The Digitally Native Vertical Brand in 2021 | Blog by Robin Copernicus

Digital native vertical brands (DNVBs) are niche-oriented companies bourne on the internet. They have become a naturally occurring innovation in the business climate of today. They hold immense launch benefits, such as a streamlined supply chain and little competition, and have a unique ability to navigate the business landscape effectively.

This guide looks into what a DNVB is and how it works, as well as some interesting tidbits that will help you in your bid to launch one.

What is a Digital Native Vertical Brand

What is a Digital Native Vertical Brand?

When looking into the definition of a digitally native vertical brand, one of the most helpful things to do is to examine the term’s constituent parts—”digital native” and “vertical brand.”

Digital Native Brands

A digital native business primarily started by selling products or services via the internet. As we all know, tons of companies fit this description, including direct-to-customer brands (DTC brands), retail brands, freelance service companies, and even online retailers.

The digital native business came as a paradigm shift for vertical commerce, providing a break from the brick-and-mortar norms. Eventually, it forced many of these brick-and-mortar stores to open websites and online stores and eventually branch into the internet age. Thanks to the growth in demand for convenience, businesses are now providing users with the opportunity to pay for their products and get them delivered to their doorstep.

Of course, the fact that a company is considered a digitally native vertical brand doesn’t necessarily mean they can’t have physical offices or storefronts. Many digital native companies started by putting their operations online, then even branched out to develop brick-and-mortar stores. 

Vertical Brands

Alternatively, a vertical brand (or vertical company) is one that has control over the experience and product (or service) that they sell. They own the entire supply chain, seeing products move from the factory directly to the consumer. One of the primary benefits of owning a vertical brand is the opportunity for customization. You can personalize products for your customers and ensure that they get only the best.

In addition, owning a vertical startup provides space for better quality control, enhanced customer support, and more. Your business can take valuable information from your niche and use it to improve their experience. The data will also help you to enhance customization and personalization in your regular communications with the customers.

It is worth noting that brands that sell through online retail platforms (like Amazon or Nordstrom) might not necessarily be a vertical brands. This is because they lack control over the critical customer experience component. Simultaneously, a company that designs its products and sells them through its brick-and-mortar stores or online service can be considered vertically integrated.

Digital Native Vertical Brands

So, knowing what these two mean, it’s easy to define a digitally native vertical brand. These are companies that start online and which control the entire process from manufacturing to customer delivery. Some businesses can be vertically integrated and not digitally native, while others can be digitally native and not be vertically integrated. The companies that manage to combine both are exceptional.

What’s important to remember when thinking of a digital native brand is e-commerce is not the same as v-commerce. E-commerce companies may focus on several niches while a v-commerce company only focuses on one.

What are some examples of Digital Native Vertical Brands?

Today, many companies can be classified as participating in v-commerce (vertical commerce). Some prominent ones are listed below.

AdoreMe

Founded by Morgan Hermand-Waiche, AdoreMe is a women’s lingerie brand based in New York. The company manufactures and sells sleepwear, lingerie, swimwear, and much more.

AdoreMe caters to women of all sizes. It started in 2010 and currently has a post-money valuation of around $50 million.

AllBirds

While the footwear market is incredibly competitive, some companies have managed to break into it and are now making waves. One such company is AllBirds, a San Francisco-based manufacturer of shoes.

Started in 2015, AllBirds uses the direct-to-consumer approach to design eco-friendly footwear. The brand is a Certified B organization, and they put great pride in their ability to maintain the eco-friendly design of their shoes. Today, the company has a post-money valuation between $1 billion and $10 billion.

American Giant

American Giant is another San Francisco-based company in the fashion space. Established in 2011 by Bayard Winthrop, the company manufactures high-quality fashion apparel, all of which it makes in the United States.

Winthrop notably believes that a company can save a great deal of money on marketing and retail distribution if they sell directly to their customers. Fast Company named it one of its 50 Most Innovative Companies in 2015, and at the time, the firm had a $74 million valuation.

Away

Away has grown into one of the most influential lifestyle and travel brands in the United States. Established by Stephanie Korey and Jenifer Rubio in 2015, the New York-based firm started by designing and manufacturing luxury luggage and bags in the state.

Soon enough, Away raised enough financing to scale its operations and grow significantly. In 2018, the company was valued at $400 million, essentially placing it in the unicorn club.

Bonobos

Bonobos is another digital native vertical brand that focuses on excellent customer experience and a fun take on menswear. The company was launched in 2007 as a purely online brand by Brian Spaly. At the time, it delivered better-fitting pants for men.

Today, Bonobos is one of the largest apparel brands to start on the internet in the United States. The firm extended its operations offline in 2011, launching Bonobos Guideshops—e-commerce solutions that deliver customized one-to-one services to people who would like to have an in-person experience of the brand.

Bonobos also expanded its distribution service in 2012, thanks to a partnership with Nordstrom. The partnership allowed Bonobos to provide apparel to specific shops across the world. The entire brand was eventually acquired by Walmart, with a juicy $130 million price tag.

Dollar Shave Club

Founded in 2011 by Michael Dubin and Mark Levine, the Dollar Shave Club started out as a $1 subscription service. The brand’s back-to-basic approach of providing members with quality inexpensive razors became an instant hit.

The brand’s 2012 video campaign starring and written by Dubin was a viral success. It showcased both his humor and marketing instincts. The video crashed their site and brought in over 12,000 conversions in under 72 hours.

It was only a matter of time before the brand expanded into self-care products. By 2018 their lineup included a wide range of shaving prep items, hair care, oral care, and even a fragrance line. What once was a simple and pure concept emerged into a diverse offering, one that self-care giant Unilever acquired in a staggering $1 billion cash deal.

Warby Parker

Derived from the name of two characters in author Jack Kerouac’s journal, Warby Parker was founded in Philadelphia in 2010. Also known as JAND Inc. (the official company name), Warby Parker is a popular online retailer for sunglasses and prescription eyeglasses. The company is based in New York and initially sold its products online. Eventually, they opened various retail locations in the US and Canada.

Shortly after their launch in 2011, the company that only started out with a $2,500 seed investment was featured in Vogue’s online publication. A little over a year later, the company was able to raise around $12.5 million. This went on to more than double by fall the succeeding year.

Valued at $1.2 billion by 2015, Warby Parker later announced its plans to build an optical lab with the goal of producing in-house manufacturing of their eyewear line. To date, the Warby Parker facility sits in Rockland County, NY, with a staff of over a hundred. 

Casper

During the 28 days following its official launch, Casper managed to raise a whopping $1.85 million in its first round of funding. Casper Sleep, or Casper, is a well known public e-commerce brand that offers a range of sleep products online as well as in various retail locations.

The company has showrooms in Chicago, as well as in New York where it’s headquartered. Its mattresses, on the other hand, are manufactured in Pennsylvania and Georgia.

By the end of 2014, the company had managed to expand its delivery beyond the United States. Additional funding also came in from numerous celebrity investors such as Leonardo DiCaprio, Adam Levine, Toby Maguire, and Scooter Braun, to name a few. The brand also partnered with American Airlines to design and produce pillows, blankets, and other sleep products for airline passengers.

Currently, Casper continues to produce top-of-the-line mattresses using four types of foam. They have also recently gone from expanding their online business to selling via pop-up shops and various retail locations.

Check out the Top 100 DNVBs listed by valuation here.

Why should I care about DNVBs?

Digitally native vertical brands are doing significant work to improve their operations and deliver top-shelf service when it comes to customer service. The business model looks quite appealing for several reasons.

Leveraging the Internet

Perhaps the most significant benefit of digitally native vertical brands is their ability to leverage the internet to commercialize their products or services. They give consumers value for their money, mixing convenience with effective service delivery.

DNVBs primarily use the internet to facilitate their business operations, interacting with their clients, and selling products and services. They can control the entire business, optimize customer experience, and get the information required to keep their service delivery up.

Profitable Operations

Contrary to traditional e-commerce companies, DNVBs invest in a zero-sum market. Essentially, if you’re a DNVB, you operate in a market where buying from you makes it impossible to patronize a competitor. There are no substitutes for what you offer, and you can essentially optimize your business margins from the first sale.

Cost-Effective Marketing

DNVBs can also use asymmetric marketing tactics, unlike traditional companies. As a DNVB, you can diversify your marketing as you see fit. Leverage viral trends and hot topics to promote your business in a low-cost, highly effective manner.

Thanks to social media and word of mouth, getting your service in front of your target audience members is incredibly easy today.

The Focus on Customer Experience

DNVBs focuses primarily on customer experience. Due to this, they focus on getting insights that help them to optimize their operations.

At the end of the day, every business looks to serve the members of its target market. DNVBs invest a great deal of time and effort into doing this. When successful, companies can grow their sales considerably.

How do I start a DNVB?

Building a DNVB from the ground up is a significant undertaking. While it can succeed eventually, you will need to shift your mindset on how to build a startup on your way up.

Here are some critical tips to consider.

Focus on the Customer List

Building a digitally native vertical brand will rely significantly on your ability to use a following to your advantage. Look at Kylie Jenner—she used social media to unveil her cosmetics brand and sold over $400 million worth of products in less than two years. It is estimated that her company will be worth $1 billion by next year.

The same thing happened with Rihanna, whose makeup line racked up over $100 million in sales across its first two months.

Both are leveraging their fame to build a customer list of willing and able buyers for your product or service. Years ago, such a business would have required a significant amount of funding to even get off the ground. However, thanks to democratizing technology that allows anyone to publish on equal footing as major players over the past few years, you can quite literally begin building your product or service business today.

Famous or not, everyone can use technology to find the right market and connect with their ideal consumers.

Here are some tips to start building your vertical:

  • Know your why
  • Know your ideal customer better than they know themselves
  • Have a compelling and clear purpose that you can share with your customers

GPDS Framework

So, you’re already determined to launch a digital native vertical brand product or service. However, you also need to have the right framework to see it through. This is the secret sauce to building a startup without business plans, pitch decks, or venture capital:

  1. Grow a customer list
  2. Presell a mockup
  3. Develop
  4. Scale

Most people make the mistake of developing an MVP (minimum viable product) first. Then they seek investment to take their development to the market to test product-market fit. This is the traditional way of starting a company.

With a vertical company, you build your community first. You then use that community to test product ideas. Once you’ve validate product-market fit, you can run a presale to fund development.

After you have the kinks worked out from development can you being to focus on scaling?

If you’re more interested in how this framework can work for you, please contact me at [email protected]

Understand That Everything is Digital

Everyone is embracing the digital transformation age. Your business will need to understand how best to scale its operations using technology to improve the customer experience.

As explained earlier, DNVBs focus on optimizing the customer experience as much as they can. To do this, you will need to interact, transact, and essentially run your business on the internet. Beyond just marketing, you need to ensure that everything you do is mobile and internet-friendly.

The harsh truth is that brick-and-mortar companies are dying in today’s business climate. Everything is moving to the internet, and you need to do the same. From your marketing to your transactions and business operations, pretty much everything should be digital. The only thing allowed to stay physical is your manufacturing process.

What are some key social media success factors for DNVBs?

If you run a digital native vertical brand, you will need to leverage social media for your marketing. While many tips can help you optimize your social media presence, here are a few essential tips that could define your success.

Focus on the Content

At the end of the day, social media is all about developing compelling content and spreading it. Your content is what will engage the members of your audience and help them interact with your brand.

Generally, two types of content sell the most—empathetic and knowledge-based. The first deals primarily with reaching for people’s emotions and pushing them to take a specific action. The other establishes you as an authority in a field that people will pay to listen to and learn from.

Whatever form of content you choose, focus on improving its quality time and again. You should also ensure that customers have ways to consume it. If you have content that people can consume that solves a problem in an industry, you have a reliable base that can help you grow your business through content marketing.

Repurpose Content Based on the Platform

Now that you have compelling content, distribution is the next hurdle to scale. You need to understand that what works on Instagram might not necessarily work on Twitter or Facebook. These platforms generally have different types of people, and you want to deliver your content in various ways to reach out to them.

You have to understand your core message and deliver it in a way that people can relate with, based on the platforms. You could use animations, webinars, short videos, anything at all. It could be a blog post, which you share on a message board or an online forum. You could even launch a podcast where you share your stories with members of your online community.

All in all, think about the best way to reach members of your audience through different platforms.

Engage Visual Content

When it comes to content, the visuals rule. In a crowded social media climate, visual content provides the best way to grab attention.

On Facebook now, the most compelling types of content are videos—more than even status updates and regular photos. The same thing goes for Instagram, which was built to accommodate photos and videos alone.

With visual content, people can consume content quickly and move on. Sometimes, that means checking out a picture or watching a short video as they move.

Be Social

When social media began, people and businesses focused primarily on likes and followers. However, these metrics don’t necessarily build your business profile. While you want to increase these as well, the most critical factor is the number of people who actually engage with your brand.

Being social makes you relatable. Eventually, people only want to do business with other people who can help and interact with them. It’s that simple. When your audience can interact with you and get responses, they look forward to your content and are more guaranteed to return.

Use Others’ Audiences

Aside from being social on your pages, you could also use others to help yourself. Actively participate in groups and programs relating to your industry to put yourself in front of relevant audiences. When these audiences see what you’ve got, they will be more open to learning from you and engaging with you.

Use Email to Your Advantage

Email isn’t a social media tool, but serves a similar function. The truth is that while social media is excellent for building a reputation and engaging your audience, the people most likely to become actual consumers are the ones who opt-in to your email campaign.

To this day, email remains the most personal form of marketing. People are more likely to open your emails than they are to interact with your social media posts—especially if they care about what you’re selling.

Quit Assuming

Never think that people will take a specific action just because they engage with you on social media. If you run YouTube videos, don’t just think an increase in views will lead to an increase in subscribers. If you sell stuff, don’t think people will buy your products just because they like your posts on Instagram.

Be explicit with what you want people to do. Put a call to action and let them know the desired outcome for all this. 

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