DNVBs (Digital Native Vertical Brands) are new brands that distinguish themselves by their integrated model (in production, distribution and even communication) and the fact that they master the digital codes that are capturing the new generation of consumers. This name hides some of America’s best and most recent start-up success stories including: Bonobos, Warby Parker, Glossier or Casper. As DNBVs reach the 100 million euros in revenue mark and as the phenomenon slowly moves to France, some predict that Amazon’s strategy to launch their own brands could threaten this model. At Otium Brands, we are convinced that DNVBs still have a bright future ahead. Here’s why:
1. The power of the brand
DNVBs, just like Amazon, are trying to take advantage of the phenomenal growth of e-commerce. But the similarities stop here. Beyond this new distribution model, it’s a new generation of brands that is born advocating succinct values of transparency, authenticity, and services that consumers look for but can’t find in traditional offers. Thanks to the stories of the founders and with the help of original, viral content, these brands are able to engage with communities who will not only become loyal clients but also great ambassadors. In a time when consumers are more and more in search for meaning, short processes and real stories, the relevance of the DNVB model seems to be only at its inception.
2. The virtue of expertise
DNVBs position themselves as experts compared to their traditional, generalist counterparts. Integrated channels (Harry’s bought their own razor factory), unique models (like that of Casper), consulting mines (Glossier was founded by the blogger Emily Weiss): DNVBs choose a sector or even a product that they master from end to end. They also benefit from two strong competitive advantages: from an organizational point of view, teams can concentrate their efforts on one type of product, master the value chain all the while suggesting new innovations and making sure they have the best quality. This allows brands to offer a range of product that is simpler and clearer to the consumer, enabling them to gain credibility and build strong relationships based on trust.
3. An enhanced experience
The inherent promise of the DNVB model is to put back the consumer at the heart of the value proposition by offering a buying experience that is as memorable as the product. The consumer’s path is carefully crafted: the ergonomics and the content of the website have to be clear making it easy to understand and to find the most adapted product. Content is specialised and created by experts allowing for a more pertinent conversation with each visitor. Delivery — unlike Amazon — is not only thought through in terms of time delay or collection of goods but as a complete and separate experience: some have a specific design, a personalized surprise or a customer service that can answer all your questions at any moment. This experience continues even in the real world, as most DNBVs are opening points of sales (whether ephemeral or permanent), that are reinventing the traditional model to offer a personalised in-store experience.
4. Opportunities due to the depth of the market
The market in which Amazon and DNVBs operate is growing fast and no one really knows the share that online sales will reach within the next few years. In France, e-commerce grew 15% in 2016 reaching 72 billion euros. This represents only 8% of retail trade with strong disparities depending on the sector. The emergence of a new generation of consumers that is more connected should give rise to specialised actors.
While the growth of Amazon and DNVBs is real, their entry in the market remains limited. In France, Amazon “only” has 12% of the market share in e-commerce and less than 1% in the trade in goods. Generally, the phenomena of DNVBs is early stage with the recent emergence of a handful of actors (Sézane, Le Slip Français, Tediber, Bergamotte, Tiptoe, Polène, Laboté, Jimmy Fairly…). Competition still essentially comes from traditional actors but this model by traditional actors is also the one that is declining the fastest. If we look at what’s happening overseas, large companies are slowly giving way to new entrants (Gilette lost 4% of market share when Dollar Shave Club gained 2% of market share during its first 4 years of operation), Amazon continues to grow (and holds 30% of online commerce), but is not preventing DNVBs from entering the market and being part of consumers’ daily life (from suitcases to shoes or bedsheets).
If this pattern repeats itself in France, both models by Amazon and DNVBs can gain grounds on traditional brands.
This is the conviction we have at Otium Brands: we believe that the old model is being challenged because it no longer answers consumers’ needs and expectations. Whilst Amazon will most probably remain the best place to make efficient purchases, that have low added-value (even though the success of Dollar Shave Club shows that it’s still possible to gain grounds), there is the opportunity for new, strong, inspiring brands to capture consumers who are making emotional and engaging purchases. Historical actors seem to agree with this vision: by multiplying their acquisitions, they are reconciling with start-ups and resisting being outrun by these young brands.
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