The next generation consumer values experiences over products

I love consumer companies. They are notoriously riskier than enterprise software companies but also offer higher growth opportunities. More so, understanding consumer companies provides profound opportunities to understand the ways in which we live.

Taking a stroll down NYC streets is not the same as it was ten years ago. There are endless options of overbooked fitness classes, block-long lines for value-centric DTC brands, and unique experiences offered inside stores.

Left: Glossier Flagship rivals , Everlane ad above building. Right: Dagne Dover and Bandier host a group yoga class with (yes) bags as props and post about it on Instagram.

While notable startups have successfully captured the effect of the rise of mobile, internet, and GPS-powered experiences enabled by the iPhone in 2008, I believe that there is still much room to innovate the major aspects of our lives using those technologies and new ones such as machine learning. The ways we eat, learn, move, dress, work and take care of ourselves is even more open to updates as lower costs of creating tech-enabled experiences powers continuous adoption to customer demands. Technology has enabled more choices than ever before, and consumers are fully exercising their freedom to choose.

Next Gen CPG, Beauty, Apparel, and Lifestyle companies are using data-driven tech practices to create direct, omni-channel services for consumers that center around experiences rather than industries and product sectors. This is because while customers have changed, incumbents have not. Incumbents:

• have inefficient supply chains with reselling driving price mark-ups.

• are disconnected from their customer in distribution, and therefore do not have a data-centric ability to optimize for the customer value cycle and experiment with product.

• lack branding which connects with customers on a personal level and speaks to their values of sustainability and convenience.

Not only are lifestyle startups addressing those three sins of incumbent companies, but they are also unlocking new industries by changing the way people think about going to stores and purchasing goods or services. High-growth startups are thinking from the perspective of the end-user experience. As seen in Away, Warby Parker, and Allbirds, brand values and a holistic, thoughtful customer experience are increasingly pronounced key drivers of growth in consumer companies. In all aspects of daily life, startups are taking advantage of new markets created by a desire for fair pricing, convenience, and health/sustainability.

Billie fighting the pink tax with subscription-based shaving service, mangoes delivered in a box, by FreshDirect and minimalist CPG offered by Pubic Goods.

Ultimately, a thoughtful lifestyle service has an appeal that lowers the friction in customer acquisition. Some notable trends include:

Source: Foodinsight.org survey

• Wave of health & sustainability values: Nielsen study confirmed that products with sustainability claims outperform the total group for each product category. FoodInsight survey confirmed that 7 out of 10 consumers would give up a familiar product for one that contained no artificial ingredients. NYU Stern found that sustainable product sales grew 5.6x faster than conventional product sales.
• The influence of personalized brand: Etsy survey shows ~40% of consumers as “seeker” and “expressive” types that would search for unique offerings. McKinsey research shows growth in revenue from personalization efforts. Epsilon Marketing survey shows consumers are ~80% more likely to do business with a company offering a personalized experience.

Nutrafol, BottleCode, Hum, Prose and more are giving customized product subscriptions based on personalized survey responses. Why would anyone go offline to purchase a generic brand?

• Convenience as a service: Subscription market for physical goods is in its early stage with 15% of online shoppers subscribing to boxed goods and subscription e-commerce growing ~100%+ y-y in 2018, according to McKinsey.

Beauty, CPG, and attire subscription boxes.

It is clear that these trends point to the fact that we are undergoing a tectonic plate shift in the consumer landscape. Technology is a tool that has enabled business model innovation (subscription, decoupling, enabling, marketplaces) to redesign offerings around customer experiences. While the most recent wave occurred in digital services (FB, Instagram, Zynga), the current opportunity lies in augmenting IRL experiences with tech (Peloton, Away, Tesla). It is the companies that target experiences and lifestyle holistically that will ultimately replace the traditional retail products on a shelf.

I am currently involved in a Strategic Finance team of a MarTech startup. I love technology and I want to be a part of how it’s changing the world. I am also genuinely interested in finance & economics, capital markets, and innovation, which of course led me here, to Medium.

You can reach me here or at elizaveta.amishina@gmail.com

Connect with me on LinkedIn.

All feedback welcome.

June 2019

Elizaveta