WHAT SHOULD BRANDS DO IN 2018? · 2018-04-25 · Top Organic Search Results for “Retinol Skin ream ... Among Top 4 Independent Brands in L2 Digital IQ Index Direct Referrals Organic

WHAT SHOULD BRANDS DO IN 2018?MAUREEN MULLEN | APRIL 18, 2018

BENCHMARKING DIGITAL PERFORMANCE

BENCHMARKING

EDUCATION

RESEARCH

THE WORLD HAS CHANGED…

$2,794B

2018Source: IMF, Yahoo! Finance.

60%43%

Share of Digital Advertising Growth

TWO PLAYERS OWN THE FUTURE

Other Digital Advertising

-3%

2016Google’s Advertising Revenue Compared to Ad Spend in Largest Markets

BIGGER IS BETTER

Sources: Alphabet, Zenith.

$10.9

$11.3

$11.4

$13.1

$22.0

$24.2

$41.9

$75.0

$79.4

$190.8

Australia

France

Germany

Japan

Google

3.6B

2.2B1.9B

1.4B1.2B

Watched 2016 Olympics

Christians Monthly Active Facebook Users

Population of China Mobile Daily Active Facebook Users

Globally, 2016

FB: THE NEW RELIGION

May 2017, Play Store DownloadsGlobal Top 10 Android Apps

FB: APP DOMINATION

Source: Prioridata.

9.82

9.87

12.76

18.25

22.24

34.92

42.12

78.05

92.48

Clash RoyaleSpotify

Subway SurfersFacebook Lite

SnapchatInstagramFacebook

Facebook MessengerWhatsApp

Snapchat has not yet disclosed Q1 ’17 figures

Instagram vs. Snapchat

Worldwide Daily Active Users

THE FACEBOOK OF VIDEO

Source: Company filings and announcements.

Launched

2016

Percent of American Households

MEANWHILE…

78%

Decorate a Christmas tree

55%

Vote inthe 2016 election

55%

Earn over 50K

51%

Attend church

monthly

49%

Own a landline

telephone

44%

Own a gun

58%

with Amazon Prime

ESTIMATED 2017 CONTENT BUDGETS

Source: The Economist.

$6.0B$4.5B

$2.5B$4.0B $4.3B

June 15, 2017 vs. June 16, 2017

Change in Market Cap After Amazon Announced Acquisition of Whole Foods

RETAIL’S ANTI-CHRIST

$11.23B

$3.07B

-$1.57B -$2.13B

-$5.69B

-$11.13B

Target Kroger Costco Walmart

Amazon Whole Foods

U.S. CPG: 2017 Share of Sales vs. Share of Growth

BIGGER IS NOT ALWAYS BETTER

Source: Nielsen 2017

31%

2%

33%

25%

19%

53%

17% 20%

Share Of Sales Share of Growth

Largest Medium Smallest Private Label

2017U.S. CPG: Dollar Sales Growth

EVEN IN GROWTH AREAS…

-1.7%

0.4%

2.6%

-0.5%

5.0%

3.1%

9.0%

7.2%

Largest Middle Smallest Private Label

Conventional Clean / Organic

Source: Nielsen 2017

UNDERSTANDING DISRUPTIONEXPLOITING NEW OPPORTUNITIES

CAPITALIZING ON INCUMBENT WEAKNESSES

CONSUMER

DEMAND

SUPPLY

CHAIN

AWARENESS/

MARKETING DISTRIBUTION

Slow speed to market

Capitalize on new channels/DTC

Exploit new platforms

Over-reliance on traditional channels

Retail/Wholesale in structural decline

Easier to access excess

supply/capacity

Serve new/unmet needs

Prices rising faster than inflation

THE NEED FOR SPEEDWHAT SHOULD BRANDS DO?

Primark ASOS Revolve Boohoo Missguided NeimanMarcus

Barneys NewYork

Kohl's Macy's JCPenney

April 2017, n=10 Brands Online Fashion Retailer Traditional Multichannel RetailerDepartment Stores: Impact of Supply Chain on Instagram Interactions

SCARCITY DRIVES BUZZ

Source: L2 Inc., Digital IQ Index: Department Stores 2017.

75.7M

32.4M

20.4M 19.1M 16.8M

4.9M 4.1M 2.0M 1.9M 1.3M

Fast Supply Chain Traditional Supply Chain

>15M interactions <5M interactions

April 2016–March 2017, n=44 Brands with Complete Data and 10+ Shoppable PostsDepartment Stores: Change in Interaction Rates for Shoppable Posts

& SHOPPABILITY

Source: L2 Inc., analysis of eDatasource data.

-60%

-40%

-20%

0%

20%

40%

60%

de

Bije

nko

rf

Zala

nd

o

Sear

s C

anad

a

Bu

rlin

gto

n

Dill

ard

's

Mac

y's

Ver

y

No

rdst

rom

Bar

ney

s N

ew Y

ork

Mr.

Po

rter

Gilt

Lord

& T

aylo

r

Ott

o

Bro

wn

Th

om

as

YOO

X

Zap

po

s

No

rdst

rom

Rac

k

Ho

lt R

enfr

ew

Mye

r

Lan

e C

raw

ford

Gal

erie

s La

faye

tte

Self

rid

ges

El C

ort

e In

gles

JCP

enn

ey

Ko

hl's

Hu

dso

n's

Bay

Ber

gdo

rf G

oo

dm

an

Mar

ks &

Sp

ence

r

Ho

use

of

Fras

er

Bel

k

TJ M

axx

Har

rod

s

Nei

man

Mar

cus

Deb

enh

ams

Joh

n L

ewis

Har

vey

Nic

ho

ls

DSW

Net

-a-P

ort

er

Bo

n-T

on

Farf

etch

Nex

t

ASO

S

Saks

Fif

th A

ven

ue

Ch

ange

In In

tera

ctio

n R

ate

s

Average Deviation -5.2%

UNLIKELY INNOVATOR

■ Kohl’s ■ Macy’s ■ JC Penney ■ S&P 50052-Week Stock Price, Kohl’s, Macy’s, JC Penney vs. S&P 500

RETAIL OUTLIER

Source: Yahoo Finance

2016 vs. 2017Same Store Sales: November & December

WHY?

Source: Company Press Releases

-2.1%

6.9%

-2.1%

1.0%

-0.8%

3.0%

Kohl's Macy's JCP

2016

2017

A NINE YEAR JOURNEY

Source: Bloomberg News, March 23, 2018

+2.5%Performance lift on fast

turnaround product

80,000Average order size vs. 500,000

which was typical before

40%Of Kohl’s Assortment is fast-

turnaround product

8 weeksFactory to Store vs. standard

16 weeks for seasonal & 6-9

months for basics

SEARCH ADVANTAGES

Source: L2 Analysis of SEMRush Data

Select Keywords Top 300 Organic

Search Terms to Kohl’s.com:

“Croft & Barrow”

“Lauren Conrad”

“Lauren Conrad Kohls”

“Dana Buchman”

“Chaps”

“Mudd”

SPEED NOT THE ONLY STORY…

July 26,2016

UNDERSTAND SMALL DATAWHAT SHOULD BRANDS DO?

May 2012–April 2017 “Retinoid” “Marula Oil”Growth in Select Ingredient Search Term Volume, Google.com

INGREDIENTS DRIVE INTEREST…

Source: Google Trends Analysis.

PRODUCTS BUILT FOR SEARCH

“Advanced Retinoid 2%”Keyword appearances on page:

“Retinoid” – 17“Retinol” – 16

“Vitamin C Suspension 23%+HA Spheres 2%”Keyword appearances on page:

“Vitamin” – 19

June 2017The Ordinary: Top 100 Organic Search Terms Driving Upstream Site Traffic

DRIVING SIGNIFICANT TRAFFIC

Source: L2 Analysis of SemRush and SimilarWeb Data

Total Visits June 2017 Traffic From Search

1.4M 39%

0.5M 50%

1.3M 44%

0.8M 57%

Ingredient79%

Unbranded11%

Branded10%

June 2017Top 100 Organic Search Terms Driving Site Traffic, by Brand

VERSUS TRADITIONAL BRANDS…

Source: L2 Analysis of SemRush and SimilarWeb Data

Branded 91%

Unbranded8%

Problem / Solution

1%

Branded 88%

Unbranded10%

Ingredient2%

Branded 96%

Unbranded2%

Problem / Solution

1%Ingredient

1%

Top Organic Search Results for “Retinol Skin Cream”

MORE ACCELERATED ON AMAZON

Radha Beauty Body Merry Baebody

Neutrogena

Roc

LilyAna Naturals Kleem Advanced Clinicals

+ INGREDIENT-FOCUSED CONTENT

Ingredient Descriptors

“active retinol”“organic aloe”“green tea”

“jojoba oil””shea butter”“all natural”

Ingredient Descriptors

“retinol”“natural and organic”“wild crafted green tea”

“organic jojoba oil”“vitamin E”“vitamin B5”

UL MIMICKING DISRUPTORS…

Shorter Product Innovation Cycle Local Copycats

Global Speed to Market Ingredient-led, Digital Natives

1

3

2

4

20 markets in 1 year

12-week product launch Increased local launches 50%

No Traditional Advertising

December 2017 – February 2018Share of Website Traffic by Channel

ORGANIC ACQUISITION

Source: L2 analysis of SimilarWeb data. *Note: Among Top 4 Independent Brands in L2 Digital IQ Index

Direct ReferralsOrganic

Search

Paid

SearchSocial Display Email

IND

IE

Moroccan Oil 16% 9% 65% 5% 4% 0% 2%

Paul Mitchell 14% 10% 62% 9% 3% 1% 1%

Madison Reed 20% 6% 50% 9% 9% 2% 5%

DevaCurl 27% 8% 53% 4% 7% 0% 2%

UN

ILE

VE

R

Love Beauty & Planet 7% 10% 56% 17% 6% 1% 3%

Nexxus 22% 19% 32% 13% 8% 1% 5%

Ingredient Terms57%

Product + Ingredient

21%

General Product

16%

Problem5%

Education1%

February 2018 n Branded n UnbrandedShare of Organic Search Traffic to Brand SiteLove Planet Beauty: Top 500 Keywords Driving Organic Search Traffic

OPTIMIZED FOR INGREDIENT TERMS

22%

78%

Love Planet Beauty

Top 5 KeywordsShare of

Traffic

sandalwood 10.0%

ylang ylang 3.4%

hair oil 1.8%

lavender 1.6%

coconut oil shampoo 1.0%

SITE ASSETS REFLECT TRENDS

Google Indexed Search Volume

2011–2018

0

10

20

30

40

50

60

70

80

90

100

coconut water argan oil shea butter tea tree oil

2011 2012 2013 2014 2015 2016 2017 2018

TARGETING KEY INGREDIENT TERMS“ylang ylang shampoo” “coconut oil shampoo”

Top Organic Result

Second Sponsored Product

WORK TO BE DONE ON SOCIAL

*Performance is measured as the engagement of followers on the platform, as well as efficacy of posting activity

Top 10* Hair Care Brands on Instagram

Q1 2018

Indie

1. Olaplex2. L’Oreal Paris3. Pravana4. SheaMoisture5. DryBar6. Redken7. Aveda8. Revlon9. DevaCurl10.Ouai

Multicultural

Share of Instagram Interactions Among Indie Brands

Q1 2018, n=17 Indie Brands

Olaplex29%

Drybar23%

Ouai16%

DevaCurl13%

Rita Hazan4%

As I Am3%

Moroccanoil3%

Love Beauty and Planet

1%

Other8%

Highly Curated Stock Images

VS. USERS AS INFLUENCERS

OLAPLEX OWNED LOVE PLANET BEAUTY

ORGANIC INTELLIGENCEWHAT SHOULD BRANDS DO?

2.2 million clients

STITCHFIX BY THE NUMBERS

Source Stitchfix Prospectus

86% repeat purchasers

22% average % of fix purchased

average # of data points customers share85

85%of fixes consumers provide personal feedback

Source: Stitchfix Prospectus

SECRET SAUCE?

Marketing as a Percentage of Total Sales

COST CONSCIOUS

Source:

3%

11%

16%

7%

10%

18%

Stitchfix Zulily Wayfair

Year Prior IPO Year

GROWTH BUSINESS NEED GROWTH CHANNELS

WHAT CAN YOU LEARN?

Estée Lauder Companies L’Oréal Group Indie Brands LVMH Shiseido Co.Q3 2016, n=31 Keywords Top 10 Most Visible Makeup Brands Macys.com vs. Sephora.com

THE IMPORTANCE OF POINT OF SALE

Beauty: Top-10 Brands in Color Cosmetics Keyword Search, by Retailer

MACY’S

4%

4%

5%

5%

6%

7%

8%

10%

14%

15%

ABH

Benefit

Dior

Tarte

Smashbox

Urban Decay

Estée Lauder

Lancome

MAC

Clinique

3%

3%

3%

4%

4%

5%

6%

6%

6%

8%

bareMinerals

Kat Von D

NARS

Smashbox

Make Up For Ever

Too Faced

Urban Decay

Benefit

Tarte

Sephora Collection

SEPHORA

Q3 2016, n=31 Keywords Top 10 Most Visible Brands Macys.com vs. Sephora.com

THE IMPORTANCE OF POINT OF SALE

Beauty: Top-10 Brands in Color Cosmetics Keyword Search, by Retailer

42.6 YEARS

22.7 YEARS

Average Brand AgeMacy’s

Average Brand AgeSephora

THE BRANDS SEPHORA BUILT

1994 1995 1996 1997 1998 1999

• Nars Founded • Urban Decay Founded

• SmashboxFounded

• ABHFounded

• TarteFounded

• Bare MineralsFounded

• Too FacedFounded

• BenefitAcquired by LVMH

• Makeup Forever Acquired by LVMH

EntersAcquired by LVMH

*AND GOOGLE & FACEBOOK…

AMAZON* THE NEXT ACCELERANT

DISTRIBUTES (& INVESTS)

DISTIBUTION:

MAY 2017

INVESTMENT:

$75 MM

DISTIBUTION:

AUG 2017

DISTIBUTION:

MAY 2014

DISTIBUTION:

MARCH 2014

BORROW FROMTHE BEST

WHAT SHOULD BRANDS DO?

TIDE SPIN

EXCEPT WHENYOU SHOULDN’T


June 2014–November 2015U.S. Google Search Volume for term “Shave Club”

SEARCH DEMAND RISES

L2 Analysis of SEM Rush Data

6.68.1 8.1 8.1

9.9 9.912.1 12.1 12.1

18.1 18.1 18.1 18.1

22.2 22.2 22.2

27.1

June 2014 November 2015

June 2014–November 2015U.S. Google Average CPC for term “Shave Club”

COSTS SKYROCKET

L2 Analysis of SEM Rush Data

$0.16 $0.56 $0.56 $0.56$1.68 $1.68 $1.99 $1.99 $1.99

$3.79$5.29 $5.29 $5.78 $5.78 $5.78 $5.78

$25.53

June 2014 November 2015

WHAT CHANGED?

27.1K800

November 2015U.S. Search Volume by Term

THE GOOD NEWS…

Source: L2 Analysis of SEM Rush Data.

“Shave Club”“Gillette Razor Club”

31x

450K33.1K27.1K

November 2015U.S. Search Volume by Term

THE HARSH REALITY…

Source: L2 Analysis of SEM Rush Data.

“Dollar Shave Club”“Gillette”

880

“Shave Club”“GilletteRazor Club”

THE HARSHER REALITY

Source: iSpot TV

Gillette 2015 TV Spend:

$44.2 mmDSC 2015 TV Spend:

$56.0 mm

AND TODAY…

June 1–July 31, 2015, n=110 URLs; US, UK, Spain, Brazil, and Korea, n=55 Beauty BrandsShare of Total Instagram Posts vs. Interactions, by Parent Company

2015: ANOTHER CAUTIONARY TALE

Share of Posts Share of Interactions

Other4%

Shiseido Co.4%

Tarte7% Too Faced

Cosmetics7%

The Estee Lauder

Companies7%LVMH

11%L'Oreal Group21%

Anastasia Beverly

Hills37%

Coty2%

Other24% Shiseido

Co.6%Tarte3%

Too Faced Cosmetics

2%

The Estee Lauder

Companies12%

LVMH10%

L'Oreal Group29%

Anastasia Beverly

Hills7%

Coty7%

2017: WHO WORE IT BETTER?

THE IMPORTANCEOF STORYTELLING


GOLIATH FIGHTS BACK

Walmart E-Commerce Announcements Since Jet.com Acquisition

STORYTELLING

Date Announcement

Sept. 2016 Jet Acquisition Finalized

Jan. 2017 Shoebuy Acquisition

Jan. 2017 Key Jet.com Execs Promoted to CTO & CRO

Jan. 2017 End of Shipping Pass Program

Jan. 2017 Free 2-Day Shipping for Orders >$35

Feb. 2017 Moosejaw Acquisition

Mar. 2017 Modcloth Acquisition

Mar. 2017 Patent Filed for In-Store Drone Program

Mar. 2017 Store No. 8 (Internal Incubator)

Apr. 2017 Discounts for Click & Collect

Apr. 2017 Hires Rent the Runway Founder to Lead AI & Machine Learning Internal Incubator

May 2017 Increases Online Assortment from 35M SKUs to 50M SKUs

June 2017 Bonobos Acquisition

June 2017 Employee Delivery Service

Upcoming Site Redesign

Acquisition Omnichannel Incubation / Innovation Key Hires Ending Programs Online InnovationWalmart E-Commerce Announcements Since Jet.com Acquisition

ACQUISITIONS

Date Announcement

















ORGANIZATIONAL CHANGES

Date Announcement

















OMNICHANNEL

Date Announcement

















INCUBATION / INNOVATION

Date Announcement
















Walmart E-Commerce Announcements Since Jet.com Acquisition

KILLING INITIATIVES

Date Announcement
















Acquisition Omnichannel Incubation / Innovation Key Hires Ending Programs Online Innovation


ONLINE INNOVATION

Date Announcement

















WALMART E-COMMERCE INITIATIVES

Date Announcement
















WHAT SHOULD YOU DO?

WHAT CAN YOU DO?What CAN you learn

from the Innovation Class?What is NOT replicable?

• Access to cheap capital (mostly)

• The “new” or “different” factor

• Low cost of customer acquisition

• Play by other rules (i.e. claims, copyright, etc.)

• Business model?

• Focus > Breadth

• Speed to market

• Clear identity is as important as ever

• Exploit data around how customers behave vs. what consumers tell you

• With every significant shift in media / distribution there are a small number of winners that benefit disproportionately

• Culture is as important as strategy

• Extend don’t copy

BIGGER BETS?

How can you participate / create / access the long-tail of growth?

Identify disruption pain points in your business and disrupt yourself.

Multiple Expansion vs. EBIDTA growth

Storytelling as competence.

Documents

WHAT SHOULD BRANDS DO IN 2018? · 2018-04-25 · Top Organic Search Results for “Retinol Skin ream ... Among Top 4 Independent Brands in L2 Digital IQ Index Direct Referrals Organic