The Age of the Consumer: How Startups are Beating Big Brands
Uncovering how technology is shifting power away from companies and toward users
The Age of the Consumer: How Startups are Beating Big Brands
Not too long ago, consumers were drawn to big brands with global recognition, relying on familiarity and reputation to make their purchasing decisions. However, a notable shift has occurred in recent times. Today's buyers are increasingly veering towards supporting smaller companies, driven by a desire to connect with the people behind the brand and align with the values that these businesses stand for. This shift signifies a transformation in user behavior and ushering in what I call the age of the consumer.
In this article, I explore the paradigm shift taking place in consumerism. I uncover how increased access to information, the rise of social media, and advancements in technology (AI) have shifted consumer buying power away from corporations and toward end users. Finally, I provide insights into the future of consumer behavior amidst the backdrop of an ever-evolving digital and technological landscape.
And, with that, let’s get into it.
The Age of Authenticity
In the past, consumers would hear about new products and services over the radio, on television ads, and in physical pamphlets. What we lacked back then – primarily key information about where products are sourced from (organic versus factory), how labor is conducted (fair wages versus unstable factory conditions), and who profits from each purchase (a large corporation or budding entrepreneur) – we now have increased access to. The reason? Information.
As this new, digital era continues to democratize information, consumers have become more discerning about the products they buy and the companies they support. On top of that, the prevalence of social media has given consumers unprecedented access to company values. According to Statista, nearly 58% of the global population uses social media. For many, social media serves as the entry point for everything they do online: communication, news, entertainment, and more recently, commerce.
Product discovery from social media players such as Instagram, Snapchat, and TikTok, allows potential buyers to see the inner workings of how the products are used by people they know and trust. Said differently, social media is word of mouth on steroids. What makes social commerce so important? It represents the shift from retailers and brands to people.
Consumers these days seek transparency from businesses, leading to a rise in favor of smaller companies that can communicate their story more intimately. Smaller businesses can often showcase the human faces behind the brand, fostering trust and genuine connections with their audience. This authenticity builds stronger emotional ties, compelling consumers to choose products that resonate with their own values.
Empowering Local Communities
Supporting smaller businesses also contributes to the empowerment of local communities. Consumers increasingly understand that patronizing smaller companies helps boost local economies, create jobs, and promote entrepreneurship. By supporting local businesses, consumers feel a sense of pride in contributing to the growth and well-being of their communities.
A good example of consumers supporting local communities is the growth in famers markets and organic food sales over the past decade. Total organic food sales in 2022 reached a record $67.6 billion, according to the Organic Trade Association and pictured below. This represents nearly double the amount of organic food sales in 2013 of approximately $30.2 billion.
What’s more, the number of farmers markets in the United States nearly quintupled since 1994, from 1,755 to 8,771 farmers markets in 2019 according to the USDA. While the shift to a healthy, cleaner lifestyle and diet has certainly contributed to the rise of organic food purchases, it is quite evident that consumer sentiment with where they spend their dollars – everything from discretionary retail goods to non-discretionary consumer staples – has exploded in recent years.
Where did this empowerment come from? In short, increased access to data through technology has allowed consumers to be more educated about what they eat. Not only that, but more and more startups with innovative, healthier products have poked holes at the various mass marketing efforts made over decades by corporations who have traditionally promoted non-organic and typically less healthy food options. In an ideal world, as users continue to gather more information, they will support the businesses with the best products for them.
Niche Offerings
Startups, local brands, and small players often specialize in niche markets, offering unique and innovative products that may not be readily available from big brands. Consumers these days seek personalized experiences and products tailored to their individual needs, and budding enterprises are better positioned to cater to these demands. Additionally, big brands are not as nimble as their newer counterparts. At big firms, there are too many cooks in the kitchen required to make the necessary adjustments to keep pace with lean teams. The inherent bureaucratic nature of large organizations causes stagnation and reduces innovation.
Niche products served up by hungry, highly motivated micro-businesses are becoming the norm. Startups often come with a meaningful story, detailing the passion and dedication that went into their creation, which differs wildly from broad thematic messaging from large corporations. Consumers are captivated by these personal narratives, and it further reinforces their decision to choose local over generic alternatives.
What’s driving the push towards specialized, niche offerings? Advancements in technology and artificial intelligence (AI) are allowing companies to provide highly specialized goods and services in a way that was not possible. Companies use neural networks that rely on training data to learn and improve accuracy of predictions over time. As more consumers click on ads on Instagram (or which platform), watch videos on TikTok (or name your platform), and search in Google (or, again, name your search engine), companies are building neural networks to train the computer what to show you next.
In the end, consumers benefit from these advancements in technology. Why? Small brands can provide highly curated, specialized products and services while also forcing their bigger peers to innovate. If they don’t, the consumer will continue to choose the startup over the incumbent.
Direct Engagement
Consumers have a greater opportunity for direct interaction with the founders and employees of small businesses. This level of engagement allows for personalized customer service, prompt responses to queries, and a sense of being valued as an individual rather than just another customer. Time and again, users are frustrated waiting on long queues and talking to bots that are often used by incumbents.
Users appreciate feeling heard and understood by the brands they support. Smaller companies are more attuned to their customers' needs, leading to higher customer satisfaction levels. Social media platforms such as Twitter (now X?) allow for users to directly engage with Founders, executives, and companies of all shapes and sizes. This type of direct access was nearly impossible just two decades ago.
Where Consumer Behavior is Headed
We are headed towards the age of the consumer. I believe that the shift we have seen over the last twenty years, due to the rise of access to information, social media, and technology (AI), will continue to move in favor of the end user. Here are some predications:
End users will be able to have increased price transparency due to data aggregation, machine learning, and data scraping from various sources.
End users will be able to interact in some way with a leading executive at any company because of social media.
End users will find products from interacting with friends due to technology and increased smartphone usage.
End users will have increased visibility into where their dollars are going once the money changes hands because of increased information disclosures by companies.
End users will have access to higher quality goods and services as big companies are forced to innovate and startups continue to offer innovative, niche offerings.
Much of the future benefits should accrue to the consumer. However, it would be naïve to think that businesses won’t benefit from advancements in technology, increased consumer purchasing information, and enhanced predictive AI models. Just as consumers will be able to use information to their advantage, so will businesses. Businesses are and will continue to monitor, track, and develop trained models to pinpoint what products and services to build, where to market them, and who to target.
From the business side, one of the key advantages that businesses have over end users is data. It’s a one-way street: businesses can use customer data to make well-informed decisions, consumers have limited access today. This dichotomy poses a challenge around who owns customer data and who has access. For now, the access to data is heavily advantaging the side of corporations. Businesses today can use customer data to monetize their customer base (Snapchat serving ads targeted by demographic), provide highly competitive substitutes (i.e. Amazon offering their own brands on their platform), and build countless products and features (Bumble providing six features that serve the same function of finding dates).
To learn more about how the business profits and thinks about user monetization and data consumption, I linked to a piece I wrote that covers Snapchat (Snap Inc.). In it, you can see the role that advertising plays as the link between social media companies and its users.
Conclusion
The transformation in consumer behavior, shifting from big brands to smaller companies, signifies a deeper societal change. Consumers now more than ever seek more than just products to fill immediate needs; they yearn for connections and shared values with the brands they support. Startups, local farmers markets, and small teams have emerged as the torchbearers of authenticity, sustainability, and community empowerment, resonating with consumers on a profound level.
In the years to come, this trend is expected to gain even more momentum. As consumers continue to prioritize meaningful connections, smaller companies with meaningful stories to tell and values to share will flourish, demonstrating that mission driven businesses have a unique edge in capturing the hearts – and wallets – of today's conscious consumers.