Business in focus: Cornerstone
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The potential for small, independent, high quality brands to disrupt established consumer goods companies through online sales has been proven by Oliver Bridge, founder and CEO of Cornerstone, a flexible, subscription-based men’s skin care, shaving and toiletries supplier.
Cornerstone, founded in 2014 when Bridge was 24, now has almost 160,000 subscribers – although they’re known as “members” – who receive regular deliveries of razor blades, shave gel, shave cream, face scrub and post-shave balm. New members are signing up online, with the company’s user base growing at the rate of about 6%-7% a month, encouraged by recent television and poster advertising.
Bridge developed the idea after being frustrated by the lack of reasonably priced shaving products that suited his sensitive skin. His particular eureka moment for the business came when shopping for toiletries in his lunch hour in Boots. “I hate shopping for boring stuff like that,” he says. “My feet were wet because it was raining and I thought, this is terrible.”
After a period of research he found there were suppliers who would be able to formulate products that met his needs, and that technology could help him sell online. His ecommerce subscription-based business model began to crystallise.
"We won’t ever sell other people’s products, because then you are going head-to-head with Amazon and just competing on price – and you don’t control the quality,” Bridge says. In contrast, Cornerstone controls the quality of its products and maintains direct relationships with its customers. “We get all the feedback on what they like and what they don’t like and then we have the power to change our products in response,” Bridge says. “That full integration is really cool for producing a customer-friendly product.”
Although there are a couple of other online subscription services for shaving products, Bridge considers his main competitors to be the bricks and mortar retailers, such as Boots, Tesco or Sainsbury’s, where most men buy their toiletries, as well as the giants of fast moving consumer goods (FMCG) such as Procter & Gamble, owner of the Gillette brand.
“We’re trying to win business from bricks and mortar and from the established, large brands like Gillette,” Bridge says. “So we tend to think of them as competition, rather than people who are like us and are small.”
FMCG ecommerce potential
Bridge sees huge potential for ecommerce expansion in FMCG in the next few years. For example, after initially focusing on shaving products, from late January 2018 Cornerstone is adding a full range of men’s toiletries to its offer.
"My personal mission is to put the men’s aisle at Boots out of business,” Bridge says. “Ecommerce is clearly going to take a bigger share of the men’s grooming market.” Not only are businesses like Cornerstone “stealing customers from bricks and mortar” outlets, but the big brands themselves, like Gillette, are getting in on the act. “In response to Cornerstone in the UK, Gillette launched its own subscription service online,” Bridge notes. “So Gillette has started, albeit in a small way, to cannibalise its own bricks and mortar business. So I think we will see consumer spend moving online, whether through challengers or cannibalisation.”
As for consumer goods in general, Bridge sees a widespread consumer preference for independent brands, perhaps as a result of the credit crash and a growing distrust of big corporates.
“The rise of independent, smaller brands is a really strong trend,” Bridge says. He refers to cleaning brand, Method, a supplier of planet-friendly products. “There’s a lot of consumer fondness for these small, independent quality products. We’ve seen it in food too, with the focus on artisan producers.”
Access to supply chain and technology
One reason for the growth of small challenger brands like Cornerstone is the easier access they now have to suppliers, Bridge believes.
"In the old days all the manufacturing resources were held by mega corporations,” he says. “These days, as a start-up, you can do a run of just 5,000 shaving gels. It’s much easier to reach the supply chain to develop your own product.”
Another feature of life today that supports the proliferation of new independent FMCG brands is the availability of easy-to-use off-the-shelf technology.
“You can get all the software you need to start an ecommerce business off the shelf,” Bridge says. “You can get CRM [customer relationship management] systems for £10 a month that are extremely sophisticated. You can plug that into [ecommerce platform] Shopify. You can put a subscription engine on the front. You could start a subscription business within an hour if you wanted to so it’s much easier to create your own distribution mechanism through ecommerce. You don’t have to get a listing in Tesco or Boots. In the old FMCG model there were only a few factories and only a few retailers and the whole thing was controlled like an oligopoly. There’s been an opening up of the tools required to build a business in this space. We are the vanguard in our tiny sector, but presumably it’s happening all across personal care, cleaning and other FMCG categories.”
Growth of mobile
The big trend Bridge sees in ecommerce, though one he admits isn’t new, is the switch from desktop to mobile.
"Some days 80% of our traffic will be mobile,” he says. “That’s a huge change and has all sorts of implications for how you design your website and make sure it’s responsive.”
The growth of mobile actually plays to Cornerstone’s strength in terms of its small product range. When customers are shopping on mobile devices and hence using small screens, scrolling through 500 products isn’t necessarily easy or fun. “The customer gets fed up because they have to keep scrolling,” Bridge says. “On a mobile you just want to make a decision and move on, so I think that drives some people towards simplicity and a reduced product range. So one of the consequences of mobile is simplification of everything. We are very conscious of that. We only have one of each product. We have one razor, one face scrub, one face wash… We don’t offer people pointless choice.”
The approach appears to be working well for Cornerstone, which now has a headcount of around 35. Of its 30 full-time staff, around a third are software developers, a third focus on marketing and a third work in customer care.
"We also have about five people who are part-time warehouse staff,” Bridge says. “We fulfil about a quarter of our orders ourselves from our office and the rest are done by third party warehouses.”
The business has so far attracted £8m in funding, including a 2015 Crowdcube crowd-funding campaign which means the company has about 300 shareholders. Most recently, in 2017, it attracted £3.5m in investment from private equity firm Calculus Capital.
The power of data
Much of Cornerstone’s power as a disruptor comes from its customer data.
“Our website is our shop front, rather than a physical store,” Bridge says. “We can track the data of everything that happens on the website – what people click on, how long they spend on each page, which images they zoom in on. We can build really detailed models of how good quality customers behave on the site, how we should engage with them after they sign up, whether we should offer them different stuff, whether we should offer discounts, whether we should catch them at different times of the day.” The business is “building algorithms to offer dynamic personalisation”, Bridge says, so that it can understand and interact with its customers more effectively.
"The next level, that we are just starting to think about, is machine learning. We’re looking at whether we can plug in off-the-shelf machine learning tools so we have bots crawling over our data to spot correlations that humans can’t think of, and then using those to come up with new ideas for how to engage customers. So I feel we are at the cutting edge of FMCG technology.”
As Bridge points out, rivals such as Procter & Gamble could also buy machine learning technology, but what would they use it on? Because they primarily sell through third-party retailers, they have no customer data to analyse. “We have almost 160,000 members and maybe 100m data points,” he says.
Cornerstone is also using automation technology in other ways, including in its customer care activities.
“We are trying to build a really light-weight tool where customers can effectively self-diagnose what the problem is and then our system will fix it for them or produce a very specific enquiry that goes to a particular person on the customer care team,” Bridge says. “It’s about applying really good technology that’s available today to simple problems. A lot of start-ups today are doing breakthrough stuff such as creating machine learning, but actually there’s a lot of opportunity for companies to apply what’s already available to old problems, and that’s what we are doing.”
Industry: Computer Software
Company size: 1001-5000 employees
HQ: Santa Monica
Ownership: Public Company
Bridge has praise for successive UK governments that have encouraged investment in entrepreneurial companies through initiatives such as the Enterprise Investment Scheme (EIS) and Seed EIS.
“Without them there’re no way half the start-up ecosystem in the UK would exist,” he says. Other tax reliefs such as Enterprise Management Incentive (EMI) schemes, Entrepreneurs’ Relief and R&D tax credits are also extremely helpful. However, he thinks the government could do more to create the infrastructure needed to support digital enterprises by ensuring high quality mobile and broadband coverage across the country. “It is frankly just baffling how many parts of the UK haven’t got 3G, and that surely is one of the biggest blockers of digital,” Bridge says. If individuals can’t be sure of having an internet connection, “that’s not a good environment to be trying to incubate a digital culture”.
Bridge believes more traditional businesses could take steps to become more digital.
“Think about your business and what processes are frustrating or slow or have high error rates,” he says. “There’s almost certainly some off-the-shelf software product that will sort it for you.” Business owners need to be willing to experiment and shouldn’t assume that other (perhaps younger) entrepreneurs always understand technology. “Everything I learnt came through testing, tinkering and experimentation,” says Bridge. “And everyone here who is a software developer or does digital marketing is self taught.”
Bridge, for example, worked out for himself how to advertise cost-effectively on Facebook and Twitter. He had to, having started his business “literally from my kitchen table”, with no specialist technology support.
"Before I started Cornerstone I had never raised money for a business, I had never spent any money on digital marketing and I had certainly never developed a range of shaving products,” he says. “You just figure it out as you go along. You experiment. That’s the mind set you need to approach this new world where nothing stands still.”
"We asked: Away from Cornerstone, what disruptive tech has most impressed you?
“The Tesla car is pretty awesome,” Bridge says. “The journey from day one to building the company that is Tesla is a phenomenal achievement. They have brought so much different technology together in one place and done it on a shoe-string budget. The product itself is great. The cars can run for hundreds of miles on a single charge and have 3G connection, so they can speak to HQ remotely.” This enables performance improvements to be made remotely, such as the addition of a faster windscreen wiper speed. “The industry Tesla is disrupting is massive and it’s the definition of the slow, lethargic, oligopoly industry that is ripe to be smashed apart,” Bridge says.