DNVB. Digitally Native Vertical Brands. If we broke it down, you’d likely figure out how their business models work…on the surface. You see, being either digitally native or vertically integrated brings with it their own respective benefits to brands. However, the companies bringing both together are revolutionising everything we knew about e-commerce.
On The Surface
Digitally native refers to a brand that began online, pure and simple. The key here is that they began online, it doesn't necessarily mean they don't eventually venture out into the physical world. The digital world gives these brands direct access to consumers, plus, they enjoy lower overheads without physical retail presence.
A vertically integrated company is one that controls one aspect of their supply chain, such a manufacturing or logistics, and outsources everything else. Just because they only focus in one area doesn’t mean they have less control, they still control everything from specifications of the product to where it is sold. For DNVBs, these companies focus on the digital aspect and outsource everything else.
A Recipe for Success
The most famous players in this space began around 2007 with the launch of The Dollar Shave Club, Glossier, and Casper who all became successful in a short amount of time. So, what do all these businesses have in common other than the amount of control they have across their value chain and being born online?
A commonality across DNVBs are highly differentiated or premium quality products or services with added convenience at a price point that is perceived as good value. Another attractive quality of DNVBs is their ability to offer unique products that connect with niche audiences. As DNVBs are vertical and online, they are able to keep their prices down, making them more affordable for both mass-market or niche audiences.
Differentiation and convenience results in an opportunity that DNVBs share and have invested in. They make it nearly impossible to shop from a competitor. How do they do this? In economics, this is comparable to a zero-sum market meaning that by choosing one option, you forgo all others. DNVBs offerings are designed to require no need for repurchasing or no need to go elsewhere.
Creating It All With Customers
Beyond the price, conveniency, and exceptional quality, consumers are drawn to the unique buying experiences that come with DNVBs. They use the digital world to engage with customers the way they want to be engaged with and thus they have taken on a new type of role in consumers’ lives. DNVBs are understanding, addressing, and approaching their customers like never before.
The ability for DNBVs to provide this revolves around their access to data - a by-product of their vertical integration and digital business model. Since they are the sole actor throughout the entire customer journey, they have all the resulting raw data at their fingertips. In every interaction and transaction, valuable data is created. The data allows them to study their customers and follow their wants and needs closer than ever before. This deep learning is at the core of their business model, from creating and improving their products to designing the entire customer experience!
Combining the benefits of vertical integration with the digital world is a recipe ripe with potential and the proof is in the numbers. In the US, DNVBs are growing 3x as fast as the average e-commerce retailer. Their dynamic and unparalleled relationship management, customer experience, and value proposition makes these businesses the ones to watch.