Niche online brands benefiting as Covid-19 leads to e-commerce surge
Box of empathy wines
Wines of empathy
Consumers have spent the past two decades changing their spending habits on the Internet. Now, with local stores closed and millions of people socially distanced, the web has become – by default – the place where we shop.
In a tweet last week that went viral, the industry newsletter 2 p.m. released the words “10 years versus 8 weeks”, followed by a graph showing that e-commerce penetration increased to 27% from 16% in just eight weeks of quarantine. This is the same volume of market share growth it has achieved in the previous decade.
Not surprisingly, Amazon was the biggest single beneficiary, focusing on essential household and medical items. Beyond the online retail giant, consumers have flocked to Walmart, Target and Best Buy websites, all of which saw an increase in first quarter online sales at the expense of physical retail.
But there is a wide range of smaller sites and niche brands that have been built for the Internet customer and are now seeing peaks in their business that they could never have anticipated. One of the main categories is wine and spirits, which experienced a 74% increase in online sales from March 11 to April 21, according to a report at the beginning of the month of Adobe.
Wines of empathy, a web-based winemaker who ships three, six or 12 bottles at a time and sells subscriptions that include three deliveries a year, is reaching daily sales levels now that he normally sees only Black Friday and Cyber Monday. The company, co-founded two years ago by a media entrepreneur Gary Vaynerchuk, was able to step up its digital marketing efforts to reach people who no longer go to liquor stores.
In addition to the reasonable prices – bottles sell for $ 20 – Empathy wines can only be purchased online, so for many wine drinkers, this is a brand new brand. The company’s small marketing team is largely based in New York, but the product is made by a winemaker in California, where all of the grapes are sourced.
“If there was a silver lining in an otherwise terrible situation, it is that people, in some cases for the first time, are buying categories in a new way,” said Jonathan Troutman, co-founder and CEO of Empathy. “We built this business with the idea that consumers are moving more and more towards this behavior.”
Venture capital Kirsten Green sees this dynamic unfolding in its portfolio. His company, Forerunner Ventures, is an early investor in Warby Parker eyewear company, Glossier skin care brand, Hims telehealth company and The Farmer’s Dog pet food company.
Green said these internet-based brands were created to take advantage of the efficiency of online shopping and the preference of a large segment of consumers to avoid malls and high-traffic shopping areas. In addition, they are attracting new customers now because people do not spend on trips, concerts and plays or expensive meals, and they do not hire babysitters to be able to get to town.
With consumers stuck at home, “it is not surprising that they are spending on personal care, wellness for yourself, fitness and your home,” said Green. “There is less competition for your money because you are not going on vacation this summer.”
This does not mean that all e-commerce benefits. Luggage company Away (which is also part of Green’s portfolio) saw sales drop 90% in the first few weeks after the first hold orders, and was laid off or laid off more than half. The founders of the company said in a blog post at the time, “it is almost impossible to continue our mission to transform travel when travel is stopped”.
Sales of clothing and shoes are also down. Clothing prices suffered their largest price drop in April in more than five years, according to Adobe.
“It is not a rising tide that lifts all boats,” said Scott Galit, CEO of the money transfer company Payoneer. “We see more winners and losers at this point,” and the environment “has tended to favor larger, more sophisticated sellers,” he added. Payoneer’s data shows growth in categories such as electronics, toys, essentials for home and interior decor, and a decline in clothing and cosmetics, other than skin care.
What is there to stay?
Galit said some of these trends are more permanent than others. While the convenience of buying groceries and hygiene-related products online will long outlive the pandemic, categories like toys “are likely to flatten over time, both as consumers have bought what they think they need, and rising unemployment and falling markets are starting to limit discretionary spending, “he said.
Even for some digital-oriented brands, there have been challenges. Warby Parker, Glossier and Madison Reed, hair care provider, all had to close physical stores. But they were able to compensate for these losses through their online operations.
From February to April, traffic to the Madison Reed website quadrupled and the number of people buying something every day increased 13-fold, the company said. CEO Amy Errett told CNBC that even though the women were at home, they were still working and spending a lot of time making video calls to make them look good. She also called it “an emotional experience.”
“Throughout the shelter period in place, we’ve always seen women skipping their makeup routine, but clinging to hair color, “said Errett, in an email.” It became their only thing. For us, we realized that, in an incredibly difficult period, we were able to spread a little joy with a coloring kit. ”
The company still plans to open eight new stores between July 1 and July 15.
LensDirect is experiencing such growth that CEO Ryan Alovis says he plans to raise external funds for the first time since he acquired the business in 2009. This year’s revenue for the company, which sells contact lenses, glasses and replacement glasses, has already almost exceeded 2018 and 2019 combined, with new customer growth this month of 400% compared to the previous year, said Alovis.
LensDirect offers a contact lens subscription service, so that every three months new lenses appear at a customer’s door. Between ease of registration, free delivery, and the potential to save money, Alovis does not expect customers who start using the service because of Covid-19 to return the old way to buy glasses.
“It’s settled and forget it,” said Alovis, owner of LensDirect via his holding company The Stella Group. “You don’t have to drive 15 minutes and talk to your ophthalmologist. You go online and have them shipped for free within 24 hours.”
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