Since the very first e-commerce purchase in 1994, the process of buying products online has evolved more rapidly. The complex, multi-channel retail industry we know today has created a unique dilemma for modern brands.
Every e-commerce company must confront a fork in the road on the path to defining its audience: Will it emphasize financial value, or appeal to customers’ personal values first?
Sound oversimplified? It’s not. Here’s why.
The Church of Cheap
Online commerce in the early days of the internet was driven by classic business strategy: increase convenience and affordability, get more customers. Sellers such as Amazon learned from the failures of their dot-com bubble predecessors, and invested heavily in efficient warehousing and fulfillment operations so they could offer competitive prices and quick delivery.
Brick-and-mortar retail giants like Staples and Walmart also built successful e-commerce arms, and a slew of price comparison sites like PriceGrabber and Shopzilla launched to meet consumer desire for hunting down the best deal. And shoppers loved it.
The Power of a Good Deal
No matter how the path-to-purchase has transformed over time, shoppers will always care about value. Even though 80% of consumers believe it is important for companies and brands to behave ethically, price is consistently the number one attribute shoppers care about when making a buying decision.
The millennial generation is no exception: They use coupons more frequently than their parents, and are much more likely to delay purchases until they can verify the value. The recession has also made many millennials more cautious with their spending habits.
This deeply human desire for discounts and savings is one major reason why brands like Forever 21, Costco, Walmart and DollarTree are successful, and Amazon has sparked nothing short of a cosmic shift in the e-commerce universe. Millennials are busy, they are spend-thrifty and they love fast shipping—for many purchases, these priorities will always win out.
In order to compete on price, new e-commerce brands must be prepared to develop cheaper manufacturing or fulfillment methods, excel in optimized price bidding and/or provide faster delivery. The alternative is an entirely different path—the lifestyle route.
The Curse of Plenty
Today, consumers can find almost anything they want online, and even identify the cheapest option in a split second via Google. Most of us are much less delighted by the novelty of a single mouse click prompting the magical appearance of an item on our doorstep.
Maybe it’s because we’re spoiled. But signs point to a more nuanced perspective; as our access to global products increases, our desire to own “things” becomes driven by entirely different motivations. This op-ed by Josh Allan Dysktra said it best:
Humanity is experiencing an evolution in consciousness. We are starting to think differently about what it means to ‘own’ something […] When we can easily acquire anything, the question becomes, ‘What do we do with this?’ The value now lies in the doing. In other words, the reason we acquire ‘stuff’ is becoming more about what we get from the acquisition. Purchasing something isn’t really about the thing itself anymore. Today, a product or service is powerful because of how it connects people to something—or someone—else. It has impact because we can do something worthwhile with it, tell others about it, or have it say something about us.”
Heaps of evidence suggests the next generation of consumers do feel dramatically different about buying and owning products. Either consumers need to buy something cheap and fast, or they demand something more from their products—a sense of meaning and identity that goes beyond two-day shipping and a competitive price tag.
The New Consumer
As most marketers know, the newest generation of shoppers have a whole different set of priorities when it comes to how they consume:
- They are global citizens – As Dr. Mel Prince of Southern Connecticut State University put it, young consumers “see themselves as ‘citizens of the world’ more than in the past.” They are much more likely to participate in diverse cultural activities, and to care about global issues.
- They seek authenticity and hand-crafted goods – The new consumer has a deeper allegiance to independently owned businesses than chains, and is more likely to support locally-crafted items.
- They care about social impact — 75% of millennials feel that it’s important that a company gives back to society instead of just making a profit.
- They respect transparency – Being the cheapest product out there doesn’t often go hand-in-hand with being fully transparent about your business operations. Millennials don’t demand transparency for all products, but when they want to know the whole truth.
- They are loyal – In spite of the perception that young people are easily distracted by the next shiny thing, 7 out of 10 millennials are deeply loyal to brands they love… but they only love those who take the time to understand their needs.
Navigating Lifestyle Lane
Why do men splurge a few hundred bucks to buy a hand-crafted axe from Best Made Co. or pay an extra $5 a month to buy razors from Harry’s instead of Schick? Because these brands have made it their priority to understand, know and serve the personal identity of their customer. These products aren’t necessarily the best financial value on the market, they are symbols of what the customer cares about. Their lifestyle. Their passion. Their raison d’etre. Perhaps it’s design, luxury, hand-made, comfort or environmental sustainability… no matter what it is, this product embodies their personal values.
Affordability and personal values don’t need to be mutually exclusive. Brands like Warby Parker manage to provide reasonable prices while offering seamless customer experience, a cause-based mission and reliable product quality. That being said, Warby Parker’s glasses start at $95, and will never compete on price with a brand like 39 Dollar Glasses. And that’s okay. Competitive pricing can be part of their value set, but their primary goal is to drive growth through quality customer experience, creative branding, superior products and charitable values—the lifestyle appeal comes first.
The e-commerce industry is booming, and there’s enough room for both lifestyle and low-priced brands to succeed. But e-commerce brands don’t have the luxury of wavering on this decision.
One day, you’ll find yourself with a fully developed supply chain, a warehouse full of products and 36 employees. The bedrocks of your business—your labor costs, sustainability efforts, raw materials, sourcing methods, customer service methods and brand story—will be mostly crystallized.
While a SaaS company has the luxury of pivoting and developing a new model from scratch, you will already have manufacturing and fulfillment processes in place—and you won’t have the luxury of easily doubling back your identity.
So what road will you travel?