It’s no secret that online direct-to-consumer brands are upending traditional retail. The rise of Internet sales and marketing has birthed a slew of digital native brands offering quality products at lower prices by selling directly to the consumer. Dedicating themselves to understanding their customers and remaining nimble, these brands have seen explosive growth in recent years.
As traditional brick-and-mortar stores fight for survival in what some consider a retail Armageddon, digital native brands may ultimately be the opportunity that inspires industry-wide innovation.
Keep reading to learn how traditional retailers can benefit from the rise of native digital brands.
Digital native brands represent attractive opportunities for venture capital firms. Dynamic founders willing to think outside of the box, loyal online communities, and nimble operations appeal to VC funds searching for their next big investment.
Digital native brands have a keen understanding of consumer trends and the ability to respond to changes quickly. The AllBirds footwear brand makes comfortable shoes from all-natural materials. Launched in 2016, its focus on sustainability soon became a sticky rallying cry. The company has raised $77.45 million from venture capital firms to date. Then AllBirds adapted its online model for brick-and-mortar and opened two physical stores. It’s currently seeking capital to build more locations, challenging retail chains on their own turf.
They’re vertically integrated.
Middlemen don’t exist in the world of digital native brands. Maintaining complete control over their distribution channels helps keep costs low and meet changing consumer needs.
Untuckit, the popular online men’s shirt brand, scrupulously monitors online reviews to identify areas for improvement. The company controls both the production and promotion of its shirts. Its lean operation allows the company to respond immediately to complaints over stitching flaws or fabric quality. Customers appreciate the responsiveness, and Untuckit has profited.
They’re piquing the interest of big retail.
Digital native brands excel at developing organic followings. They use social media to attract customers and continuously refine their experience. The rise of loyal online communities is catching the attention of more established retailers. Many large retailers are snapping up digital native brands to leverage their dedicated customers bases. Walmart has acquired several digital native brands including Modcloth, Moosejaw, and Bonobos. Target invested $75 million in Casper, a direct-to-consumer online mattress company, and sells items from other digital natives such as Quip, Harry’s, and Native Deodorant. Glamsquad, an app offering in-home hair and makeup services, partnered with CVS to provide in-store services. The alliance has helped Glamsquad extend its market reach and expand its business to sell hair care products.
These deals spell wins for both sides. Large retailers bolster their name recognition and foot traffic while diversifying their revenue streams. Meanwhile, digital native brands are realizing that brick-and-mortar is crucial to growth. A physical presence in a major retailer lends credibility to online brands and gives consumers the ability to touch the product before purchasing it.
They’re expert marketers.
Digital native brands dedicate serious resources to researching their customers. They know what their customers want and how to satisfy them. They excel at building a storyline around their brand and appeal to customers by selling a lifestyle, not just a product or service. Digital native brands leverage social media, influencer, and word-of-mouth marketing to reach their target customer and build brand recognition.
Third Love, an online start-up company selling comfortable, customized bras, collects more than 75 million data points through its customers’ responses to its “FitFinder” survey. The trove allows Third Love to continuously improve its product line and expand its sizing options. The company overcame the initial reluctance of buying bras online by instituting a successful “Try Before You Buy,” policy to allow customers the opportunity to test their choice before purchasing.
They’re building sustainability into their supply chain.
Digital native brands know how to highlight sustainability in their marketing story. Many companies that sell environmentally responsible products also employ a give-back model.
Sock brand Bombas donates one pair for every pair it sells. Bombas’ mission to help the homeless inspired its use of natural materials and trademark sock design. It spent two years redesigning the product to increase comfort and support. Spreading the word via social media has helped Bombas donate more than 10 million socks while growing its sales.
Digital native brands disrupt markets. As nimble players, they challenge legacy ideals and adapt quickly to market demands. Large retailers are no strangers to leveraging technology, but digital brands use it as a cornerstone. They monitor customer reviews and preferences for clues on where to focus next.
Away, the direct-to-consumer luggage brand, makes affordable, high-quality luggage rooted in the wanderlust culture. Its social media channels feature customers using their suitcases to document their adventures. Now, Away is looking beyond luggage to disrupt the industry by “building the biggest travel brand in the world.” The company has set its sights on expanding into private-label travel accessories and hotels.
They’re laser-focused on data and customer experience.
Legacy retailers and digital native brands use data differently. Retailers study it to identify sale opportunities through promotional activity. Digital native brands use it to improve their products and their customer experience. This allows them to maintain their focus on serving their customers instead of on designing promotions.
Four years after Untuckit broke into the men’s shirt market, the brand continued is trajectory by opening brick-and-mortar stores. Leveraging its technology to provide a seamless customer experience, the company introduced a mobile order and point of sale system in its retail locations. That means that sales associates can check inventory, place orders, and make transactions on their iPads or iPhones without having the customer wait in line. Meanwhile, the system tracks customer preferences, allowing Untuckit to respond quickly to changing trends.
The Bottom Line
The growth of digital native brands shows that the retail landscape is far from apocalyptic. Rather, it’s undergoing a renaissance.
These online companies are disrupting the retail industry by building lean, customer-centric operations. Though their success signals a sea change in retailing, many of these brands are now finding opportunity in adapting their product and experience for traditional brick-and-mortar stores. Traditional retailers–stand up and take notice. Keep a close eye on digitally native brands. This could mark a prime occasion to leverage a brand’s social media following and revitalize your sales.
Learn how CB4’s proprietary machine learning algorithms helps brick-and-mortar retailers rise to the increasingly complex demands of shoppers at each store in their chain.