unpackingDS_podcast
Peter_Episode1
PODCAST - Unpacking the digital shelf

How Niches Destroy the Mass Market

Based on an article from business and tech analyst Ben Thompson, Rob and Peter explore how the arc of the newspaper industry holds lessons for how brands will need to adapt to masses of markets to win.

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TRANSCRIPT

Peter:

Welcome to unpacking the digital shelf where we explore brand manufacturing in the digital age.

Peter:

Hey everyone. Thanks for joining us to unpack the digital shelf. Peter Crosby here from our studios on the Cape, and Rob is here from the Berkshires and Rob, I'm just going to jump right in. Inspired by our big ideas guru Ben Thompson, he wrote an article about how the internet breaks down previous structural competitive advantages in all industries. I mean, you and I have been talking about forecasting that the result of this would be moving from a mass market for brands to masses of markets for brands. You recap it better than I do, but, talk about sort of where the power of the niche is, taking brand manufacturers particularly the opportunity that arises because of where the internet has gone.

Rob:

Yeah. Ben Thompson uses the quote fall of newspapers in the article, as a way to illustrate the point. Ultimately, if you were a newspaper you could create basically a little monopoly by being the best newspaper in a small market. And so the New York times, for example, the best newspaper in New York could service the entire New York Metro area. And they were the only ones that had the logistics capacity to print and deliver the paper on a daily basis. Remember that the paper is a physical thing, it's a daily thing. And so you've got to have your printing facilities and your delivery facilities, all working in lockstep to be able to produce the whole paper every single day and get it on people's doorsteps before they wake up. And so the New York times then in that world, they're a scale of logistics, was a meaningful advantage. And it meant that for example, the Chicago Tribune could not go into the New York market very effectively because Chicago, it would be a huge capital expense. And in that world, New York, the way the New York times looked at their market was, everyone that's wealthy enough within a geographic radius. And so they had to practice a form of journalism, which, you know, there's sort of a religiousness to the way that people discuss journalism, but was a show, both sides of the argument in journalism, right? Like we're unbiased, we're fair and unbiased. And so they had a paper that reflected that and they had an op ed column, a set of columnists, for example, that had the conservative and the liberal side.

Peter:

Because their reach was limited, right? So their reach was limited, they had to represent both exactly in order to serve their audience. Yeah.

Rob:

Exactly. They needed a good enough product for everybody, right. If they, if they were, for example, going to be a hardcore liberal publication, a lot of people that subscribed to the times would have just stopped or if they were going to go the other way and be hardcore conservative. A lot of people that would have subscribed to the Times would stop. And so they needed a good enough product for the whole market. And, the analogy to brand manufacturing is in the big box era 62 to 2008, you needed to try to address all of America to scale advantage on your manufacturing investment, on your capital investment and on reach. So you couldn't segment down to a market, a specific market segment, you needed to make a good enough product for everyone, and you would compete on scale and efficiency. So what Ben Thompson says is on the internet distribution is free. So this whole, how you define your market and who you, who is your customer changes dramatically. All of a sudden the New York Times is not just competing with other upstarts in New York. It is competing with the LA times and the Guardian in the UK and the BBC and the Chicago Tribune and, and all of these, all of these papers. And so a lot of the death of the newspaper, a lot of people focus on, Oh, you know, advertising moved online and blah, blah, blah, blah, blah, and the internet killed the newspaper. They, what they, what they miss, is that a big part of the internet killing the newspaper is that all of a sudden it's a winner take all market. All of a sudden LA times was not insulated from the New York times, competing with them by geography. All of a sudden LA times is now competing with the New York times. And the New York Times has a better paper and the LA times went bankrupt. And, and so the competition in that winner take all market is tough. Now another side effect of this is that being good enough for everyone leaves you vulnerable. So in the world of newspapers, for example, the New York times, like I find their tech coverage to be bad, frankly, and it's extremely biased, it just misses a lot of facts and details that matter when reporting on cases, they're journalists don't really understand tech deeply. If you compare that to Ben Thompson who lives in briefs tech all day long, or Benedict Evans or Matthew Ball and media, or whoever, the, whoever the specialist is best specialist in the world, isn't the field, New York times is worse. And so if you're somebody who cares about tech, don't spend time reading the times. If you're somebody who cares about the media, don't spend time reading. You know, if you're spending, if you love the media, read Matthew Ball, he's better, his articles are deeper and they'll give you a better understanding of what's going on. And you'll get an understanding of the, of the, of the model. And that this model is basically that instead of the market being a segment of like boomers, the market is all of a segment, is all of a sudden, a segment of people who deeply care about tech. And it means that the markets, the market segments themselves are smaller and more specific, and people that can serve those smaller market segments perfectly we'll beat the mass market products and bring manufacturing. You see that right in brand manufacturing, in a store, we talked about this with Sam Gagliardi, from IRI in a store, Folgers has, you know, four or five, six brands they compete against online on the first page of Amazon. There's 36. And people can really get specific about what they care about in their purchasing in a way that they can't, in-store just due to limited selection with unlimited selection. They can niche down to a very specific, highly targeted product. That's perfect for them. And this means that these mass market products get cut from all sides, right? They get there, there's a slightly better product for this market segment, a slightly better product for this market segment, a slightly better product in that market segment. And instead of one product, having 70% of the market, you have 50 products that split 70% of the market. And that's like a good thing for the consumer, but it's a tough thing for these companies that have achieved scale on a mass market product and tying this back to media. What he says is for the New York times, you know, his advice to them is figure out who your best customer is and right for them, you know, their op-ed column calmness has been a mess for years. And people who love the times hate the conservatives in the column. The time tends, it tends to bend a little bit to the left. And so Ben is like, look, just embrace that. Stop trying to play both sides, stop trying to do this journalism where you're trying to appeal for everyone that doesn't exist anymore.

Peter:

Yeah. I mean, I guess part of the question for me, and this is specifically on the times there are any of these, when you're talking about journalism versus brand manufacturing, like journalism, one would hope that being able to focus on your audience does not necessarily mean that you do not expose them to different points of view. So because, and so we'll see whether or not that holds true. I mean, there's the broader to whatever degree it exists. The broader responsibility of if you are a reporter of news and you report to be wanting to represent all the news that's fit to print. Then, I think there is some value in having competing, you know, as a subscriber to the times and actually to other newspapers, like I think there's value to the exposure to multiple points of view. Um That said, you may be absolutely right. That might not help your subscription base at all. But there's also hopefully a mission based there that...

Rob:

I mean, let's be honest. These are, these are, these are for profit businesses, right? So you've got to treat it like a business. And I think that if you appeal to everybody these days, you appeal to no one specifically. I think if people want to have both sides of the story, they're not actually being that well served by the times anyway, because there's better, stronger resources that are more specific on both sides. And so, I don't know. I mean, you end up in the middle where who's your best customer? So I looked at my dad and my dad was a GE capital executive, and he found it very, very important for his career to understand both sides. So, you know, he subscribed to lots of newspapers. You know, we had the financial times, the journal, the New York times, when we lived abroad on the trip and, you know, a bunch of other publications and he would read them every single day to understand what people on from the various different points of view are saying. And I think that's kind of the strategy. Like if your goal is to be educated and understand both sides, you don't get it from one source, you get it from multiple sources and the internet makes that really easy. And so, I don't know, like I think the journalism mantra, you get everything from one place is maybe dated. And I think for brand manufacturing, I think the same thing is true. Like the, you can, you can get this one product works for everyone the same way. Probably, you know, it's not happening.

Peter:

Yeah, but then that must be a huge challenge to brands thinking about their, their assortments and product development chain. It just, again, supports the need for nimbleness and agility and the scale instead of being the scale of masses of markets needs to be. Mass markets needs to be the scale of masses of markets. and tons of niche brands, and tons of different marketing campaigns to different constituencies in a way that they really haven't had to tackle at this level of speed before.

Rob:

Yeah. I mean, I think if you look at, you know, look at, look at online, purchasing by some measures, Shopify is the second biggest eCommerce platform in North America. Shopify is made of millions of millions of websites doing each relatively small amounts of business, but the business is super targeted at specific niches. And so you've got a mass market player, Amazon, and then, you know, also Walmart is doing a great job and then other mass market players are coming up like a target or a home Depot are doing, doing well. And then you've got an absolute fragmentation of the rest of the market into these tiny little sites that are powered by Shopify. It's just an illustration.

Peter:

Yeah. And just to cover like the last sort of Ben Thompson closed by making kind of three points. And I'd like to sort of go through and think about his point and then maybe relating it to our brand manufacturer audience to close. So, the hopeful note about the internet, bringing us closer to the truth by virtue of increasing the amount of information is quite obviously correct. He goes on to say the light revealing the dust in the air in terms of the African American experience is coming not from traditional publications, but from the fact that everyone is now a publisher. And so when I think about that and then relating that truth, that we're seeing where so much of the change that is happening right now is being driven by masses of voices. I think that's also the trend that we're seeing in terms of these niche products, as well as micro influencers, right? That whole brand can be made from a ton of individuals affecting their audience in small, tiny little markets globally. It's, I mean, that's a really exciting opportunity, but it takes a lot to manage it. And secondly he talks about, you know, he's talking about the New York times, finding it difficult to sustain the opinion section representing all sides of the issues that you were talking about. And he does close with the point that New York times ultimate responsibility is to its audience and its reporters, which is the point that you were making. When you think about that in the brand manufacturer way, it's the same thing, like getting super niche and super focused means that you can create a product that resonates and creates loyalty that will bring people back to you again and again. And I would say even from a creative point of view, you know, my, my work in marketing, that's an exciting challenge. And, in some ways a bigger challenge than a more exciting creative and, and empathetic challenge than a big brand would ever represent. And then finally, third, it's talking about sort of the Facebook and Google lack of competition. They are defining the terms of that competition. And he's saying instead of insisting, either company levers their power explicitly, particularly in terms of politicians that have electoral accountability, more attention should be paid to the fact that that power is completely unaccountable in the first place and apply it in so many ways we cannot see. So I think that idea that, the existence of a Shopify to your point, and I think creates a much more democratic society and opportunity for success than maybe in the advertising market online today, that there's, you know, and seeing retailer ad platforms pop up, I think in some ways there are more ways to be able to take advantage of reaching audiences in different ways than ever before.

Peter:

So this is a call to arms to think about how we transition from mass market to masses of markets and what that means in terms of new kinds of scales, different ways to market, et cetera. So as part of that journey, we are dedicating an entire series of virtual sessions in Q3 to content and conversations around going direct to sessions have already started. Go to digitalshelfinstitute.org to join our email list, to get all the updates. It's really going to be a powerful series. We've got point of views from analysts direct to consumer experts and brand execs who have been there and are doing that. It's going to be really cool. So please join us and thanks as always for being part of our community.