Challenger brands are making noise in the retail industry – taking big steps into the market of both e-commerce spheres and brick & mortar spaces. They are bridging the gap between online and traditional commerce and shaking up the safe spaces that have long been dominated by the biggest names in retail.
Recent years, especially in the post-pandemic era, have seen massive growth and profitability for online retailers and Amazon sellers, especially smaller brands that have carved out a niche market for themselves. Digital, in particular, is opening up the landscape for brands, making it easier to find new customers and expand into on a global level. With the rise of digital marketing and e-Commerce, challenger brands can move past the wall and grow with the increasing customer demands.
According to recent research, more than a third of smaller independent retailers have seen profit margins higher than 20% from selling online. It’s clear that in certain categories, these maturing and upstart challenger brands are leaving some of the bigger, global brands left playing catch up, as they take more and more market share and increase profitability.
At BRANDED we know that in the ever-shifting retail environment the ability to be agile, to push innovation, and to listen to your customer base is crucial. Challenger brands looking to take on the big guys need to have a competitive attitude alongside a star product range – but that’s not enough. They also need to be positioned to scale. That’s where BRANDED can make a difference.
In today’s world it’s easy to get started, reach consumers directly and build momentum. With our unrivaled expert teams and worldwide presence, we’re poised to accelerate challenger brands and help them enter new sales territory immediately. From what we’ve seen at BRANDED, the challenges you face as a $1M brand vs. a $5M brand vs. a $10M brand vs. $25M brand are totally different.
With experience turning well-loved products into household-name brands, and an emphasis on openness and fairness in all our dealings, you know you’re in the right place to get your brand where it could be – and where it should be. We spot potential in these early challenger brands (when around $10M in annual revenue) and have the expertise to amplify them to $100M brands. Working with BRANDED helps businesses to accelerate the capture of market share, increasing success exponentially and achieving global growth. But to work with us, you’ll need a strong track record in your market, in-demand products, and healthy finances.
How Things Used to Work: The Old CPG Guard
In order to fully appreciate the relevance of challenger brands we have to take a look back on the consumer industry history. For decades, big CPG (Consumer Packaged Goods) businesses dominated the marketplace, with a mass ‘one size fits all’ approach to products, services and marketing. Selling non-durable household goods, such as cosmetics, toiletries and packaged consumables, priorities lay in minimizing costs and maximizing profits. In the past, these companies spoke ‘at’ their customers, not ‘to’ them – and rarely ‘with’ them. It was pure consumerism without any meaning.
Selling products quickly and at relatively low cost, some of our biggest household names are part of big CPG conglomerates. Nestlé, Procter & Gamble and PepsiCo head up the herd in the USA. Combined, total U.S. CPG industry sales reached $962 billion in 2021.
Fast-forward, large CPG companies are facing considerable challenges when it comes to harnessing the same marketing power that characterizes the challenger brand’s appeal. Historically, the CPG industry had much higher barriers to enter markets – since distribution was limited to big retail players. Companies needed to have a traditional physical presence and expansion was a costly investment.
In today’s world, for an emerging challenger brand, the options are far more accessible for ambitious businesses that have the ability to be agile. From ready-made marketplaces such as Amazon to building customer bases through social media communities, challenger brands have the power to break through the noise of big CPG companies and carve out a loyal following for themselves.
Challenger brand business models allow them to flourish at breakneck speed in the market, worrying established brands who have become increasingly reactive with copycat messaging and campaigns.
What is a Challenger Brand?
But what do we mean by a ‘challenger brand’? The term was first coined by Adam Morgan in 1999 in the business book, ‘Eating the Big Fish’. In a nutshell, a challenger brand is both market-disrupting and game-changing. Neither sitting as a market-leader nor a tricky niche business, they are companies that live and die by their ambitions, lofty goals, and overwhelming desire to be more to their customer than merely an end product.
Some of our most well-known brands are actually successful challenger brands that have achieved legendary status – each one by doing things differently from the herd. Examples include:
The Body Shop – One of the very first cosmetics brands to rebel and prove that the beauty industry could be cruelty free. Back in the day, The Body Shop was both bold and revolutionary and paved the way for the new normal in cosmetics.
AirBNB – Now an ubiquitous household name, AirBNB once took on an entire hospitality industry and turned it on its head. Started in 2008, AirBNB is now worth $35 billion.
Peloton – Turning the idea of attending spin classes a full 180°, Peloton pounced on the pain points of its target market with style. Using sleek marketing and innovative technology that works, Peloton transformed into a force to be reckoned with, especially during the pandemic.
At BRANDED we’re taking it one step further. We believe that challenger brands show early potential way before they’re getting noticed like major players, Peloton or Airbnb. We also believe that there are brands built on Amazon that have the right bones to make it to the big leagues.
We’re looking for exciting, innovative challenger brands that have the potential to take the market by storm. Brilliant, pioneering products with a strong brand vision, combined with our market expertise and resources on board can ultimately conquer omnichannel retail – and create a lasting, profitable partnership.
The ecosystem of these brands will be very different 5 to 10 years from now. Marketplaces will play a very big role in the future in terms of building and scaling brands and we want to be part of that.
What we look for:
- Brands with momentum close to $10M in sales alread
- Strong customer loyalty rates
- Categories that encourage repetition & brand loyalty (Beauty & Personal Care, Health, Home, and Hobbies)
- Social media presence and potential
- Market opportunity & trend
These brands are started with gusto by fierce entrepreneurs who we believe could benefit from a platform approach earlier on in their success than previously considered by outlets like PE or outside funding.
So What Makes a Challenger Brand Interesting for BRANDED?
BRANDED works with a range of e-commerce brands across many platforms but with a particular focus on product categories, including Beauty & Personal Care, Health, Home, and Hobbies. With all these categories, there is no escaping the fact that consumer attitudes towards brands are changing and we all know that customers speak with their wallets. And where they’re spending their money is evolving. Customers are following their hearts, while not being afraid to shop around for the right price from the right brand.
In the marketplace, both online and on the street, challenger brands are doing just that – challenging the status quo of big brands and honing in on what consumers actually want: namely, an experience, a journey, as well as a great product at a great price.
As Pierre Poignant, our co-founder and CEO says: “We’ve decided to focus on challenger brands as here you have the opportunity to engage with consumers directly with no go-between. In the old days of the brick and mortar retailer the buyers were the gods. If they buy your product and put it on a shelf you have a business. If they don’t, you’re out. With Challenger Brands, it is a completely different, more open, game. The ones who interact the best with the consumers and are authentic and unique are the winners, which is a revolution.”
Gone are the days of unquestioning brand loyalty. Instead, consumers are excited about finding new businesses with a story. Buyers are no longer just interested in price (although undoubtedly this is still an important factor). They want to know that the company they are buying from cares about them and their purchase, that they have positive policies around the environment, that there is transparency in the supply chain and that they are fully invested in their own products. According to research, around 78% of American consumers believe that companies need to do more than just be profitable – they must give something back to society as well.
Challenger brands create a narrative their customers want to buy into and be a part of. They offer value beyond price point and connect with their fans through the channels they use daily, and in language they understand.
These brands are real and accessible and bring their buyers along on their brand journey. Customers want to feel part of their community, to be included in the story. Challenger brands have the ability to create and nurture meaningful networks of fans and ambassadors by creating meaningful experiences. They have the benefit of having a perceived ‘underdog’ status which grounds the brand, keeping it friendly and accessible. This is what we at BRANDED view as a Challenger Brand and why we’ve built our business to bet on the long term potential for these companies.
What Does the Future Hold for Challenger Brands?
With the rise of digital marketing and the growth of e-commerce after an initial dip post-Covid, the traditional barriers to market entry have been obliterated.
Smaller brands that are fast to respond to customer demand and agile in their marketing and product development mean that 2023 will see a continuation of long-term trends. E-commerce penetration will keep expanding and the market will sustain the rise of challenger brands in spheres previously dominated by big CPG players.
The importance of direct access to customers through both Amazon and DTC methods allows for innovative entrepreneurs to reach customers fast and effectively with a whole new world of tools at their disposal. However, it’s important to note that much of the market disruption for CPG business is currently being seen coming from more DTC brands than Amazon-based sellers. Nevertheless, sticking just with Amazon isn’t the solution either, as the rise of ads means sellers need to spend more and more money to be seen. Similarly, Meta’s enhanced privacy policy is causing its own problems for sellers there. These limitations of each marketplace just highlights the importance of taking these Challenger Brands out of a one-market approach, and into the omnichannel sphere.
Social media is also changing the way we shop online. With the likes of Instagram, Facebook and Tiktok offering more and more in-app shopping experiences. Harnessing the power of this and participating in, or even creating, trends and quickly identifying gaps in the market will also continue to be key. However, staying current to avoid being overlooked by the competition is an important consideration.
Competition can be an issue in other ways too. It’s easy to start a business and even easier for competitors to see what’s going well for you and replicate it for their own brand. Savvy businesses will need to be constantly adapting to stay ahead of the game.
This includes a razor-sharp focus on your audiences and recognizes the clear differentiation in audiences’ generations and behavior, both online and offline. It is the brands that are able to focus on how to reach their actual customer who will find success.
Challenger brands have the opportunity to make a splash in their market, but they need to be sure they maintain a vision that will take them from one year to the next by leveraging all the tools at their disposal and truly make the most out of all the favorable trends supporting them.
How We Help Brands Grow, Excel and Amplify
Times are changing, and at BRANDED we’re excited to be part of the movement. Our industry pioneers, years of expertise and multi-skilled global teams ensure we are poised to amplify and grow businesses and give us ideal placement to empower small e-commerce brands to become the next big challenger.
We have an important competitive advantage in our ability to get products to market fast and effectively and we want to help innovative brands in their growth. Our future sees even better developments in more strategic, more robust product launch capabilities.
The skill sets needed for launching a business are very different to that required for growing one. Working with us means getting access to the teams needed to take that step, including performance and brand marketing experts, supply chain whizzes and marketplace operations professionals to get you to the next level.
With these multifaceted teams at your disposal, we can help you launch new products and set yourself apart from the competition. Then once you are in the best place to sell, we provide compliance and regulatory teams that can address difficulties and ensure smoothness in selling.
Founders often stay on and work with us, continuing to work on the areas they know and love, whilst we leverage the knowledge, drive and consumer connection that made their brand so successful in the first place. Previously sellers had to work with many agencies to achieve the above results. Now they can get it all in one place and continue to participate in the growth.
Since inception in late 2020, BRANDED has grown a portfolio of best-selling brands with more than 700,000 reviews on Amazon’s marketplace, collectively generating $200M+ in gross revenue.
Contact us to learn more and get connected with our team!
