers at ease about ordering such a tactile and intimate product online.
“What’s it gonna take for you to walk off this lot, with THIS car?”
Finally, I’ll mention the shopping experience perhaps hated most by consumers: buying a car. Thankfully, transparent commerce has come to the car-shopping world as well, with companies such as TrueCar. Now, all the price information needed to make a smart purchase decision is pulled together for the consumer so she feels confident about the purchase decision.
Transparency. It is the new value proposition. The emerging consumer and retail brands that we see succeeding in the marketplace today understand that consumers want information and have access to it like never before. These new brands are competing with giant incumbents with deep marketing pockets, and so they must differentiate themselves. An extremely effective way to rise above the competition is through full disclosure — of ingredients, production costs, manufacturing processes, delivery timelines and countless other measures of value. Consumers value information. Businesses are sitting on data that consumers appreciate and that they can share relatively inexpensively. When they do this, they are creating transparent commerce, and that is indeed a beautiful thing.
Author Bio
Ryan is the CEO and co-founder of CircleUp, the online marketplace for investing in innovative, emerging consumer brands. Before he founded CircleUp, Ryan worked in consumer product and retail-focused private equity at TSG Consumer Partners and Encore Consumer Capital. His experience in private equity exposed him to many great consumer and retail businesses that were too small to obtain funding through the customary private equity channels. As a result, he decided to make funding available to these small and promising companies through CircleUp.
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