The future of online retail is here, now, and quickly becoming the norm. Familiar with Warby Parker? Dollar Shave Club? Alo Yoga? These examples of vertical commerce (or v-commerce for short)—also known as digitally-native vertical brands (DNVB)—are quickly becoming forces to be reckoned with.
Marketing expert and CEO of Bonobos, Andy Dunn coined the phrase “digitally-native vertical brands” for companies that have essentially been born to function online. In this instance, think of the term vertical as a “segment within an industry that is made up from similar customers and businesses.” Combine these two concepts and you can understand these types of business models to have been built on online marketplaces in order to cater to specialized audience needs within a specific industry.
So, why are DNVBs being called the future of online retail? It all boils down to these 13 facts.
1. They embrace the digital era we live in.
In 2015, it was estimated that the average adult, a member of the digital natives, spends more than 20 hours online per week. These numbers increase for young people between the ages of 16 to 24 at more than 27 hours per week and hours across the board are sure to have gone up in these past years with trends in use for social media, mobile, etc. We live in a digital era and DNVBs take advantage of this by turning to the web (on desktop and/or mobile) as a means of interacting, transacting, and storytelling to consumers – their form of native advertising.
2. Content reigns supreme.
Vertical commerce brands produce some of the best content around when it comes to attracting customers and building communities. Part of this comes from their expertise and focus on specific niche audiences, and the other on their ability to traverse digital landscapes. Being born online means you have to make yourself known online via online channels. If no one knows who your brand is, it’s the content you create that will first have to establish authority and credibility.
3. Commercialization of the brand through an e-commerce channel is not the core asset—the brand is.
E-commerce may be the way in which vertical commerce brands deliver themselves to the masses but it doesn’t define who they are. Their branding is the core asset with its name on both the physical products and website. It needs e-commerce as a means of establishing itself but at the end of the day, the brand and its vertical nature are what sets it apart.
4.User experience is the focus.
Digitally-native vertical brands more often than not put a great deal of focus on the customer experience and intimacy. Compared to horizontal commerce structures that need to sell to large numbers of consumers, v-commerce companies can find success in smaller numbers of sales. And because of this, they tend to be more focused on providing stellar service and experiences through the physical product itself, web/mobile, and customer service.
A customer-centric model isn’t about a brand telling the consumer what it is, but the consumer creating the brand definition. With this mindset at the helm, v-commerce brands are able to attract new customers and generate loyalty so that a purchase is not just one and done: it’s regular and repeated.
5.DNVB doesn’t mean they have to stay digital-only – they can extend offline.
Just because a brand is DNVB, doesn’t mean it’s forever bound to the online world. Through selective partnership or physical retail, these brands have the ability to extend past the web and into more traditional business models. Alo Yoga, for example, was founded in 2007 and just opened its first brick and mortar presence this year.
With regards to cases of partnerships, the brand controls its external distribution as opposed to being controlled by it. Since they have an established online presence as its driving force, they can be more selective about the physical locations they appear in. This allows v-commerce brands to ensure the physical experience more closely mirrors the online experience of their brand, and remains true to overall image.
6.Digitally-native vertical brands usually offer essential products or YONO (You Only Need One).
V-commerce brands are usually born out of an opportunity to provide consumers with something they’re lacking options to in a vertical space. These brands then function off a YONO strategy, meaning customers only have to purchase their product because they won’t need any others (i.e. Casper mattresses, Dollar Shave Club razors, Brilliant Bicycle bicycles, etc.). With their product built under this idea of being essential, they can spend less time focused on acquiring new customers and more time focused on retention.
7. There’s a clear audience.
Since the customer is such a driving force across all areas of the business for v-commerce brands, they are usually have a direct and to the point understanding of who these people are, and who they should be. They cater to a specific market and create branding marketing that’s reflective of this. ThirdLove is a great example of this with their focus on not the quantity of styles offered for their undergarments, but the quality.
8. The conventional way a consumer purchases something is challenged.
When it comes to finding the right product, there are certain items thought to be best decided upon in person, such as mattresses and clothes. A vertical commerce brand challenges this commonly believed mindset. They develop ways to ensure a customer feels assured when making purchases, regardless of where those purchases are taking place. For example, finding that perfect pair of jeans or shirt can be difficult to do online, since sizing can vary from one place to another. However, many v-commerce companies now offer lenient replacement or return policies to aid in these situations. New technology is being created and adopted by some DNVBs to help define the concept of a virtual fitting room. DNVBs are completely revolutionizing the online shopping experience.
9. There’s less barrier to entry.
Setting up a horizontal business can prove quite difficult, because of the broader audience and competitor base a company has to expect. There are also less physical costs that go into starting a v-commerce brand, which means more of the focus can be spent on actually developing the brand itself. The v-commerce market is still growing, which makes it less daunting for entrepreneurs than horizontal markets, but is also full of potential for success.
10. DNVBs represent unique brands, and unique products.
Brands build off DNVB models are able to produce products outside the norm of what’s found from more horizontal structures.These companies are able to create unique products because they’re catering to unique audiences. What makes them truly distinct is how the brand becomes the driving force behind their originality, rather than just the products themselves.
11. DNVBs tend to give you a good deal.
According to Hil Davis, co-founder and chief executive officer of J. Hilburn, a typical garment found at most retailers is marked up at three times its production cost. This is due to the fact that it must work its way through a lengthy supply chain from factory to brick and mortar store. V-commerce, on the other hand, creates a retail strategy that removes a lot of this cost out of the system because of the control they have on the supply chain. More importantly, they’re able to focus costs on areas that are likely to improve the overall quality of what’s being produced, rather than just producing and optimizing for the sake of quantity.
12. DNVBs produce unique marketing campaigns that drive action.
With content at its core, DNVB companies often generate some of the most unique, clever, and entertaining ads on the Internet. ChatBooks is one example of this. With original YouTube content that speaks to the challenges of being a typical good, crafty Mom, they connect with their audience on a more thoughtful and personal level. They gain customers by speaking to the things they really are rather than trying to box them into a preconceived notion of what they should be.
13. Those behind the brand often live the brand.
More often than not, DNVBs are founded by individuals seeking the same solutions they’re hoping to provide with their products. Chubbies, for example, was founded by four guys who had an affinity for short shorts throughout their college days and saw an opportunity to share their passion with others who might feel the same. Authenticity is at its peak with companies like this, because who better to drive the mission than those who eat, sleep, and breathe it every day? As a result, brand loyalty is much easier to gain.