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Do what you love, impact an industry
Consumer goods startups have been in the headlines for failing the expectations of shareholders and customers. Turns out makers are the antidote for recent threats to the space.
Recent weeks have seen numerous headlines of consumer brands failing to meet the expectations of shareholders and customers.
The aftermath has revealed bankruptcies, fallen stock prices, and a wave of investor skepticism in response to challenges in the space.
Brandless? Shut down.
Casper? Post-IPO, trading less than 5% above the amount of funds it raised.
Outdoor Voices? Losing $2M a month on $40M revenue.
For the last decade, the direct-to-consumer category has been growing, and raising money, at unprecedented rates. The early success of companies like Warby Parker, Glossier, and Harry’s, combined with the relatively low barriers to starting an online business, has resulted in a massive influx of capital and competition. It’s the reason we now have nearly 200 online mattress companies.
But, there is an antidote for recent threats to the space. Because many of these brands have been distracted by venture capital demands to acquire customers at an unprofitable pace, with founders motivated more by signals in trending product markets rather than by innate passions, many have overlooked the critical importance of product innovation, offering up products that are just “good enough” rather than products with truly unique value propositions. By relying too heavily on contract manufacturers, and overemphasizing brand marketing as a primary differentiator, businesses have missed out on strategic opportunities to set their companies apart with one-of-a-kind products that are bolstered by a compelling founder’s story.
Especially considering the current hesitancy on the part of funders to avoid the next consumer investing mishap, an opportunity is clearing for a new wave of consumer businesses founded by makers—those producing products born from a mastery of skill, creativity, and the genuine passion of the founders behind the business. Uniquely, this class of founders is more naturally disposed to eschew VC funding in favor of more sustainable and future-proofed approaches to profitability, such as bootstrapping, debt, or revenue-based arrangements.
In founding my company Schmidt’s Naturals in 2010, without any outside funding, I entered the deodorant market with an innovative homemade formula I’d created in an attempt to solve my frustration with the existing options in the category. My waterless base and ingredient listing was wildly different from anything on the market and was packaged in sustainable glass jars which were diametrically counter to the industry mold. By attracting early attention with the unusual packaging, I set up the company to expand into more familiar stick applicators, a format I formulated for years behind the scenes in preparation for expanding to the mass market.
Schmidt’s was positioned as healthy, accessible, and perhaps most importantly, a bit peculiar. We quickly developed an established following that served as the basis for growth that would disrupt our competition, which was comprised of brands that struggled to win customer loyalty with their effectiveness and differentiate themselves with their packaging, scent offerings, and formulations.
With the early success of my original product lines and the credibility my backstory lent to our brand, consumer enthusiasm propelled us into expanding our deodorant product line and entering adjacent categories such as oral care, home care, and soap. Seven years after founding, Schmidt’s was acquired by Unilever, who recognized our impact on the industry and was eager to complement its family of brands with our distinguishable products.
Through my experience, I came to understand four primary considerations for harnessing the powers of any maker-born brand:
When you create a product and brand out of a true love for the work you are doing, you have an immediate leg up on the competition—one that’s observable to your customers. Starting and growing Schmidt’s from my kitchen as a pregnant mom-to-be was the end of a decade-long quest to find fulfillment in my work. I had been determined not to settle for a job that didn’t fulfill me, and when I discovered my passion for formulating natural personal care products, I was more empowered than I’d ever felt in my life. It’s a story and ambition of breaking out that so many of us can aspire or relate to, and one that caused customers to root for Schmidt’s all the way from my humble days of taking products to craft markets, to lining the shelves of Target and Costco. A maker’s story is something that money simply cannot buy—it’s priceless.
Early on, the motivation to solve my frustrations with other brands provided me with the ambition to go above and beyond in product formulation. I knew I wasn’t alone in my dissatisfaction, and I seized the opportunity to create a breakthrough alternative, one that required countless hands-on revisions and optimizations throughout the process.
Later, when copycats started to crop up, I planfully innovated with new ingredients that would define our sensitive skin, charcoal, soap, and oral care lines and allow us to maintain a competitive edge. Without my maker mindset, I would have had to rely on third parties for innovation, which would have resulted in lost time and products that looked similar to offerings already on the market.
As a maker brand, there comes a point when the decision must be made to continue making in house or to outsource production. As CEO of Schmidt’s, I established and maintained in-house manufacturing, growing from batch sizes of thirty deodorants on my stovetop to fifty thousand in a full-scale facility with 150 employees. Needless to say, the challenges were massive, but I attribute much of the company’s success to this decision. By manufacturing in-house, I was able to ensure quality control and directly stress test our capabilities. Making in house also ensures the confidentiality of your formulas and allows for flexibility when offering limited-edition product runs, allowing you to stay nimble and innovate quickly. Another benefit is less pressure in forecasting, which can be problematic when working with co-packers who require months of notice and are not able to produce on the fly.
I spent my earliest days of the business selling at farmers markets, street festivals and craft shows. This offered an incredible opportunity to talk face-to-face with my customers and to incorporate feedback on my core product. Whether it was textural tweaks that could be applied to my formula, the adjustment of scent levels, price sensitivity, or changes to the packaging and sizing of my products, my community served as a no-cost focus group. Recognizing the significant improvements that resulted from this process as the company grew, I continued to lean into this feedback loop by commissioning surveys, clinical studies, R&D, and collecting insights to plan our next moves.
By successfully balancing a maker mindset with keen business sense, it’s clear that maker-born brands are equipped to tap into significant competitive advantages. And I believe that as the industry experiences a cooling over the coming year, that the time is right for makers to capitalize on this opportunity.
For those refusing to recognize the power of this movement, consider the following phrase: "You’ll never win playing a game somebody else loves more than you.”
About the author
She is also the author of Supermaker: Crafting Business on Your Own Terms, out April 28, 2020 on Chronicle Books.