According to the latest findings by market research giant Euromonitor International, nearly one-third of brands introduced in 2022 were discontinued by the end of 2023. This revelation stems from their cutting-edge artificial intelligence (AI) powered Passport Innovation platform, shedding light on the dynamic and often transient life cycles of new brands across various markets.
The year 2023 alone saw the launch of over 4,000 new brands, complemented by more than 33,000 sub-brand introductions, as detected by Euromonitor's Passport Innovation. This robust influx spanned across 32 global markets and 50 categories, monitored meticulously through online retailers.
From 2021 to 2023, the platform observed the birth and growth of over 11,000 new brands and an astounding 105,000 sub-brands, indicating a prolific period of brand expansion largely driven by line extensions.
However, not all that glitters is gold. Despite the surge in new entrants, Euromonitor analysts pinpointed a rather sobering statistic: less than a 60% likelihood of new products sustaining long-term market presence. This figure speaks volumes about the volatile nature of brand longevity and market receptiveness.
Among the bustling arenas of product innovation, certain countries have emerged as leaders in particular, the US led the charge with 16% of all new launches. Dubbed as the 'super six' — the United States, Germany, India, France, Brazil, and the United Kingdom collectively accounted for over half of all new brand and sub-brand activity noted by Passport Innovation in 2023.
Passport Innovation's revealing 'roll-out to phase-out' analysis provides businesses with a powerful lens through which the entire lifecycle of a product can be viewed and assessed. This AI-powered database covers an extensive array of categories including beverages, food and nutrition, health and beauty, and home products, among others.
Brad Borgman, Chief Innovation Officer at Euromonitor International, said: "We have been investing in large language models and have developed a state-of-the art database that identifies and tracks new product launches with unprecedented speed. It is a unique platform where companies can learn how these new products proliferate across retailers, countries, categories and see how they evolve in terms of attributes.
"Businesses will also be able to gain unparalleled insight into consumer purchasing preferences and assess how brands are responding. We can provide detailed answers to questions on product attributes and features, brand expansion and decline, markets with most new product launches and timings, product testing, and the players in the market that most frequently launch brands."
Stella Vatcheva, Senior Head of Practice for Innovation at Euromonitor International, said: "This is the only NPD platform that exclusively monitors e-commerce data, where most products are likely to launch first. Our Passport Innovation clients will be the first to know which new brands are failing or succeeding, with up-to-date information on whether a new product is expanding or being dropped by e-retailers. They will be able to visualise a new product's evolution over time, with detailed summaries of attributes and positioning."
We reached out to e-commerce owners and experts to get their hot take on the staggering report, to ask:
“Why are ecommerce brands failing at such an accelerated rate? Is it fully internal factors such as a poor business model or do external factors such as the economy play a role in the failure rate?”
Emily Amor, an SEO Manager & Ecommerce Strategist at Digital Darts, a leading Shopify optimization agency, and has been growing online businesses for over 10 years says:
It's never been easier to launch an online business literally overnight with plug in and play platforms like Shopify, and countless avenues for dropshipping. So it's really no surprise that so many people go into it with high hopes of a 7 figure turnover in the first year (or even 7 figure months!) because of a few exceptional success stories they hear.
But these stories are often just that, the exception. They are often brands that have taken off from viralty but sooner than later, they all face the same roadblocks to growth such as hiring issues, inventory control, supply chain problems, manufacturing hold ups, managing cashflow and diversifying marketing channels.
These are the unsexy parts of business that can often burn people out or kill the intial drive and novelty that passes after launching. Without a passion for their product or a real reason why they're in business, you can understand why under this pressure, it's easier to just walk away.
The online retail space is also super competitive. For long term success, you can't solely rely on one platform to drive your sales. This may work intiially, but there are so many external forces out of your control like algorithm updates or even the passing of federal laws (look at TikTok potentially being banned in the US), and without a solid business model or a financial safety net, your business could go bellyup overnight.
These are the kind of external factors at play here too as well as consumer spending being down because of high interest rates and inflation. These online platforms we rely on to send us traffic are also leveraging AI to serve content to users instead. There are also businesses that simply overstocked during periods of high growth, which, when traffic to their online store stalled and sales took a dive, found themselves cash poor with too much inventory on hand, and unable to move it.
Lou Haverty, Owner of Skid Retailer, who has run a few previous e-commerce brands that did not work, says:
I would start with two main factors: profit margins and branding. On the profit margin side, I really think it is challenge to survive if you are selling products with a low price point. Essentially less than $750 products. If you assume a 20% margin that gives you just $150 to spend towards advertising and operating expenses. That makes if very hard to become profitable.
When you sell higher priced products, you have larger profit margins (in dollars) which gives you far more flexibility to make mistakes as you build your business.
On the branding side, you really need to have a simple brand name that people can remember. You also need to be a specialist in your business because you do not want to compete as a generalist against Amazon.
The branding in my first ecommerce business was too broad. My products were outdoor products but I wasn't specializing in any product category. In my second business, I created a much tighter brand, Skid Retailer. Customers recognize that we sell skid steer attachments and the store name is very easy for customers to remember.
This is critical because you start to gradually build a base of repeat customers which helps you generate revenue without the advertising cost.
Michael Zakkour, Founder and Chief Strategist at 5 New Digital, formerly worked for major eCom players and brands like Microsoft, Alibaba, and has built eCommerce strategies for dozens of the top 500 brands, retailers, CPGs and marketplaces, says:
eCommerce brands are generally accepted as "DTC" brands. They started with direct to consumer, without planning for wholesale or B2B sales.
They are struggling now due to a number of reasons:
The model for success was based on buying cheap digital advertising, great content marketing. eliminating middle-men and generous "growth" subsidies from investors. Now, Cost of Customer Acquistion is inflated by 50% to 300%, financial backers have shifted focus from growth to profitability, and consumer journeys are no longer linear and funnel based, they are non-linear and "snowball logic" based.
To succeed today, they must adapt to the evolution of eCommerce to "Immersive Commerce," Understand and leverage "the new retail model," and adapt to the reality that cost of consumer acquisition and logistics have skyrocketed and they need to use these new models to lower CAC and increase traffic, conversions, average order volumes and long-term consumer value.
So no, it's not the macroeconomy, it is legacy D2C brands, start-ups, and legacy retailers and CPGs being slow to reset strategy and tactics to lower CAC and logistics costs, and using UC and IC to increase traffic, conversions, AOV and LTV.
Teajai Kimsey, Maker/Founder of Cheerdocious.com who has run her e-commerce business for over a decade says:
First, I think it's a combination of the economy, product availability, and the increasing number of scam vendors/inferior products.
When people have less disposable income, primarily due to the inflationary prices of the basics like food, gas, and the like, they won't buy as much. Finding the best price causes businesses to race to the bottom which guts profit margins.
I also think that the internet as a retail destination is getting a bad rap on several fronts. How does one know that the influencer is honest about the product they are advertising? And the many boutique businesses, like mine, have to contend with similarly small, or unknown, companies that are not legitimate which makes us all look bad.
That is my input sitting at the helm of a small business. I know I'm always looking for that one thing that will make my business stand out. It's a challenge to be sure.
Jake Munday, Co-founder and CEO of Custom Neon, who has over 10 years running multiple e-commerce businesses, some more successful than others says:
The increase in eCommerce business failures isn't simply about internal missteps, errors, or misjudgments. It reflects both internal challenges and external market dynamics, some of which, can't always be predicted.
Internally, many startups launch with rose-tinted glasses, but without sufficient market validation. They invest heavily based on enthusiasm and limited feedback (friends and family should not be the only data pool for this!), often overlooking comprehensive market demand analysis like web search volumes and actual sales potential on initial platforms like Gumtree. Without this data, companies risk scaling prematurely or misjudging their market fit.
Externally, economic fluctuations play a significant role. Economic downturns, changes in consumer spending power, and shifts in market preferences can swiftly render a once-promising brand irrelevant. In addition, the competitive landscape in eCommerce is fierce, with new competitors constantly emerging, thanks to low barriers to entry.
And if you are a market leader in your field, these new entrants will be doing all they can to replicate your site, services, and products, so there is no resting on your laurels. Brands that fail to differentiate themselves or adjust to evolving consumer needs and competition, quickly find themselves outpaced.
In our experience at Custom Neon, we mitigated risks by bootstrapping, ensuring our business model was sustainable from the start, and continuously monitoring market responses before further investment. This approach allowed us to adapt quickly and effectively, ensuring our brand's longevity in a volatile market.
