The Book of DNVB

The Rise Of Digitally Native Vertical Brands

What is a DNVB?

I have spent the last ten years of my life figuring that out. I don’t know everything about it, but here is what I know:

  1. It’s primary means of interacting, transacting, and story-telling to consumers is via the web. The digitally native vertical brand (DNVB), is born on the internet. It is aimed squarely at millennials and digital natives. It doesn’t have to adapt to the future, it is the future. It doesn’t need to get younger customers. It starts with younger customers. When we launched Bonobos in 2007, somebody asked me who had done this before. I said no one. The history of innovation is the story of ideas that seemed dumb at the time.

Too often the DNVB is compared to a typical e-commerce company. If a typical e-commerce company is a frog, at birth the DNVB does look a lot like a tadpole. But it doesn’t end up as a frog. The difference is profound, and it requires an appreciation the role brand plays in inspiring people, speaking to them, shaping their choices, and a sharp understanding of how different the economics and growth trajectories are.

It requires investors to look more closely at the downstream math of a DNVB versus an third-party e-commerce purveyor. That differences in the unit economics and the contribution margin cohorts are profound — apples to oranges. Cohort analysis is only part of the story. Brand matters. These brands have a soul that is not easy to quantify at first. The e-commerce stories are flashier at first on the top-line (more brands!), but the long run winning strategy may well be DNVB (cult brand monotheism). The e-commerce businesses are often commodities that rise and fall (Fab); the dream for the vertical brands is to endure for a century or more (Bonobos, Warby Parker).

The e-commerce company is a channel; the DNVB is a brand. The e-commerce company has low margins; the DNVB has high margins. The e-commerce company can grow unbelievably fast; the DNVB can’t grow as fast, but it’s more valuable in the long run because it’s about more than just price.

While third-party e-commerce requires you to compete against a grizzly bear called Amazon, creating a DNVB gives you an opportunity to combine the growth of being an e-commerce company with the margins of being a brand, and with proprietary merchandise where you control distribution and your own destiny. When done right, when there is some differentiation in the core physical product itself made possible by the vertical commerce nature of the model, as the DNVB can provide a better overall bundle of product and service than the competition.

The DNVBs are just getting started; only recently are people beginning to realize how big they might be at scale. Their strategy creates a brand loyalty impossible to create in the commoditized world of channel, and as traditional vertical retail dies a slow death, the DNVBs rise to take their place.

In the history of DNVBs, it’s incredibly early. The net promoter scores are off the charts. There is still a lot to prove still on profitability. We are in the first decade of a century long shift where retail is re-organizing from the automobile (the 20th century) to the smartphone (the 21st century). Vertical brands were a huge part of the brick and mortar driven era of retail (Zara, Ikea, Trader Joe’s), and their digital reincarnations become the driving story in the future of retail.

Next up: the encyclopedia of DNVBs.

Spirit animal @bonobos, swan hunter @redswan, brother @monicaandandy. I love cilantro but love even more the people that hate it