A version of this article was originally published by Forbes.
Technology was at the center of the biggest consumer product launches of the past 12 months and they have one thing in common: they embody what has come to be known as a digital native brand. This is an analysis that summarizes how you can apply the learnings from the top DNVBs to your business.
Kylie Jenner launched her cosmetics brand using social media and according to Vogue, Kylie sold $420M in 18 months and it's estimated that her company will be worth over a billion dollars by 2022. Rihanna launched a makeup line for women of color and racked up $100 million in sales in the first 40 days and YouTube content generated $72M worth of earned media in the first 30 days alone. Glossier was conceived by its founder after her beauty blog became a smashing success online. Lady Gaga secured funding between $5M to $10M for Haus Beauty though is has not released any products yet – according to recode.
Just five years ago, launching a digital native brand would have required a great deal of funding and time. Thanks to Twitter, YouTube, SnapChat and Instagram digital native brands can grow fast and organically without depending on paid online marketing. Lady Gaga, Kylie Jenner and Rihanna have the advantage of being famous, however, Emily Weiss the founder and CEO of Glossier was neither when she started.
The thread that link Emily Weiss –founder of Glossier- and her superfamous competitors is their savvy use of technology to validate the market and to connect with consumers at a scale. Fenty Beauty and Kylie Cosmetics embraced a digital native brand mindset and executed a strategy that relies on existing technologies. They are also laser focused on listening to their customers and responding by bringing the right products to market fast.
Technology, focus and perseverance marks the difference between a small mom-and-pops operation with few stores and a rocketship like Glossier that went from non-existent to a valuation of $390M in five years.
Below, we analyze the top traits of these direct-to-consumer companies and how you can apply these to your business.
Change comes from the top and empowering people to solve problems using technology is a big reason for their success. Paraphrasing a recent HBR article, 5 behaviors are key for the C-suite to authentically exert positive change, especially when transforming the company's mindset towards digital: (1) Share a compelling and clear purpose by articulating the company values and respecting the customer. (2) Identify the opportunity by showing the short and long term goals and providing the means to achieve them to your team. (3) Seek out what's not working because, as the article mentions, "people need to feel psychologically safe to share the good, the bad, and the ugly."(4) Promote calculated experimentation aided by tools that allow your team to make decisions based on data (5) Seek boundary-spanning partnerships that instill innovation at all levels of the organization.
Digital natives don't run on conventional thinking. Being digitally native is about being unconventional, fluid and agile — and sometimes it’s about being ready to let go of some control.
It started with Millenials and now Gen Z is taking over as the first truly digital generation. Most founders have a strong industry background and they are able to advance the company to first base. The difference between first base and a business that hits a home run is how you scale your reach and operations with technology. This is becoming crucial as Gen Z takes the reigns of the economy.
"Digitally native vertical brands are maniacally focused on the customer experience and they interact, transact, and story-tell to consumers primarily on the web." Andy Dunn, Bonobos CEO
This is the beginning of a massive shift towards fully digitized retail operations. As an example, let’s compare the impact of one single digital native company (Shopify) against classic brick-and-mortar. Nearly 7,000 brick-and-mortar stores closed in 2017 while Shopify alone grew by 73% and powered over 600,000 unique stores, generating a $26.3 billion yearly gross merchandise volume (GMV) according to company's financial reports.
Here are two guiding principles that retailers must understand about technology. First, building great, functional software is hard and expensive. Second, if you are a retailer, your core product is strengthened by using existing software, not by building it.
"Technical debt is the price companies pay for short-term technological fixes — hinders their ability to innovate and adapt in the digital age." MIT.
Start by choosing the right size of e-commerce platform. Many of the companies we work with have made their choice of e-commerce platform based on cost and feature set rather than return on investment (ROI) and integration capabilities with third party apps. When a technology solution turns out to be too big or too small for your needs, it creates technical debt. When a system is too small, you need to scale up by hiring people to fill a void. When a system is too large, you are not only overpaying for it but also underutilizing the tool and paying for seats and training you don't need and stressing your team with goals they are not ready to reach yet. This is known as "technical debt" and creates a hard problem to solve in the future.
MIT suggests decoupling your technical debt by doing 4 things that are crucial to the success of your digital transformation. This MIT article focuses on large corporations, but you can apply this to your business, regardless of size. First, decouple data from legacy systems mainly through APIs. Second, decouple apps from legacy infrastructure by moving data to the cloud. Third, unbundle business processes by allowing disparate systems to talk to each other through APIs. Fourth, decouple IT talent and budget from the "IT department" since technology is the backbone of a modern enterprise.
Digital Native Brands start online and since the internet shopping experience is not tactile yet, many Guide Shops, as Bonobos likes to call their brick-and-mortar presence, are becoming more popular as it affords the brand a temporary physical location that is not tied to outdated real estate multi-year contracts. The pop up store model allows digital native brands to provide an enchanting experience that translates not only into more sales-per-square-foot (outdated KPI) but into massive viral experiences, like Kylie Jenner's pop up store in San Francisco.
Let me tell you a story.
The wild pig and seacow were best friends who enjoyed racing each other for sport. One day, however, the seacow hurt his legs and could run no more. So the wild pig carried him down to the sea, where they could race forever, side by side, one in the water, one on the land.
"Storytelling is the greatest technology that humans have ever created.” — Jon Westenberg
Before social media, these stories were passed down in written and oral forms. While the best storytellers –think Shakespeare– went viral, many other stories lived within the confines of their local communities.
Technology platforms empowered the world to share their stories through networks that can make a story travel the world in just a few seconds. Learn the tools of the trade and use them to your advantage. Remember that what your customers are looking for is a story they can buy into and a company that stands by its products.
The key differentiator between brick-and-mortar retailers and newer digital native brands is the mindset. While storefronts are being retrofitted to attract foot traffic in a vacuum, digital-native retailers are defining the future of retail. Leveraging software selected by technology leaders, these companies can take full advantage of personalized algorithms that study geography, buyer motivation, and daily necessities. These necessities are supported by an immediate delivery, availability, choice and relatable brands. This seemingly magical buying experience is all made possible by software.
Subscribe to Insights at Tangelo
Accelerate your growth with key industry insights.