Fast or Frivolous 2018: How consumer brands are evolving, accelerating and evaporating

The Backstory

Fast or Frivolous? How consumer brands are evolving, accelerating and evaporating, our flagship report from 2017, charted the rapid changes—but also continuity—that the internet brought to the consumer economy. Before the internet, the playbook for consumer brands remained largely static, with incremental improvements such as catalogs, but the digital revolution gave rise to a new flurry of activity and distribution methods. Thanks to a the digital point of entry, which requires much less capital and resources, the number of brands flowered exponentially.

But even though the landscape changed, the fundamental process of doing “good business” did not. The maxims, “don’t spend more than you make,” and, “don’t grow too fast,” should have continued to guide consumer brands, but many batted these adages away as antiquated and no longer relevant to their digitally-native philosophies, particularly given the abundant influx of venture capital funneled to digital brands, totaling billions of dollars—a level of financing that legacy brands did not raise. Subsequently, many digitally-native brands grew too fast and spent too much—some have since shuttered, while many others struggle to stand out, stay afloat or find suitable exits that make money for everyone involved in the business.

2018 has been one of the more transformational years in the consumer economy, largely affirming the path Fast or Frivolous 2017 anticipated brands to follow. First, while the rise of new digitally-native brands has not slowed, more are diversifying their channels into offline spaces. Witnessing this return to traditional avenues, we saw the peak of digitization in 2017, and that increasingly, digitally-native businesses are returning to the multi-channel sales strategy that brands have always used, in which ecommerce, retail and wholesale all play a role. As more traditional brands devote greater attention to selling direct-to-consumer as opposed to wholesale and offline retail, multi-channel businesses will grow more uniform, regardless of whether a brand started online or offline.

This report is both a follow-up of Fast or Frivolous 2017—a continued exploration of what the brands featured in the original report have faced over the course of the past year—and now an ongoing annual survey of the consumer brand landscape.

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Altruistic commerce or commercial altruism? The benefits and limitations of philanthrocapitalism

In today’s hyper-globalized and -politicized world, more consumer product companies are seeking to align with initiatives that ameliorate society and the world, either at inception or later in their life cycle. Whether environmental sustainability, social justice or technological democratization, for-profit companies incorporate elements of the nonprofit world into their business models—at least on paper.

But regardless of the sincerity and impact of their socially-minded missions, for-profit companies are inherently driven to generate as much revenue and profit as possible, at the expense of everything else. This report questions the sincerity and effectiveness of their social missions, outlining the inevitable tradeoffs that for-profit companies make in order to both run their businesses and give back to society.

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For-profits versus non-profits and the rise of philanthrocapitalism

Today’s rise in for-profit social enterprises diverges from the traditional path consume product companies have taken to “do good”: philanthropy. Traditional philanthropy is distinct (and criticized) for its timeline; it occurs only after great wealth is accumulated rather than as a company grows. With mounting expectations that for-profit companies will do more throughout their life cycle than simply sell products and make money, traditional philanthropy is increasingly seen as working backwards, when for-profit companies should be “doing good” every step of the way, i.e. paying it forward.

More entrepreneurs are now pivoting to a new model of charity called philanthrocapitalism, which folds philanthropy into for-profit business practices. Philanthrocapitalism views capitalism itself as philanthropic because it powers innovation and creates products that improve life, offered at increasingly lower prices. More entrepreneurs are embracing philanthrocapitalism today, guided by the impulse to control where their capital goes; instead of contributing to charity, they use the capital to accelerate economic development. The idea, according to Michael Porter and Mark Kramer, founders of The Center for Effective Philanthropy, is that “businesses acting as business, not as charitable donors, are the most powerful force for addressing the pressing issues we face.” Still, critics point out that philanthrocapitalism takes dangerous steps in privatizing social policy.

The line between for-profit and non-profit companies appears to be blurring more than ever before as buzzwords like “transparency” and “corporate social responsibility” continue to circulate. B Corps, for instance, are for-profit companies “certified by the nonprofit B Lab as voluntarily meeting higher standards of transparency, accountability, and performance.” But as as for-profits take on elements of nonprofits, it’s all the more important to question the intentions and potential impact of any philanthropic donation and any social initiative attached to a for-profit business. Investigating how for-profit companies balance generating revenue and fulfilling a public good helps to elucidate the level of authenticity in a business’ purported social mission.

Intentions and caveats behind for-profit altruism

Though their actions may be guided by the impulse to generate as much revenue as possible, for-profit companies don’t exist in a vacuum. Their decisions and actions, whether within the company, throughout its supply chain, or in the hands of shoppers, have wide-reaching and reverberating effects on employees, consumers, society and the planet. Though it is in a company’s best moral interest to reduce its carbon footprint, provide broad employment benefits, stand for equal rights and create products that improve life without causing detriment, there may not be a financial incentive to do so, especially in the short-term. For-profit companies also are legally bound to make money for their shareholders—a task that has nothing to do with society at large.

At the same time, consumers are demanding more than ever that companies behave transparently about their internal corporate culture and dynamics, their environmental sustainability efforts and ethical sourcing, and their attention to socially-minded projects, whether or not this mission intertwines with or exists outside of the business’ fiduciary health.

This trend is particularly strong among the newer crop of digitally-native brands, from Warby Parker, whose Buy a Pair, Give a Pair program offers affordable glasses and operates a training program for basic eye exams—to Bulletin, a startup retailer that gives digital-first, female-led brands accessible shelf space, hosts events to empower women, and sends 10% of all profits directly to Planned Parenthood of New York City. As consumer perception increases in importance—a survey from 2014 found that only 24% of respondents said they trust the federal government to “do what is right”—companies may be more incentivized to self-regulate and proactively address public issues. If anything, doing so may ensure that more customers open their wallets.

An investigation into for-profit companies that take on a social mission unveils two main ways of “doing good”:

  1. Companies do it as they grow (as they climb the mountain).
  2. Companies (and their leaders) do it after accruing a large amount of wealth (once they have reached the mountain’s summit).

Because there are so many avenues to give back to society, each company establishes at least an implicit hierarchy of “doing good,” determined by their founders and leaders; one may claim that amassing great revenues and then donating millions to charity later on is the most effective form of philanthropy while another may decide it’s more efficient to start giving from day one. In each situation, there are tradeoffs to make based on how the company applies resources to a public good versus pours revenue back into its product business, at what point in a company’s life cycle it decides to give back, and how much giving back affects sales. Any given social initiative may mix and match from a variety of benefits, whether socioeconomic, environmental, technological, societal, educational, etc.

Despite the intentions behind altruism, it always comes with caveats. For for-profit companies, it’s always a risk—alignment with a particular issue can hurt a business, even lop off a section of its customer base. For-profit companies that take on a social agenda are not immune to criticism, no matter what cause they endorse or how they give back. Some critics also decry these companies as hypocritical, masquerading a nonprofit ethos when they still exist to make a profit, and then producing self-aggrandizing advertisements.

Anand Giridharadas, author of “Winners Take All: The Elite Charade of Changing the World,” calls it “fake change”—“change the powerful can tolerate. It’s the shoes or socks or tote bag you bought which promised to change the world. It’s that one awesome charter school—not equally funded public schools for all… It is impact investing—not the closing of the carried-interest loophole.”

Not only are donations often only small cuts out of a for-profit company’s revenue, but the very existence of some of these companies has also resulted in or exacerbated many of the problems they seek to address through altruistic means. Given endemic issues with charity and other forms of humanitarianism—fields that cannot, unfortunately, escape corruption—there’s logic to the argument that both nonprofit and for-profit companies alike might be able to “give back” more effectively simply by improving their own business practices. For for-profits, this may mean paying employees higher wages or reducing carbon emissions in their supply chain. For non-profits, it comes in the form of refusing tainted funds from figures or entities that are incongruent with their mission, or pouring the maximum donations into their public programs. In 2014, for example, a joint investigation by NPR and ProPublica found that the Red Cross’ overhead expenses were much higher than it professed.