The Rise of Digitally Native Vertical Brands (DNVBs)
In the past, brands that dominated supply chains, dominated the markets share in their category. P&G, Unilever are brands who owned their categories for the past few decades. With the shift towards digital, there was a rise in direct-to-consumer brands called Digitally Native Vertical Brands or DNVBs.
What is DNVB? A brand that is digitally native, vertically integrated company that sells its own products and controls its own distribution via the web maintaining a strong focus on customer experience. While the DNVB starts online, it often uses a brick-and-mortar strategy. This term was made popular by Andy Dunn, founder of a famous online-first brand, Bonobos.
DNVBs have been shaping a new Retail landscape in the US, building competitive advantages and differentiators enabling them to not only compete with well-established brick-and-mortar businesses but also leading e-commerce businesses making a huge impact on what consumers expect from brands. Some of the DNVBs include Blue Apron Inc., Casper, Dollar Shave Club, and Home Chef.
Let’s take a deeper look into three growth strategies of these brands that proved successful:
Personalization in products
The product offerings in DNVBs are truly unique to each buyer, and these brands take time to craft experiences based on the specific user taking into account their needs, preferences, and behavior.
For instance, Blue Apron takes into account the preferences of the customer and with this information, provides custom meal options that would suit that customer’s need and likes, giving the customer a personalized brand experience.
Customized products require a lot of information and attention to details which requires a different supply chain that big e-commerce companies like Amazon are yet to provide. This provides DNVBs an edge within a cut-throat, competitive ecosystem.
A brand that sells directly to customers combines multiple benefits - lower cost of online sales, better control of the whole supply chain from manufacturing to distribution.
A great example of vertical integration is Everlane, a web-only clothing brand that compares its own pricing to that of traditional retailers and is able to share with its customers its cost break down as they know their supply chain.
DNVBs are more like tech companies rather than retailers as they build their own retail technology to sell better. It further enables them to track customer interactions, manage inventory, offer store credit, gather feedback to improve data curation, etc.
This user-centric and data-centric approach of DNVBs emphasizes all the steps of the user journey, from pre-purchase to post-purchase experience. This helps meet customer experience and generate loyalty while still offering them a highly personalized experience depending on location, customer behavior, purchase history, etc.
Web-only brands have often become frequent acquisition targets, not only because of the products they sell, but also because of the talent and technology they bring to the traditional retail structures leading to deals like Unilever’s one-billion-dollar for Dollar Shave Club. Another strategy that retail applies in order to avoid the downsides of an acquisition is to take part in the funding of startups of web-only brands such as Target and $170 million dollar series C led by Casper.
While all the retail companies are leaning towards technology to find new ways to innovate and change the customer experience, a factor that web-only brands or DNVBs heavily rely upon is to scale as well as the ability to attract and retain talents. This is something that traditional retail organizations are yet to tap into completely.
The retail industry has never been as competitive as today, with three e-commerce giants Amazon, Walmart, and Alibaba taking the large chunk of the e-commerce revenue as well as the technological acceleration being this quick. Among all the retail players, a new category of business is on the rise, disrupting the industry.
Stay tuned to see what must traditional brands do, to keep pace and compete with DNVBs.