- The key differentiator between brick-and-mortar retailers and newer digital native brands is "mindset."
Technology was at the center of the biggest consumer product launches of the last 12 months, and they have one thing in common; they’re «digital native brands.» We summarize how you can use the learnings from pioneering digital native brands to your own business.
Table of contents
- What Makes A Digital Native Brand Different?
- Digital Native Brand: Company Level
- The Shopify Effect
- Manage Your Technical Debt
- Make Your Customer Experience Magical
- Storytelling with Technology
- The Future Is Digital
Just five years ago, launching a «digital native brand» would require 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.
Emily Weiss and Kylie Jenner launched their cosmetics brand using social media as the first and most important channel. According to Vogue, Kylie sold $420M in 18 months. It’s estimated that her company will be worth over a billion dollars by 2022.
Digital Native Brands are fast –– in the last 24 months, many celebrities have launched digital-first companies. 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. Glossier happened after her beauty blog became a smashing success online. According to recode, Lady Gaga secured funding between $5M to $10M for Haus Beauty though it has not released any products yet.
What Makes A Digital Native Brand Different?
The thread that links 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 brand mindset and executed a strategy that relies on existing technologies. They listen to their customers and respond with the right products.
Technology, focus, and perseverance mark the difference between a small mom-and-pop 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 DTC companies and how you can apply these to your business.
Digital Native Brand: Company Level
Foster A Digital-Native Mindset
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:
- Share a compelling/clear purpose articulating values and customer respect
- Identify the opportunity with short and long-term goals while guiding your team
- Seek out what’s not working and eliminate it or fix it
- Promote experimentation that allows your team to make decisions based on data
- Seek 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.
Everything Is Digital
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 can advance the company to the first base. The difference between a first-base and a home run is scale and operations. This is crucial as Gen Z takes the reigns of the economy.
«Digital 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
The Shopify Effect
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 a classic brick-and-mortar.
According to the company, 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) ‘s financial reports.
Manage Your Technical Debt
What is technical debt?
When a technology solution turns out to be too big or too small for your needs, it creates technical debt. If it is too small, you need to scale up by hiring people to fill a void. If a system is too large, you are overpaying for it and 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.
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.
Choose the right e-commerce platform
Many of the companies we work with have made their e-commerce platform based on cost and feature set rather than return on investment (ROI) and integration capabilities with third-party apps.
Make Your Customer Experience Magical
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.
Storytelling with Technology
Let me tell you a story.
The wild pig and sea cow were best friends who enjoyed racing each other for sport. One day, however, the sea cow 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 Future Is Digital
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 immediate delivery, availability, choice, and relatable brands. This seemingly magical buying experience is all made possible by the software.