Brand can save the high street: Lessons from a new breed of retailers

Around 2008, online retailers were confident that the physical store would become a thing of the past. In 2018, as global e-commerce sales grew by 18% year-on-year to nearly $3 trillion, the figures seemed to prove them right. This growth was led by the top ten global online retailers such as Amazon, Ebay and Aliexpress.

E-commerce giants are reinforcing their dominance, increasingly pressuring legacy retailers. In March this year, iconic denim brand Diesel filed for bankruptcy in the US blaming changing customer habits and expensive bricks-and-mortar leases. It is now focusing on its online business and exiting most of its 28 owned stores. This story has played out across the US, with 5800 store closures and 11 major retailers filing for bankruptcy in the first quarter of 2019 alone.

But whilst legacy retailers are playing catch-up online and trimming their portfolio of store locations, a new breed of brand, born online and agile, are spear-heading new interest in the potential of the high street. These Digital Native Vertical Brands (DNVBs), like Warby Parker, Bonobos and Casper to name a few, grew nearly three times faster than the e-commerce sector overall.

The term DNVB was coined in 2016 by Andy Dunn, CEO and co-founder of Bonobos menswear brand. Unlike classic e-commerce companies, a DNVB is not confined to a specific channel. DNVBs design, produce and sell their own products, allowing for higher margins and the optimisation of production to demand, which according to Dunn means they can be “maniacally focused on the customer experience.”

As their sales grow, interest in these companies is mounting. Legacy retail giant Walmart acquired Bonobos in 2017 for $350 million, while venture capital firms like the Fifth Wall are starting to help digital retailers open physical stores as they begin to understand that it is not the channel that matters but the capacity of a brand to inspire.

Replicating the commitment DNVBs have to their brand is no easy task. They have succeeded by building with brand from the ground up. The bigger you are and the longer your brand has been around, the more difficult it can be to change perceptions. It takes time and requires holistic change from within your company. However, the same principles followed by DNVBs can be deployed to drive the transformation of a business at any stage.

What lessons can legacy retailers learn from DNVBs to harness the power of brand?

Have a reason to exist.
DNVBs define a clear brand purpose that explains why they are in business, laying a solid foundation for everything they do. Casper disrupted the mattress retail business in 2014 with an online proposition and a brand purpose that was to improve people's sleep, rather than manufacture mattresses. This purpose comes alive across every touchpoint. On Casper's social media you won’t find information about how hard or soft the mattresses are or for what price they’re available. Instead, you find a wealth of information to help improve your sleep, and a Spotify playlist called the Sleep Channel; “a magical slumberland of sounds, meditations, and bedtime stories to help you wind down and drift off”. In 2018 Casper opened its first shop and announced plans for 200 new locations over 3 years. Today, this company that has mastered branding is valued at $1.1 billion.

Find relevance and stay in touch.
Once you’ve defined your brand purpose, the key is to stay relevant and adaptable. A vertically integrated model allows DNVBs to collect and respond to demand data to enhance their product offering. But to drive engagement with their brand and build customer loyalty, DNVBs tune in to their customers’ emotions, needs and aspirations. HIMS, a brand born to improve men's wellness, has opened up the challenging categories of products for erectile dysfunction, hair loss, skin care and mental health. HIMS established itself as an expert in men’s wellness not only by integrating a medical advisory board to its organisation but more importantly by creating a strong community that enables open discussion and breaks taboos around these topics. By being the host of the conversation they are able to keep their finger on the pulse and adapt their offering to audience needs. Two years after its inception, HIMS is about to reach a $1 billion valuation.

Break new ground. Differentiate.
A simple detail can underpin a strong brand purpose that has the potential to disrupt an entire industry without the use of any breakthrough technology. Successful DNVB´s have excelled at this. Thirdlove, an underwear brand, was born online from the simple observation that there is not enough variety of bra size on the market. The founder Heidi Zak had a bad experience with Victoria’s Secret limited sizing and out of frustration with their impossible beauty standards she decided to start her own brand, proposing a bra for every body. Today, Thirdlove produces bras in 74 sizes so everyone feels comfortable and confident. The brand was the first to offer half cup sizes. Valued at $750 million, it is now generating over $100 million in yearly revenues, posing a direct threat to Victoria’s Secret.

Tell inspiring stories.
DNVBs inspire trust with charismatic founders and inspiring stories. They tend to have a face, an individual or group of friends whom anyone can identify with. Those brands are born out of passion, purpose and the will to help those people experiencing the same needs. Every DNVB has developed a unique, inspiring signature story that has spread as fast as the brand name itself, generating curiosity and amazement. According to David Aacker, professor of marketing at the University of California, signature stories have the ability to go beyond the set of boring facts shared by most companies. They communicate a mission, values and strategic intents whilst enhancing customers’ attachment to the brand by creating interest and discussion. Take, for example, the footwear brand Allbirds, a DNVB recently valued at $1.4 billion, which articulates its brand vision and values by telling the story of how its founder Tim Brown found the inspiration to start the brand: “A native of New Zealand, Tim Brown was always well versed in the magical qualities of merino wool. Inherently curious, he began asking himself why such a remarkable, sustainable resource was virtually absent in the footwear industry […] The outcome? An entirely new category of shoes inspired by natural materials, and an ongoing mantra to create better things in a better way.”

Build an experience. Not a place.
DNVBs are infusing the brand purpose into the customer experience at every touchpoint, both online and offline. Though an online brand, Bonobos was amongst the first to invest in a physical location. Aligned with their purpose of making shopping more enjoyable for men, they created a “guideshop”. Unlike traditional retail stores, a guideshop holds no inventory. Instead it is focused on the experience, designed as a beautifully-curated, by-appointment showroom where customers have zero waiting time and receive one-on-one attention from highly skilled Bonobos guides. Once they’ve chosen, their order is placed by a guide and the item is shipped to their home address. Customers can leave without the hassle of carrying shopping bags. Defining and bringing to life Bonobos’ brand purpose has not only enhanced the customer experience but also translated into economic success. With an estimated $1,626 of sales per metric foot Bonobos’ guideshop outperforms typical menswear stores by far in American malls, where sales rates range between $350 and $650.

DNVBs’ successes go far beyond their mastery of online channels, and operational efficiencies can be credited to their mastery of core branding concepts. Legacy retailers, like those in the fashion industry who are watching their market share erode, need to reevaluate their brand approach as a matter of urgency.

By Jo Kassis, Strategist