Getting a product retail-ready can be complicated, especially for time-starved entrepreneurs who are already wearing too many hats. But the effort is worth the reward--while big brands still dominate, small, independently owned brands are gaining ground. Last year, small brands became the fastest-growing Consumer Packaged Goods (CPG) segment, with collective sales rising 4.9%, according to IRI.
Facing complex listing requirements from retailers, rapidly changing consumer tastes and other unexpected challenges, successful small brand owners can get assistance in many ways, ranging from informal mentors to paid advisors. Going it alone is a risky move that may ultimately limit the growth and potential of an emerging brand.
New research from GS1 US, a not for-profit product identification and standards organization, called “Charting the Growth Journey: From Product to Profitable Business” examined what it’s like for small brands to successfully navigate multi-channel retail.
The study revealed that partnering with experts supports growth in an increasingly competitive, but opportunity-ripe retail landscape. Entrepreneurs who may be on the fence about investing in partnerships should consider the following key findings:
55% of growing small brands said external partnerships have been critical to understanding what it takes to grow.
The GS1 US study examined responses from over 500 small businesses, and took a close look at what growth leaders are doing to become successful, meaning those who have achieved more than 25% growth in the past year. They were compared to laggard brands, those whose sales declined in the past year. Growth leaders are far more likely than laggards to lean on external partnerships to move the business forward. The growing group was three times more likely than the laggards to use a business advisor, consultant, retail broker, software providers (such as ERP, supply chain management solutions), or barcode services like printing and labelling.
“Brands need to recognize that they’re not able to do everything. Outside of building the product, the right partner can help scale the business,” says Peter Edlund, chief solutions evangelist at DiCentral, a global provider of supply chain solutions.
51% of survey respondents said they started their business to pursue a passion, ambition or skill.
This finding indicates that the majority of small brands are born out of the owner’s personal connection to the product. Yet passion can only take a business owner so far. Only 22% opted for the most outwardly focused response, “I saw a gap in the marketplace.” This could help explain why entrepreneurs, though extremely driven, may lack the right connections or a deep understanding of how the retail industry works when going to market. Partnerships are critical part of moving forward beyond ideation.
“I think the world is a better place when we're creating new businesses,” said Joanne Domeniconi, co-founder of the online marketplace The Grommet. “Often the entrepreneur has a lot of experience creating the product to solve a problem they see. Invariably they run into difficulty because to create a product is one thing. To create a business requires a whole host of other expertise.”
68% of survey respondents said that working with an external partner has improved their understanding of product listings and the potential impact it can have on their business.
Small brands that set their sights on using multiple sales channels are more likely to grow--this includes expanding into e-commerce options like launching their own website or an online marketplace. To put the opportunity into perspective, multi-channel shoppers are key to growth because they spend more. According to the National Retail Federation, consumers who shopped both in-store and online spend an average of 25 percent more than those who shopped one channel.
To prepare for a successful e-commerce expansion, small brands must be mindful of the extensive product information consumers need to make purchase decisions online today. Product listings should be chock full of details, above and beyond the basics like size and color. Is the product machine washable? Hypoallergenic? Does it have any certifications like organic? Listings also must include an authentic UPC that links the brand with its product. Online marketplaces like Amazon and eBay have become more vigilant in this area, requiring that businesses provide GS1 standard UPCs. Additionally, a clear variety of images is necessary to help the consumer get a feel for a product they cannot see in person.
Tackling these high expectations head-on, ambitious small brands enlist the help of external partners to gain a deeper understanding of what’s required for a successful product listing. Many partners specialize in helping brands compile, format, and share product data with retailer partners so that they can sell more on e-commerce platforms.
“Working with a content provider can allow small brands to shorten their time to market, and expand their addressable market,” said Michael Hauck, director, product management, Salsify, a product experience management platform. “Small brands should not underestimate the value of good and complete product information.”
It’s very rare that someone can build a successful business entirely on their own. Growth requires working with partners and investing in additional resources. These partnerships help brands move beyond the day-to-day and on toward building long-term sustainable businesses.