Six years ago, Andy Dunn, founder of Bonobos (among other things), wrote a compelling article entitled ‘The Book of DNVB’ on the rise of digitally native vertical brands. Andy’s article was, as it turns out, prophetic. Since then, eCommerce has evolved and spawned thousands of successful DNVBs, most of them using Shopify. Andy himself sold Bonobos to Walmart for $310 million in 2017. Let's look at some growth strategies used by Bonobos and other successful DNVBs.
As Andy Dunn suspected six years ago and successfully overcame himself:
Shopify DNVBs usually can’t grow fast.
However, it turns out there are ways to speed up growth by leveraging complimentary brand partnerships, a dropshipping model, and intelligent eCommerce automation.
In short, Shopify vertical brands realize their growth goals with assortment expansion using virtual inventory and simplified dropshipping eCommerce. This approach helps to significantly boost eCommerce KPIs such as Average Order Value and Customer Lifetime Value without the complexities of launching their own inventory lines.
But before we get into all of that…
What is a DNVB, I hear you ask?
In order to understand why Shopify DNVBs have turned out to be so successful in building almost religious customer following, let’s first review Andy’s classic definition back from 2016. Let's understand why vertical brands enjoy the product gross margins that are at least double that of traditional eCommerce e.g. 65% versus 30%.
If you’re not into definitions and reminiscing, skip ahead right to DNVB growth strategies.
A DNVB, or digitally native vertical brand, could be defined using the following criteria:
- Its predominant means of doing business is digital. In other words, all customer interaction, marketing, and sales happen online.
- It is a vertical brand, owning both the manufacturing and eCommerce side of the business. Usually focused on a single product-line, at first.
- There is a maniacal focus on the customer experience. This should be reflected in the website design, the products, customer service, post-purchase - you name it.
- There is a much higher level of customer intimacy compared to other brands. There’s only one business, one store, one CRM. There is little-to-no wholesale, all customers bought directly from the brand, and so the brand maintains the customer relationship.
- The product and service combination is much better than traditional competition can provide. Whether it’s product personalization, atypical subscription offerings, or something else, the fusion of a high quality, outlier product, a memorable, user-friendly web/mobile experience, and maniacal customer service is what the brand becomes in the customer’s mind.
- It began as a startup. Corporate entities strive to create brands such as these, but the reality is that without an entrepreneur’s desire to make something out of nothing, it’s hard to create a brand that has those unique, standout qualities.
- It needn’t remain a digital-only brand. It needn’t remain a vertical brand. In fact, it needn’t remain a brand that only sells its own products. While it was born a DNVB, there may come a time when the brand would like to broaden its horizons. That could mean opening a physical location or filling out the category tree with a curated selection of 3rd party brands’ products to be sold in a dropshipping model. Whichever path is chosen, the quality of products and the customer experience must be maintained.
Now that that’s taken care of…
How did ‘The Book of DNVB’ prophesy the future?
It can be summed up with a single quote taken directly from The Book of DNVB:
The DNVBs are just getting started; only recently are people beginning to realize how big they might be at scale.
Six years ago, that may have been true. Now, half of all Shopify stores very well may be DNVBs, and there are some brilliant examples of them at scale, and people have definitely taken notice.
So, let’s take a look at a few of the brands mentioned in ‘The DNVB Encylopedia’ (also written by Andy Dunn six years ago) and see where they are now.
Starting out as a humble, all-American manufacturer of hoodies, American Giant had a mission to improve the quality of everyday clothing items by doing everything in-house and on American soil.
By selling directly to the consumer, they were able to offer higher quality goods for more affordable prices - a common theme among DNVBs.
They’ve since expanded their category tree significantly to include all kinds of menswear, womenswear, and even denim.
American Giant’s revenue is relatively low compared to some of our other examples and they’ve been around for more than 10 years, making it a testament to Andy Dunn’s “DNVBs can’t grow quickly” statement all those years ago.
Being fed up with how hard it was to find pants that fit them well and looked great, and after asking around, they found that a lot of their friends and classmates were, too. They set out to design a better-fitting pair of pants and then launched Bonobos to sell them.
Bonobos now cover a much wider range of fashion categories and have done numerous collaborations with celebrities and other brands.
In 2017, the brand was acquired by Walmart for a whopping $310 million dollars. However, staying true to its digital origin, the products are not sold in Walmart stores.
The idea was simple: Produce the best mattress possible at an affordable price, sell a single model, and deliver it quickly, for free, with a 100-day trial period. It worked: Casper had sales of $1 million in its first month.
Now, it manufactures everything bed-related - pillows, frames, bedding, and sleep accessories - while staying true to its flagship product, and even goes as far as to offer bed bundles that include everything a customer needs to replace their sleep setup.
At the start of 2022, it was acquired by Durational Capital, a private equity firm.
The history of Food52 is a fascinating tale indeed. To begin with, they weren’t even in the eCommerce business. It all started in 2009 when they shared their first blog post about butter.
A boatload of blog posts and a handful of published recipe books later, Food52 is now a large-scale marketplace with many categories in home, food, and garden.
And, of course, they have their own product lines. A massive advantage of the marketplace model is that there’s no need to invest in R&D, materials, and manufacturing to test the market - the suppliers' sales (or lack thereof) on the marketplace provide a huge amount of insightful data.
Food52’s most recent round of funding in December 2021 saw them raise a massive $80 million in private equity.
When Emily Weiss launched the brand, there were a total of 4 products. Now, Glossier offers a total of 84 different beauty products (not including color variations!) plus a few fashion items, and is widely regarded as one of the earliest breakout successes of the DTC model.
As of 2022, Glossier is valued at jawdropping $1.8 billion!
The five original founders of Stance saw an opportunity to address a category of fashion they felt had been overlooked by many brands and the majority of the industry - socks.
Engaging in numerous sponsorship deals with athletes, musicians, models, and designers, they found a way to breath life into their vertical and turn it into a astonishingly successful business.
By 2015, the brand had sold an astounding 36 million pairs of socks. One can only imagine what that number is now.
How can a DNVB scale?
As we’ve seen above, many Shopify DNVBs, at some point in their journey, decide to expand their product offering either by making new products themselves or by partnering with 3rd party brands in some way, shape, or form. The general idea, to put it simply, is more products = more sales.
To elaborate, what’s it’s really about is:
- meeting the customer’s needs once the customer acquisition investment has been made;
- not letting the competition consume that customer’s disposable income;
- and increasing the average order value and lifetime value,
- therefore getting return on investment in a shorter timeframe with smaller risks, and less cashflow challenges.
However, as Andy Dunn put it:
DNVBs can’t grow fast
They are destined to cook low and slow until they reach optimal tenderness. This is in part due to the time-consuming nature of coming up with new product lines and maintaining a high level of customer satisfaction as order volume increases.
But what if I told you there is a way to scale faster? Well, there is, and it’s to adopt a marketplace model and onboard those previously mentioned 3rd party brands as sellers.
Not only is this a risk-free way to scale, as it eliminates the potential losses incurred from failed products or brand collaborations, but it also serves as a means to research the market by seeing what’s being sold and what isn’t, thereby allowing for more educated decisions when designing new product lines. Combined with an extra revenue stream in the form of commission, what’s not to like?
But won’t selling other brands' products ruin my brand’s reputation or negatively impact sales?
On the contrary!
A DNVB should be an established authority in its vertical and have a strong, intimate relationship with its customers. If those two are true, then customers will have faith in and trust the DNVB and so will be happy to purchase any products that have its seal of approval.
When it comes to brand reputation, the key is seller curation. Any brands the DNVB onboards to their marketplace should follow the same values as the DNVB itself - high-quality products, prompt shipping times, and excellent customer service. By picking and choosing the right brands to work with, the DNVBs reputation could drastically improve in both the eyes of customers and investors.
Regarding the impact on sales, the answer is also curation. Product curation. By carefully picking and choosing which products from which brands to make available on the marketplace, the product catalog can be filled with hundreds or thousands of complimentary (not competing!) items that can be used, one way or another, to boost the sale of your own products.
The reasoning behind all of this, under the assumption of appropriate brand and product curation, comes down to two related KPIs - average order value (AOV) and customer lifetime value (LTV). By expanding your product offering, you give your customers a reason to 1) return more regularly (LTV), and 2) purchase more every visit (AOV).
For example, one household only needs so many beds, and they don’t need replacing that often. Still, they may also need lamps, air humidifiers, some essential oils to go with the humidifier, bedroom decorations, and perhaps a little bedtime reading. Not offering these products could be seen as a lost opportunity for the business, forcing customers to go elsewhere to satisfy their bedroom needs.
Does it make sense to invest resources into developing all of these products yourself when nobody recognizes your brand for these categories? Perhaps, as proven by Casper. But does it make more sense to partner with established brands in each category, transforming your vertical bed brand into a sleep marketplace brand? Absolutely! Again, this allows you to research the customer base before investing in new product development.
Another added benefit of the marketplace model is that there are no limitations to the industries you can explore. Evolving from a sleep-focused marketplace to a home marketplace or from a home marketplace to a lifestyle marketplace couldn’t be easier, provided you have an adaptable eCommerce solution at your fingertips.
That’s where Vendo comes in.
How can Vendo help Shopify DNVBs grow faster?
Now that we’ve explored why starting a DNVB marketplace makes a lot of sense when it comes to scaling, it’s time explain how exactly Vendo can help digitally native vertical brands to adopt a marketplace model and thrive thereafter.
1. Supplier Onboarding
Vendo allows you to onboard marketplace sellers from platforms such as Shopify, WooCommerce, and Magento. Vendo fully automates the product synchronization process between your seller’s existing stores and the marketplace, allowing you to populate your product catalog with complimentary items in a matter of minutes.
Once you’ve identified a brand you’d like to partner up with and invited them to your marketplace, it takes a matter of minutes to connect the brand’s store. After the initial connection is made, our store connectors automatically:
- Pull product names, images, descriptions, and variants from the seller’s store.
- Pull shipping methods and tax information from the seller’s store.
- Update inventory levels in real-time to avoid overselling.
- Push orders made on the marketplace directly to the seller’s Shopify dashboard.
- Pull shipment tracking information from the seller’s store.
From a seller’s point of view, it really couldn’t be more straightforward. Once the initial connection is made, they can continue business as usual, with the Vendo-powered marketplace functioning as another sales channel managed from their existing dashboard.
From a DNVB marketplace owner’s perspective, there is no easier way to onboard 3rd party brands than what Vendo has to offer - it’s a simple as that.
2. Product Catalog Curation
After onboarding a seller and syncing their product catalog with the marketplace, it is now time to curate. Catalog curation is a two-sided process involving both the seller and the marketplace.
On one side, the seller selects (e.g., in their Shopify dashboard) which products they’d like to make available on your marketplace, whether pre-agreed or on a whim.
From there, it is the job of the marketplace owner to curate/edit the product information (e.g., images, descriptions) so that they are aligned with those of the marketplace, and also choose which products to set as ‘active’, meaning visible and available for purchase on the storefront.
By default, newly synced products will have their status set to ‘draft’, and can only be set to ‘active’ by the marketplace owner, so there’s no concern about random, brand-compromising products popping up on the marketplace storefront.
3. Uniform Customer Experience
- Vendo gives you full, end-to-end control of the customer experience, meaning that your brand retains and maintains the customer relationship.
- Replicate your existing storefront UI with Vendo’s built-in, configurable storefront so that existing customers will still feel familiar with what they’re interacting with.
- Send on-brand transactional, shipment tracking, and marketing emails using Klaviyo.
- Blend content (advice) and commerce (curated product selection) to promote brand partnerships, stimulate sales, and reinforce your influence as an authoritative figure in your industry.
- Combine various brands’ products with your own into sets, collections, or bundles that go well together and/or fulfill specific customer needs.
With these 3 key areas (and a host of other features and automations) taken care of by Vendo, transforming your Shopify DNVB into a marketplace has never been more straightforward. Take advantage of the dropshipping opportunity with high-quality, domestic partner brands at your side.
Leverage your brand’s existing audience and start your own marketplace to help quickly scale your business, capitalize on missed opportunities, and help your customers find everything they need all in one place. Vendo will support you every step of the way.