Digitally native vertical brands are pushing e-commerce innovation. But why are digitally native vertical brands, so-called DNVBs, an innovative approach to digital commerce, and what makes this approach so exciting?
Global online sales is growing by 18 percent a year, and daily social media usage of global internet users amounted to 135 minutes per day in 2017, growing by 5 percent on a yearly basis. These underlying statistics have forced forward not only a growing digital commerce market but also a new consumer shopping behavior. As every online service also gets easier and cheaper to use, the entire supply chain of retail has been disrupted during the past years. It is easier than ever to source products from low labor cost countries such as China, Bangladesh, and India, and to set up exceptional looking e-commerce only costs 29 USD a month with Shopify. How does this affect the brand building in 2019?
Digitally native vertical brands (DNVBs) are brands born on the Internet. They have a maniacal focus on customer experience, and unlike typical e-commerce brands, a digitally native vertical brand controls their own distribution. The products are sourced directly from a manufacturer and sold directly to the end consumer. This means double gross margins compared to regular retail, which means a much more profitable business than regular retail. Double gross margins also mean that marketing spend can be much higher than regular retail is used to. That is the reason why digitally native vertical brands usually experience massive growth. Thanks to the digital landscape demographic barriers do not exist. With the world as its playground, the digitally native vertical brand can grow super fast without external capital needs, be super profitable, and create a massive impact on its audience.
Let´s take the watch company Daniel Wellington as an example. Thanks to an innovative influencer marketing model the watch company grew from nothing to a revenue of 200 000 000 EUR from 2012 to 2016. In 2016 the companies net profit was 48%. This is the potential of digitally native vertical brands.
A digitally native retailer starts selling online, taking advantage of the easy access to consumers across the country to grow their business. Retailers can grow beyond selling online only by working with individual retailers or moving into their own physical stores. These spaces usually serve as showrooms for customers who often walk out without the product in hand.
Vertically integrated brands control the product from the factory, all the way to when the product is in the customer's possession. Many retailers don’t own the factories, but they can influence the factories to the point where they can specify exact product details, essentially making what they sell directly to consumers unique and even customizable.
By focusing on a singular product category, and being obsessed with customer experience, DNVBs are able to capitalize on changes in the market quickly, delivering new products to the market with a very little turnaround.
We truly believe that the brands of the future are built online. And we believe their main marketing strategy will be influencer marketing. They will be digital, global, social and mobile. That is why we at Fashion Tech Group have chosen to focus on this specific kind of e-commerce. Wanna know more?