Amazon and the rise of microbranding
Spooked by the Discounters, Supermarkets have become obsessed with simplification. Rationalising ranges, removing niche SKUs and generally making things less complicated for consumers.
But something weird is going on online.
Amazon has the power and the delivery infrastructure to undercut big brand players and sidestep many of the pressures faced by the multiples. Instead of simplifying, they’re diversifying, big time. It’s Private Label, and it’s a successful part of Amazon’s strategy.
However, things get interesting if you stop thinking about this as private label and start thinking about this as micro branding.
It’s worth remembering what brands are – i.e. a tool for shoppers to quickly find the product attributes they particularly want. They’re a short hand for a whole set of associations, functional and emotional.
But in the supermarkets, space is at a superpremium. A medium sized Tesco has a finite number of SKUs, and each will have to constantly justify its presence. Supermarkets are utilitarian within the constraints of their square footage - looking to stock products with the greatest appeal to greatest number.
On Amazon, these constraints disappear; there’s infinite shelf space, and thanks to Amazon’s complete fulfilment service there is a near infinite capability to design, package, and deliver against different needs.
Amazon could support 100,000 different wines, for instance, allowing it to target specific consumer preferences way more tightly than the inherently catch-all propositions available in supermarkets.
These micro brands are particularly interesting in categories where functional characteristics are undifferentiating. Using the wine analogy again: The data shows that most people don’t know much about wine but generally like an Australian Shiraz at about the £6 mark.
Beyond that the decision is subjective based on things like label design, price perception and what I think other people will think. Personally, I like brands with a modern, stripped back label, a cool font and an elegant but not too friendly tone of voice. Amazon will show me several versions of this preference quicker than any supermarket.
This is something we’ve been doing at Bray Leino – with our client Thornton and Ross we’ve developed a brand called Benenox, an energy-boosting supplement that you take before you go to bed, targeted at the niche of sleep-deprived young professionals. A significant audience on a national level, to which we’re serving a highly targeted product with a highly tailored brand to go with it.
Combine this trend with machine learning, and microbranding becomes automated – systems will quickly deduce that customers prefer this font over that one, this set of words over that. Amazon will know the preferences of people like you, and serve you private label recommendations on the fly.
But these automatically generated options are unlikely to create a real price premium, and here’s where agencies of the future will play a role.
Instead of mass advertising to the masses, we’ll build premium brands to answer micro-niches; the same product underneath, carefully tailored a hundred different ways to suit different consumer desires. In this way, our knowledge of the consumer and creative firepower can transform automated commerce from private label to premium price point.