As some of the biggest retail sales days of the year that kick off the holiday season, Cyber 5 has historically been a critical event to win for destination categories such as toys, laptops and other consumer electronics and kitchen appliances. But with the rapid growth of online shopping and ecommerce sales, the unique and real-time dynamics of the digital shelf have made Cyber 5 – and other key retail holidays like Prime Day – must-win occasions for all brands, even those less seasonally relevant and those more everyday essentials such as beverages, protein bars and shampoo.
Why you might ask?
1. Enter the Challengers: Because of ecommerce, waves of new and ever, more prominent challenger brands have emerged onto the market and rivaled their respective incumbent market leaders. In fact, per IRI research, the incumbent market leading brands in 1 out of 14 categories have greater share of their category on Amazon vs. brick and mortar. The story only improves a little bit at Walmart where market leading brands in 5 out of 14 categories lead with greater market share of their category on Walmart.com vs. brick and mortar.
Incumbent market leaders are being challenged by multiple groups of players:
- D2C & Digitally Native Brands: We’ve seen multiple D2C and digitally native brands leverage ecommerce-first strategy and digital agility to successfully launch and capture meaningful market share, including but not limited to Dollar Shave Club (acquired by Unilever), Bai beverages (acquired by Keurig Dr Pepper), Harry’s (acquired by Edgewell Personal Care), RXBAR (acquired by Kellogg’s) and ONE Protein Bars (recently acquired by Hershey’s). The consistent acquisitions from big CPG demonstrate the opportunities these challenger brands exploited and why acquisition vs. defense is often the path of least resistance for the incumbent category leaders. There are still over 400+ D2C and digitally native brands across categories not yet owned by a national consumer goods company – and counting.
- Specialty Channel Brands: Brands from specialty channels and higher involvement categories, such as natural pet food and beauty, have historically been more limited in geographic distribution and brick and mortar availability despite growing popularity and demand. Specialty online and omnichannel retailers like Chewy.com and Ultra Beauty, as well as 3P marketplaces like Amazon provided brands and 3P sellers alike to capitalize and fulfill that growing demand nationwide. As a result, many of the online market leaders are the brands that grew up through specialty channels like independent pet stores and beauty salons and now are challenging the national brand scene at scale.
- Private & Exclusive Brands: Private label has been around for decades. It’s not a new challenge. But it poses greater risk today to national brands for multiple reasons. First, in brick and mortar, private label sits next to the national brand. In ecommerce, private label effectively sits in front of the national brand when it ranks higher on the digital shelf and pushes the national brand down out of the shopper’s view. Second, due to profitability pressures on retailers as they invest heavily in ecommerce and technology and their increasing need for differentiated assortment vs. omnipresent mass retail brands, the retailers themselves are aggressively inviting manufacturer exclusives and innovating themselves and driving their private label portfolios. Lastly, private labels are increasingly becoming private brands designed for the consumer based on unmet product and category needs and indistinguishable from the national brands from a formal branding perspective.
As of November, Amazon has a reported 146 private brands and 640 exclusive brands. Walmart has over 319 private brands across 20 categories with new ambition to launch its own digital brands. Target has over 50 and counting private brands and exclusive brands, Good & Gather being its largest private brand launch in its history with over 2000+ food SKUs launching in 2019-2020.
- Smaller Brands: And naturally, there are smaller brands in the market who have ranked below the incumbent market leaders for years in-store, but who have seen the potential growth the ecommerce channel offers them and are taking full advantage more quickly and nimbly than the larger brands.
2. The Retail Shelf is Shrinking: As both digital shopping and ecommerce buying increase, the retail shelf is actually decreasing.
- Perceptively: The brick and mortar physical shelf could have 10’s to 100’s of SKU facings in particular category for the shopper to consider. But the digital shelf on desktop only displays 6-12 SKUs for consideration depending on the retailer’s site and the shopper’s screen dimensions. And the mobile shelf only displays 2-3 SKUs and as we shift further to voice search, an Alexa-enabled device, for example, only suggests 1 SKU in response to an unbranded purchase inquiry. Despite the virtual aisle with millions of choices, the nature of the digital shelf is one of greater curation, personalization and recommendation to limit choice and drive conversion. If a national brand is not winning the digital shelf vs. challengers, it ultimately ceases to exist to shopper.
- Physically: The role of the brick and mortar store continues to evolve as smaller formats are introduced and as finite space is allocated to experiential merchandising, services and ecommerce fulfillment and pickup capabilities. As a result, center store is under ongoing pressure and so, challenger brands present or not, the retail shelf is shrinking for the national brands.
3. Digital Leadership is Determining Brand Fate: As retailers continue to seek avenues for growth and differentiation, they are beginning to bring digital leaders into the physical store at the expense of the national incumbent leaders.
Target, for example, has already brought in 10+ digital challenger brands as both private and exclusive partners into the stores with special 4” endcap displays and 4-6” shelf sets, disrupting the planograms of many traditional leaders. As their physical center store shrinks per above and new assortment curated, these retailers will have to make tough decisions about who they continue to stock in-store. And inevitably, it will be the brands winning digitally who are the most appealing candidates, be it the challengers or the incumbents who have pivoted to win online.
Now Back to Cyber 5
Now with all these challengers emerging and the momentum behind them, the Cyber 5 holiday poses all brands a strategic opportunity irrespective of their category relevance to the holiday season itself.
Defend, disrupt or be disrupted. All that traffic and sales potential can be yours if leveraged effectively to protect your share leadership or help you gain your fair share. If you don’t, a challenger will do it for you and may sustain their event bump long-term costing you disproportionately more to bounce back.
Cyber 5 Front Runners: