A long tail of 20,000 companies below the top 100 produced half of all growth. Ads would be hopelessly ex-pensive so driving demand would be im-possible. No large retailer would stock it. The growth of «just-in-time» manufacturing means start-ups no longer need to splurge on inventory.
Other service providers can pass on economies of scale once available only to consumer-goods giants. Lumi, a packaging firm, uses a network of factories to design and produce packaging for small brands. It represents thousands of brands so can get better prices. Businesses such as ShipBob, a Chicago startup, do something similar with ship-ping, allowing small brands to offer faster, cheaper deliveries.
The costs are high but it gives them access to the online giant’s shipping services and huge user base. Many of the big firms have, by con-trast, been reluctant to sell on the giant’s website, so feature low in search rankings. More of them have started selling on Ama-zon in recent years, says R.J. Hottovy of Morningstar, a research firm, but it still represents a small slice of their sales. He sold $50,000 of snacks and then, on the basis of data gleaned, Blake’s Seed Based changed its recipe and relaunched in September.
m Gemi, an on-line seller of posh shoes, offers new de-signs weekly so can respond precisely to consumer demands. Their giant rivals, by contrast, use data filtered by retailers. Consumer-goods behemoths are well aware of the threat posed by microbrand ankle-biters. One response is to buy them.
Nestlé’s acquisition in 2017 of Blue Bottle, a hip Californian coffee brand, bought it ex-posure to new market segments. Competition is fierce to buy the best mi-crobrands so big firms may overpay for their acquisition, says Mr Hottovy. Other big firms are trying to grow their own brands. Earlier this year Kraft Heinz launched Spring-board, an incubator for small, disruptive food and drink brands.
In the long term some small brands will be swallowed up but others will be encour-aged, argues Sonali De Rycker of Accel, a venture-capital firm. More will want to re-main independent for longer, or entirely, which will mean larger deals or ipos.