Digitally Native Vertical Brands and where to find them
Image from Paul Bica, found on Flickr, source link: https://bit.ly/1pHnPgF
Digitally Native Vertical Brands (DNVB’s) are a growing trend in the business world. More companies seem to be emerging “from thin air”, typically in the form of a completely digital, self-sufficient, and incredibly far reaching businesses.
While many DNVBs have been scoffed at for having an unsustainable business model, there are some that have achieved incredible success, some even being bought out for 1 billion dollars. Events like this have certainly caught the world’s attention to DNVBs, and their popularity is growing fast as a result.
The cost-shaving capabilities of a DNVB
Companies like Dollar Shave Club have completely changed the game in terms of their DNVB business model. It’s digitally native, since it was born on the internet, and it continues to thrive there. It’s also completely vertical, meaning that most operations are handled in-house, cutting down costs of potential suppliers and distributors significantly.
Companies like this, which are well-nested in the digital space, also leverage the power of digital commerce, making it even cheaper and more efficient for them to sell their products quickly and easily. With all sales transactions occurring online, there is no need for true sales representatives (just customer support). This even further cuts down the costs of the organization, speaking more to the ability of these companies to scale healthily in the short run.
But what about the long run? One of the most common criticisms of the DNVB model is its emphasis (or perhaps overemphasis) on vertical integration. While handling the majority of outbound logistics can greatly reduce costs in the beginning, it can really put you in a bind if you’re not ready to expand those operations once demand starts to really take off. For example, some DNVBs spend up to 30% of sales on marketing efforts, which successfully boosts demand in the short term, but doesn’t leave as much money to spend on future investments.
If small companies like this continue to grow rapidly without foresight, then they risk being financially ill-prepared when it comes time to building property, hiring more talent, or calling on other distribution channels for assistance. So this begs the question: how exactly was Dollar Shave Club able to conquer this challenge of scalability?
Boost business with a sharp and precise ecommerce platform
At the time of the acquisition, Dollar Shave Company’s CEO Michael Dubin stated in a Business Insider story that he “hadn’t built Dollar Shave Club for a quick cash-out”. In fact, he even expected it to continue to grow long into the future. Of course, this was all before Unilever’s mammoth offer of $1 billion. Dubin is projected to receive a cut of that — somewhere around $100 million — largely due to the successful implementation of digital commerce strategy that Dollar Shave Club exhibited.
It’s important to emphasize that the key factor to Dollar Shave Club’s success was its flexible and reliable online strategy. More specifically, customers sign up for a subscription plan on the brand’s website, and then the company fills the order, packages it in-house, and then ships it directly to the consumer. In tandem with its severe price undercutting, Dollar Shave Club was able to leverage this online strategy to achieve quick growth in its first 3 years.
This strategy was facilitated through a reliable digital commerce platform. Using this critical tool, customers were able to quickly and easily engage with the business, allowing more energy to be directed toward the actual comparison of products and subsequent purchasing decisions. This isn’t the only company with such extreme and rapid success. Many companies like Dollar Shave have been able to implement a highly similar strategy, and they’ve each been able to yield incredible results.
Companies like Bonobos (a clothing retail DNVB) was bought out by retail titan Walmart for over $300 million, while another vertical brand Allbirds (who specializes in wool-based material shoes) has produced over $100 million in sales in just a few years. Clearly, this business model, coupled with an effective digital commerce strategy, can drive strong and rapid sales growth to those who take advantage of this currently under-represented revenue channel.
Prepare your DNVB with Luminos Labs
With the Digitally Native Vertical Brand model increasing in popularity, it’s important to make preparations for scalability now while there aren’t too many players in the game. The successful implementation of a flexible digital commerce strategy is key to driving sales growth within this particular business model, among many others. If you’re looking to boost your brand’s sales through a reliable digital commerce platform, we’d love to hear from you.
At Luminos Labs, we pride ourselves on our digital commerce expertise and our ability to build and implement effective websites and tools for businesses of all kinds. Remember, there’s no cost for initial consultations. Additionally, to learn more about our work or the latest industry trends, please check out our website and subscribe to our weekly newsletter.