up new rules,
Traditional players can learn
from these digital innovators
by Eric Heller
In the past three years, one of the most incredible e-commerce innovations has been the rise of the Digitally Native Vertical Brand (DNVB)—category-specific brands born online that live primarily (but not exclusively) online. Some of these brands are well-known, like Casper, marketer of sleep products, and some are less well-known but just as important, like Anker, a Chinese consumer electronics maker. DNVBs represent the knife’s edge of product and brand development. And they pose threats to established players.
While it’s easy to dismiss these DNVBs because they don’t often play on the physical shelf, they are still stealing real market share. Anker, for example, is estimated to have done $400 million-plus on Amazon alone, just in 2016. In even the most unexpected or protected categories, like mattresses and razor blades, DNVBs are leveraging readily available information about customer preference, and combining it with rapid product development, to build brands that are serious contenders.
While digging in on traditional brand power and superior marketing is certainly an option, there’s definitely another way established brands can learn from the DNVB segment, combining the best of their techniques with the power of a well-known brand, to beat the new brands at their own game. At Marketplace Ignition, we recommend leveraging the power of online marketplaces like Amazon, just like major players like Anker or Sunvalley, another Chinese electronics maker, and others have done, by focusing on:
1. Rethinking the traditional organization DNVBs have learned to create connections between teams that traditionally don’t partner together: e-commerce and product development, marketing and supply chain, and customer service and brand marketing. By connecting these traditionally separate teams and enabling them to be active from product development, market launch and iteration, the brand gains efficiency and speed often not available to traditional organizations.
2. Mass data analysis Once the team is in place, the most critical place to go next is the data. By understanding search, brands can understand demand. By combining this with the current product portfolio, gaps can be identified and filled. Anker’s story is often told as one of deep search analysis, comparing search volume to available products at the deepest level of categorization to find kernels of opportunity in both new products and new variants of existing products. Who needs a color consultant for product development anymore when we can look at what color thousands of users paired with your product last month? DNVBs are doing this and monitoring product reviews and questions to continuously iterate product development via mass data gathering in a giant, ongoing feedback flywheel.
3. Micro-SKU management The most successful players in e-commerce know that you never just have one or a few businesses on Amazon. If you have a thousand SKUs, the only way to win is to manage it the way Amazon does—at the SKU level. Having 1,000 SKUs means having 1,000 micro-businesses, each with its own challenges and opportunities to excel. For example, if you are a footwear seller, you know that non-standard sized shoes for women are returned by buyers at a 30 percent higher rate than a standard color and size. Whole-sized slippers are easiest to fit, and rates of return are incredibly low, often with very high feedback ratings. Those metrics matter for nearly every calculation. By understanding the throttles at the SKU level, brand owners can optimize and grow brands faster in e-commerce than anywhere else. We often focus SKU level improvements on four key areas (Please see sidebar).
Most interesting is why DNVBs’ success has come so suddenly, and why now. The biggest accelerant has come with the combination of rapid development, guaranteed product quality/social affirmation, and the tightened connection from manufacturer to consumer. The most-nimble brands are now getting iterated product in consumers’ hands in the time it took a decade ago to run a focus group. By disintermediating the import/export chain and leveraging solutions like consumer data mining and rapid manufacturing and prototyping, brands can get new versions in to market before competitors have even finished developing a concept. Direct injection into Amazon’s global fulfillment network shortens this time even more.
Questions to improve
1. Discovery What can we do to improve discovery of a new or existing product?
2. Traffic How do we drive traffic once the product is findable? Which earned and paid opportunities will have the most impact?
3. Conversion How do we make sure the SKU is in stock and buyable with the fastest delivery time to ensure it converts interest into sales?
4. Reputation How do we nail social affirmation, both online and offline, using the great tools currently available.