Offline? No, you haven't! Online-Only Brands – a new segment in retail
The digital transformation of retail has led not only to the growth of e-commerce, but also to the emergence of a whole segment of Online-only brands - brands that are sold exclusively on the Internet. What factors contribute to the development of such multichannel?
Nikolay Novoselov tells
New Business Director Cuore
In the USA, even general TV advertising most often leads a potential buyer to Amazon, because most Americans use the marketplace. About 92% of American consumers make purchases on Amazon.
During the pandemic, such a transformation took place in Russia: the audience of marketplaces tripled in 2020 and doubled in 2021. The revenues of the market leaders increased, respectively: 5-6 times. And now, up to 40 million people buy goods online at least once a year (e-pepper researched), which is almost half of all Internet users in Russia.
For the seller, these figures indicate that 40 million people in Russia can buy his goods in three clicks: they have already entered addresses, payment parameters and configured the type of logistics. In other words, now the online audience may not be an addition, but the very basis for a significant number of companies.
In addition to sellers who are reducing their offline presence, there are also more and more brands that exist exclusively online, or so-called Online-only brands (OOBs). What factors contribute to the development of a new segment?
Rapid evolution of online brands
Easy access to online allows an impressive number of entrepreneurs (there are already more than 350 thousand of them on Wildberries alone!) to test their business hypotheses. And the simplicity of the work makes it possible for each of them to test many hypotheses, attracting a minimum amount of resources: which goods go better, whether it is necessary to give a gift and how to pack.
During the pandemic, such a transformation took place in Russia: the audience of marketplaces tripled in 2020 and doubled in 2021. The revenues of the market leaders increased, respectively: 5-6 times. And now, up to 40 million people buy goods online at least once a year (e-pepper researched), which is almost half of all Internet users in Russia.
For the seller, these figures indicate that 40 million people in Russia can buy his goods in three clicks: they have already entered addresses, payment parameters and configured the type of logistics. In other words, now the online audience may not be an addition, but the very basis for a significant number of companies.
In addition to sellers who are reducing their offline presence, there are also more and more brands that exist exclusively online, or so-called Online-only brands (OOBs). What factors contribute to the development of a new segment?
Rapid evolution of online brands
Easy access to online allows an impressive number of entrepreneurs (there are already more than 350 thousand of them on Wildberries alone!) to test their business hypotheses. And the simplicity of the work makes it possible for each of them to test many hypotheses, attracting a minimum amount of resources: which goods go better, whether it is necessary to give a gift and how to pack.
Previously, online sales required significant investments and resources: creation and promotion of your own online store, sales, logistics, call centers, reverse logistics. Now, to make a sale, you don't even need a legal entity: it's enough to be self-employed. All this has caused the emergence of a whole trend - brands that limit their business exclusively to the online channel are quickly emerging online. They simply don't need offline.
First winners: niche products and products from the "shop on the couch"
One of the first such Online-only brands were manufacturers of goods for highly specialized niches (dietary, sports goods) or with a complex threshold of entry through specialized networks (children's and near-medical goods).
For example, for the first category, one of the best products on the marketplaces is protein bars. Their total sales amount to more than 60 million rubles per month on the two largest marketplaces (according to MPstats). For the second category, kinesiotapes (about 30 million per month) can be called an excellent example. From the know-name of low-turnover goods on the shelves of offline retail, brands with their own fan base appeared here.
The second winners were the players from the group "shop on the couch". Pillows for pregnant women, protective handles for windows, white paint for sneakers, stands for dish lids — these products are really hard to find in offline retail, but they show excellent results in carts. And the marketplaces effectively covered the segment of goods "I wonder how such a thing works and how much it costs." Brands were also able to gather their loyal audience and build relationships with it.
But already now in Russia this process has gone further: groups of products in highly competitive niches are beginning to appear, which become full-fledged brands. These are natural cosmetics from the Krasnodar Territory (which competes with Korean brands), and children's products (such as Orthodon baby massage mats) and other rather specific products.
The rapid development of the online-only brands segment is shaping new markets and trends in Russia, just as it has happened and is happening in foreign markets. Let's look at what is happening, dividing it into two parts: processes related to marketplaces, and trade that is not included in their contour.
Marketplace and the future of sellers
In addition to reducing the complexity of closing a transaction on the part of the client, there is also a decrease in the entry threshold on the part of the seller. Contract production and several managers allow you to have revenue of several tens or hundreds of millions per year. In a nutshell, the sellers' business becomes manageable and predictable.
● Accelerators and incubators for Online-only brands
Obviously, waiting for a manufacturer to grow into a prominent retailer is not effective. Now there are all the tools to influence this process and reduce the time of such growth. Moreover, the ease of launching and testing products on marketplaces implies the possibility of growing and improving in a centralized way.
The world leader in this Amazon: he has his own "umbrella" of 100 exclusive brands, which they centrally and actively promote. Actually, Amazon has its own accelerator of such brands. In addition, the online giant has in its arsenal a whole pool of "shadow" accelerators that test the best ideas from other countries on the stream.
● Buyers of Online-only brands
The growth of disparate online-only brands has led to the emergence of specialized management companies that willingly buy up such "homeless" brands, combine them into clusters, and manage their development and distribution, significantly reducing operating costs.
This large and very fast market was born only in 2018: thrasio started working in the USA. At the moment, they alone have raised more than $1 billion.
A similar process has begun in the Russian Federation. For example, the Market Fund takes over small and new brands, and grows successful brands from them, specializing in Ozon and Wildberries. However, while in Russia this market is in its infancy, and the process of its development is complicated by the legal features of the organization of a large number of sellers and niche brands.
Nevertheless, combining Online-only brands under one "roof" looks logical: by assembling several dozen productions into one umbrella, you can save a lot on marketing, logistics, leasing and other processes.
Life outside the markteplays
Such domestic pioneers of e-grocery as "Party of Food" or "Eat Rustic", literally, taught customers to order online, enter the card number on the Internet and plan a courier visit. The entire marketing budget actually went not to sell the product, but to onboarding the client online.
In 2021, even a subscription to diapers seems to be the norm. An example of the development of online commerce in the world shows that not only the threshold for entering marketplaces is decreasing, but also in general in online sales. People are becoming more accustomed to ordering something online, so the creation of independent products or stand-alone platforms becomes more predictable due to the ease of obtaining a buyer and the possibility of attracting new target audiences, which previously could not be segmented online.
D2C for big brands
Thanks to this transformation, big brands began to build direct relationships with their customers. You can order a Tesla car with delivery, and even subscribe to Lays. And all this is not on third-party marketplaces, but on the sites of the manufacturers themselves.
Of course, here, first of all, brands that are already familiar to the client and that are included in his basic basket are fired. For example, sales of meat boxes or sports/special nutrition kits are growing well in the Russian Federation.
First winners: niche products and products from the "shop on the couch"
One of the first such Online-only brands were manufacturers of goods for highly specialized niches (dietary, sports goods) or with a complex threshold of entry through specialized networks (children's and near-medical goods).
For example, for the first category, one of the best products on the marketplaces is protein bars. Their total sales amount to more than 60 million rubles per month on the two largest marketplaces (according to MPstats). For the second category, kinesiotapes (about 30 million per month) can be called an excellent example. From the know-name of low-turnover goods on the shelves of offline retail, brands with their own fan base appeared here.
The second winners were the players from the group "shop on the couch". Pillows for pregnant women, protective handles for windows, white paint for sneakers, stands for dish lids — these products are really hard to find in offline retail, but they show excellent results in carts. And the marketplaces effectively covered the segment of goods "I wonder how such a thing works and how much it costs." Brands were also able to gather their loyal audience and build relationships with it.
But already now in Russia this process has gone further: groups of products in highly competitive niches are beginning to appear, which become full-fledged brands. These are natural cosmetics from the Krasnodar Territory (which competes with Korean brands), and children's products (such as Orthodon baby massage mats) and other rather specific products.
The rapid development of the online-only brands segment is shaping new markets and trends in Russia, just as it has happened and is happening in foreign markets. Let's look at what is happening, dividing it into two parts: processes related to marketplaces, and trade that is not included in their contour.
Marketplace and the future of sellers
In addition to reducing the complexity of closing a transaction on the part of the client, there is also a decrease in the entry threshold on the part of the seller. Contract production and several managers allow you to have revenue of several tens or hundreds of millions per year. In a nutshell, the sellers' business becomes manageable and predictable.
● Accelerators and incubators for Online-only brands
Obviously, waiting for a manufacturer to grow into a prominent retailer is not effective. Now there are all the tools to influence this process and reduce the time of such growth. Moreover, the ease of launching and testing products on marketplaces implies the possibility of growing and improving in a centralized way.
The world leader in this Amazon: he has his own "umbrella" of 100 exclusive brands, which they centrally and actively promote. Actually, Amazon has its own accelerator of such brands. In addition, the online giant has in its arsenal a whole pool of "shadow" accelerators that test the best ideas from other countries on the stream.
● Buyers of Online-only brands
The growth of disparate online-only brands has led to the emergence of specialized management companies that willingly buy up such "homeless" brands, combine them into clusters, and manage their development and distribution, significantly reducing operating costs.
This large and very fast market was born only in 2018: thrasio started working in the USA. At the moment, they alone have raised more than $1 billion.
A similar process has begun in the Russian Federation. For example, the Market Fund takes over small and new brands, and grows successful brands from them, specializing in Ozon and Wildberries. However, while in Russia this market is in its infancy, and the process of its development is complicated by the legal features of the organization of a large number of sellers and niche brands.
Nevertheless, combining Online-only brands under one "roof" looks logical: by assembling several dozen productions into one umbrella, you can save a lot on marketing, logistics, leasing and other processes.
Life outside the markteplays
Such domestic pioneers of e-grocery as "Party of Food" or "Eat Rustic", literally, taught customers to order online, enter the card number on the Internet and plan a courier visit. The entire marketing budget actually went not to sell the product, but to onboarding the client online.
In 2021, even a subscription to diapers seems to be the norm. An example of the development of online commerce in the world shows that not only the threshold for entering marketplaces is decreasing, but also in general in online sales. People are becoming more accustomed to ordering something online, so the creation of independent products or stand-alone platforms becomes more predictable due to the ease of obtaining a buyer and the possibility of attracting new target audiences, which previously could not be segmented online.
D2C for big brands
Thanks to this transformation, big brands began to build direct relationships with their customers. You can order a Tesla car with delivery, and even subscribe to Lays. And all this is not on third-party marketplaces, but on the sites of the manufacturers themselves.
Of course, here, first of all, brands that are already familiar to the client and that are included in his basic basket are fired. For example, sales of meat boxes or sports/special nutrition kits are growing well in the Russian Federation.
