While companies like GAP, P&G, and Facebook operate in different business categories, they have one characteristic in common—they are all large multi-brand companies.
As the agility and accessibility to manufacturing keep increasing and go-to-market times continue decreasing thanks to new distribution models, a multi-brand strategy is becoming an attractive option to explore for all companies.
The strategy of diversifying your brand portfolio holds many benefits. Today, several eCommerce trends are simultaneously making this approach increasingly appealing and easier to implement.
Some of the main benefits of the multi-brand business model include:
- Less shelf space for your competitors makes it easier to dominate a market
- "Brand switchers" can switch between brands but remain your customers
- Synergy effects and startup costs result in cost savings for new brands
- Internal competition between the different brands in your portfolio can help spur performance and improvement
- Data and insights from one brand can be used to create new brands
- Cross-sell, and up-sell opportunities are available across different audiences
- Building several brands diversifies risk as all of your eggs are not in one basket—for example, if one brand's reputation is marred, it doesn't impact total sales.
In this article, we'll look at current eCommerce trends that are relevant in this context. But first, let's define what we mean by a multi-brand strategy.
What Is a Multi-Brand Strategy?
Having a multi-brand strategy means having a portfolio of products with different brands or names, all owned and managed by the same company.
An example of this is Nestlé, with a multi-brand portfolio of over 2000 different brands, including Nespresso and KitKat. Another example is L'Oreal, with brands like Garnier, Maybelline, NYX, and La Roche-Posay in their portfolio.
Multi-Brand Architecture: House of Brands or Branded House?
There are different ways of setting up your multi-brand strategy and the best solution for the company depends on a number of different factors. It's helpful to distinguish between two main types of multi-brand strategies: a Branded House or a House of Brands.
A Branded House
This is the most common multi-brand strategy. If you're launching new brands or sub-brands that serve different needs—but for the same audience—then you will most likely adopt this strategy.
With this setup, it's beneficial to house all of your brands within the same customer experience and on a unified eCommerce platform. A well-known example of this is Nike. Jordan is a massive Nike brand found inside the Nike eCommerce experience.
A House of Brands
A House of Brands is the opposite of a Branded House. A House of Brands contains numerous brands, each independent of one another and with different target audiences. Procter & Gamble and Unilever are typical examples of this. Nobody associates the products with the parent brand but rather with the sub-brands that stand on their own in the consumer's minds.
Multi-Brand Strategy Trends
Several eCommerce trends affect the current eCommerce landscape, making a multi-brand strategy interesting for a more significant number of players. Let's look at some of the most prominent ones and the implications they may have for your business.
From B2C (Business to Consumer) to D2C (Direct to Consumer)
The rise of D2C (Direct to Consumer) has reduced the complexity of launching and maintaining more than one brand. Removing the middleman (ie. retailer or reseller) means companies can experiment with branding and go to market much quicker. The number of businesses independently manufacturing, promoting, selling, and shipping their own goods is rapidly rising, which is changing the eCommerce landscape on the whole.
The D2C business model often allows suppliers to provide a superior end-to-end brand experience as they retain control over the whole process. The company manages everything—creating a winning product, attracting an audience, marketing the product, delivering the product, and owning customer communication and experience.
The direct interaction with consumers enables D2C suppliers to collect customer data and address issues without intermediaries slowing things down. And while 80% of traditional retailers have experienced sales decline during the pandemic, 52% of D2C brands have instead seen surges in demand. This success is thanks to the agility that comes with this approach, which brings us to the next trend: instant or on-demand production.
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From Long Lead Times to Instant or On-Demand Production
China's rise as a manufacturing power has spurred eCommerce growth, and today it's easier to find a manufacturer than ever before. This means it takes less time to start a brand from scratch, react to trends and tendencies, and turn them into physical products.
If we take fashion as an example, the days when the fashion year consisted of spring, summer, winter, and fall collections are long gone. Instead, the winning brands are not only launching new products in response to new trends and demands, but they're also launching whole new brands to meet them.
Small "point solutions" for well-defined niche audiences can be developed and and scaled quickly. An example of this is Amazon, which will create products when a category is doing well, as they sit in the middle of all of the data and manage their own multi-brand commerce strategy.
From Physical Stores to Advanced Logistics & Distribution Models
Moving forward, distribution will be one of the most critical aspects of eCommerce. The need for brick-and-mortar retail space will continue to decrease as brands are increasingly able to rely on advanced logistics and distribution systems that save money and provide a better customer experience.
As efficiency increases, the need to hold large quantities in stock also decreases, further diminishing the need for a physical footprint. Options like drop shipping and AI-based fulfillment make launching, testing, and tweaking new brands even easier.
From Static Websites to Immersive Omnichannel Shopping Experiences
In the wake of the pandemic, brands have had to adapt to the new dimensions of eCommerce, where customer experience (CX) and innovation are key.
Brand success is based on three primary factors: a clear purpose, a solid understanding of key customer targets, and an exceptional brand experience. This last component is critical in digital commerce, where customers interact with the brand via multiple touchpoints. Strong brands ensure consistent messaging by optimizing the customer buying journey to reinforce brand values, perceptions, and performance. But the consistency needs to be maintained throughout the entire digital customer experience.
Brands affect every point in the conversion funnel for potential customers and shouldn’t measure just clicks as a KPI. Brands must measure the top and the middle of the funnel, paying attention to consumer engagement, sentiment, and interaction with shopping ads and content. According to a June 2021 survey from BrandTotal, 79% of respondents said they had discovered a brand they were not previously aware of via a sponsored post that resulted in a purchase, and 84% of those who discovered a new product purchased it in the last three months.
These multi-brand / multi-touchpoint strategies are extremely effective as strong brands have been shown to consistently outperform the market. Yet, as choices and channels increase, strong brands cannot get too comfortable. They must embrace new methods and approaches to beat their competition. And being cutting edge pays off. Research by McKinsey shows that businesses that are brand innovators grow their topline revenue four percentage points faster than less-innovative companies.
Linear commerce, social commerce, livestream commerce, and mobile commerce are just some of the recent innovations for companies to evaluate in their digital strategy. Couple these innovations with cutting edge technology such as AI-based visual search from companies like Syte, mobile commerce geotargeting available through Attentive, and enhanced visuals with 3D & augmented reality offered by Threekit—forward-thinking brands have much at their disposal to meet the increasing demand of engaging online experiences.
Implementing a Solid Multi-Brand Strategy
Today's consumer expects a smooth, seamless experience regardless of what country they're in, what channel they're using, or which brand in your portfolio they're buying. This requires companies to manage customers' whole lifecycle and choose tech that gathers all touchpoints and data in the same system.
Opting for a unified eCommerce experience rather than a single, best-of-breed point solution for each brand is a better and more sustainable path to success and ROI for multi-brand businesses. Whether your customer stops by a physical store to return an item or browses your website at midnight, you need to foster that relationship built on trust and minimized risk—interact with them and track, manage, and close the sale.
At Vaimo, we're presently helping more than 65 multi-brand, multi-currency, multi-language clients. Get in touch with our team of experts to learn how we can help you take your eCommerce business to the next level!