Value Destruction, You and Me; Part 1

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Dynamite1

I have to admit that I had never heard of the term digitally native vertical brand. That changed when I read a startling  article by "How Companies Like Dollar Shave Club Are Reshaping the Retail Landscape," describes how new technology has allowed startup companies like the aforesaid Dollar Shave Club, Casper (a mattress company) and Warby Parker (eye glasses) to bypass the traditional supply chain and sell directly to consumers at disruptively low prices. Is the strategy successful, well Unilever just purchased Dollar Shave Club for $1 Billion. Dollar Shave Club was five years old.

So, what is the digitally native vertical brand? Here is what I learned on a website called Medium in an article by Andy Dunn, CEO of Bonobos, Inc. they published entitled "What’s a DNVB? Only the future." Here is a direct quote from the article describing the criteria (I suggest that you read Mr. Dunn's full article by clicking here:

  1. It’s primary means of interacting, transacting, and story-telling to consumers is via the web. In almost all cases the brand is born digitally. Hence the term digitally-native.
  2. It’s a brand, and that brand is vertical. The name of the brand is on both the physical product and on the website. It requires the commercialization of an e-commerce channel, but that channel is an enablement layer, it’s not the core asset.
  3. The DNVB is usually maniacally focused on customer experience and on customer intimacy. The experience tends to be three-part bundle of physical product, web/mobile experience, and customer service that collectively become the brand in the consumer’s imagination.
  4. While born digitally, the brand rarely ends up digital only. This means the brand can extend offline, eventually. Usually its offline incarnation is through its own experiential physical retail or highly selective partnerships. In nearly all cases of partnerships, the brand controls its external distribution versus being controlled by it.

Essentially what this describes is the vulnerability of our historic manufacturer through retail to consumer system. Its what Ben Thompson in his blog "stratechery" is calling "value destruction." In the case of the Dollar Shave Club, this means that traditional razor and blade companies like Gillette and Schick will see their value decline.

By being successful, companies like Dollar Shave Club are continuing what Walmart started, the squeezing out of all non-essential costs. The difference this time is that companies like Walmart are in themselves a non-essential cost.

More all of this in part 2.

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