Change is good.  It’s more than good – it’s necessary for growth.  Companies need to evolve their offerings in order to keep things fresh and their customers interested.

But what happens when a company changes its business model in a way that strips away a valuable element of its brand equity?  Is it able to recover lost equity and maintain its appeal?  We’ll find out, given the recent announcement that ShoeDazzle is scrapping its monthly subscription model.

background:  Just three years ago ShoeDazzle made a grand entrance to the e-commerce scene.  The company’s innovative approach was based on offering a personalized selection of shoes, handbags, and jewelry curated by Kim Kardashian to members who paid $39.95 a month.

The company was founded by two attorneys (including Robert Shapiro of OJ Simpson trial and LegalZoom fame) and Kardashian.   Backed by Polaris Venture Partners and Lightspeed Venture Partners, the company turned heads in the tech, retail, and fashion sectors.  Last year it secured $40 million in a financing round led by Andreessen Horowitz.

ShoeDazzle now has over 10 million members.  When you join, you fill out a taste profile which enables the site to curate a selection of products and present you each month with a personal “Showroom.”  Over time, the site’s recommendation algorithm gets more sophisticated as it takes into account your actual purchases and so you end up feeling like you’re shopping from a collection of items handpicked just for you.

That, plus the inexpensive price tag, free shipping both ways, and phenomenal in-box presentation (see below), has generated legion of fans who serve as ambassadors for the brand (recent love tweets include “ShoeDazzle is the greatest thing since sliced bread.  No joke.” “OMG, shoe addiction” and “Just got my first pair of shoes from ShoeDazzle.  IM IN LOVE.”) and recruiters of new customers (members get points and discounts for every friend that becomes a member.)

now:  Given how successful ShoeDazzle has been, it’s no surprise it has spawned a throng of copy cats including Kimora Lee Simmons’s Just Fabulous and Rachel Bilson’s ShoeMint.  And as a result, there’s been some buzz about “subscriber saturation” and questions about the viability of the concept.

Enter Bill Strauss.  The cofounder and former CEO of ProFlowers, was recently named CEO at ShoeDazzle “because of his experience retaining high levels of customer satisfaction at a booming consumer Internet company,” reports an analysis in Fast Company.  “He’s very heads-down and focused on operational execution and delighting the customer at a large scale,” Andreessen Horowitz partner John O’Farrell told the magazine.

Strauss has decided to nix the company’s subscription model.  No longer will customers be required to make a selection each month; everything on the site is simply $39.95.

The move is not surprising, given Strauss’ background.  After all he built Proflowers into an e-commerce powerhouse by leveraging sophisticated technology to dominate search engines and build a highly productive customer database.   And at first blush, loosening the requirements and making purchasing easier would be a no-brainer for any website.

But, ShoeDazzle is more than an e-commerce site.  The brand is about more than getting good product to lots of people for a decent price.  In fact, Fast Company reports that Strauss calls the ShoeDazzle experience “akin to one you’d receive at a high-end boutique, where salespeople know your name and your tastes…ShoeDazzle believes consumers are ready for the more intimate shopping experience they get at real-world boutiques.”

This makes his elimination of the subscription model a curious choice.  It’s a move that seems to have stripped the company of important brand equity levers.  No doubt the change will bring some initial growth, but it represents some risky trade-offs:

- trading status for scale – Strauss explains that “what will differentiate ShoeDazzle in the next phase is building the company out to a gigantic scale.“  Scale may be good for your brand if you’re Amazon or Walmart, but not if you’re trying to serve up an experience akin to a “high-end boutique.”  By no longer requiring a subscription, the company has democratized the experience. The monthly commitment had served as a signal of status and brand exclusivity — now there’s little barrier to entry.

- trading connection for choice – “Some people liked the model,” Strauss says, “but a lot of customers told us they’d like to buy two or three times in one month and then maybe not for a few more months.“  So the new model gives customers more choice.  But it also allows for customers to slip away for months at a time, perhaps even forever.  Even though the subscription model had offered customers the option of skipping a month, most customers still visited their showrooms at least once a month.  Without the monthly commitment, there’s no foundation for a regular connection.

- trading urgency for ubiquity – There’s also no reason for a timely customer response.  Opening up the purchasing model will allow the company to “capture as much of that demand as possible,” Strauss says.  But is getting to a large prospect pool that may or may not be interested in buying at some point in the future better than engaging with a smaller customer base that has committed to buying something that month?

Sure the brand still has the cachet of celebrity – and the personalization aspect is a draw.  But as a writer in New York Magazine observed, “It’s probably only a matter of time before all retail websites follow this practice of automatically recommending things to you based on your size, brand preference, and past purchasing history.”

Last year, Andreessen Horowitz’s O’Farrell explained his company’s position with ShoeDazzle saying, “Like their 1920s counterparts, [founder] Brian [Lee] and his team realized the appeal of serendipity and anticipation.  ShoeDazzle members await the first of the month with its new selection with the same avid excitement Book of the Month Club members must have felt as they awaited the mailman with their latest monthly title…The result is a new and genuinely exciting approach to ecommerce that is transforming the way fashion products are marketed and sold.”

Now, it seems, ShoeDazzle is just another website with inexpensive products.

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Recently several manufacturers have announced that they are initiating an e-commerce business.   I’m not sure of the motivations behind these moves but it seems to be a growing trend. Although many manufacturers have been offering direct sales for many years through their own e-commerce sites, it seems we’re seeing a new surge of interest in doing so from players who have historically shunned the idea.

And this got me thinking about how a manufacturer could do e-commerce in a way that doesn’t simply cannibalize the sales would be generated by a third party distributor or retailer, but instead would increase the value of the brand which is delivered to the customer. I can think of three ways a manufacturer might do this.

First:   exclusive product selection. Whether it is a wider selection of product that is available in other channels and/or special product that is not available in those channels, a manufacturer’s own website is the best place for it to merchandise the best product selection that they have to offer.

Kipling is an example of a brand that has strategically used product selection on its own website.  Kipling is a maker of travel bags, handbags, backpacks, and other accessories.  Its products are primarily sold through department stores, travel goods retailers, and a select number of Kipling retail boutiques.

Several years ago the Kipling team launched its own e-commerce site — and with its exclusive product selection, it was able to strengthen its brand perceptions.  You see, Kipling was growing its handbag business but some retailers were not interested in carrying a wide selection of Kipling handbags because it was an unproven product line competing for shelf space with established choices.  So Kipling used its own e-commerce site to roll out and promote its full product lines of handbags.  As such, it was able to expand the brand footprint and merchandise the best of what the brand was becoming.

The second way a manufacturer can increase the value of its brand through its own website is by offering customized product — either the ability to select certain features on products and/or allowing people to add their own personal touches to the product.

A good example of this is NikeID.

On the NikeID site, people can customize nearly every kind of Nike product.  In many cases, the ability to customize is quite extensive.  On footwear, for example, customers can indicate their preference on functional, performance variables like base material and cushioning technology – and they have style-oriented choices like selecting the color of the shoelaces and having their name or other text stitched onto the shoe.  Customers can also use the site to show off their designs to others and/or view designs from around the globe for inspiration.  As such, the site serves to further the promise of self-expression which is at the core of NikeID brand.  And this is only possible through NikeID’s own channel.

Manufacturers can also use their own sites to foster brand community.  Many retail sites feature their own community (e.g., Best Buy’s Twelpforce), but that community is focused on the retailers’ brand.  A manufacturers’ e-commerce site enables the manufacturer to develop an exclusive community for its own brand fans.  A good example of this comes from LeCreuset, the cookware brand established in 1925.

The folks at LeCreuset had noticed that LeCreuset customers loved sharing with each other on other cooking sites recipes, tips for usage, and stories about the LeCreuset brand and the importance of it in their lives.  They wanted to participate in the conversation and lead and inform it, so they launched their own e-commerce site.  In addition to giving users the ability to post content, create profiles, and share recipes, the brand team posts interesting tidbits about the brand, introduces new products, and solicits new ideas, etc.  Through the site, LeCreuset not only sells directly to consumers but more importantly engages with consumers and fosters the kind of community that builds brand affinity and loyalty.

Earlier this year I had written a post called “can anything retailers do, manufacturers do better?” It was inspired by a conversation I had with someone about the unique advantages that retailers have over manufacturers.  It was written in part as a response to the many retailers who were developing their own product lines as a way of trying to compete with the manufacturers’ brands they carried.

At that time I suggested that if retailers were indeed going to try to compete with manufacturers, rather than simply creating their own product lines (which may or may not be the same as or better quality or value than the manufacturer’s brand), they should instead focus on the things they can do that manufacturers can’t.  This post is almost the reverse of that one – the above are things that manufacturers can do that retailers can’t.

Between the two posts there are the common themes of differentiation and added value, both of which are important concepts for brand-building and business growth.   I would suggest every strategic business move including introducing a new website ought to further differentiate the brand and/or deliver additional value to customers.   Otherwise, why do it?!

If you’re only going to launch something in order to be comparable to existing alternatives, the growth that comes from that launch is inherently limited because the most you can hope for is to steal share from those existing options.  However if you are truly differentiating your offering and adding value for customers, not only can you get a larger slice of the pie, but there’s also the potential to grow the size of the pie itself.

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