I spent most of the weekend reading obsessively about Digitally Native Vertical Brands (DNVBs) largely because we want to scale our e-commerce store, therefore in a world where there are Goliaths we need to find a way to be a David. I subscribe to the Thiel school of thought where my intention is to avoid competition at all cost. Our e-commerce store sells third-party electronics. We are trying to differentiate ourselves by being niche, primarily microphones, vlogging kits etc. Tools for the modern-day creator as my partner Mash called them. But in my heart of hearts, I believe if we are to be successful we will have to face the Goliath or other little Davids partnering with the Goliath to kill us.
How do you win when 1. You have no money to scale & 2. fighting a losing battle on price. I looked at the original King of Direct-To-Consumer (D2C) brands, the Godfather of DNVBs, Andy Dunn the co-founder of Bonobos menswear & Chairman of Monica+Andy. On his medium blog, Andy has 2 pieces widely regarded as a must-read for anyone building a DNVB:
In the first piece — E-commerce is a bear, Andy argues that e-commerce is a terrible business & there’s no way to win unless you change the business model itself. He says you can do this in four ways:
- Proprietary Pricing — Verticalized Flash sales, think Zara but for babies.
2. Proprietary Selection — Building an audience around curation.
3. Proprietary Experience — Subscription Boxes.
4. Proprietary Merchandise — Fully Owning the brand & how its made.
In The Book of DNVB, Andy tries to figure out what the difference between an e-commerce business & a Digitally Native Vertical Brand. He lands on the following:
The e-commerce company is a channel; the DNVB is a brand. The e-commerce company has low margins; the DNVB has high margins. The e-commerce company can grow unbelievably fast; the DNVB can’t grow as fast, but it’s more valuable in the long run because it’s about more than just price.
E-commerce is a channel that DNVBs use to sell a customer a unique experience.
DNVB has skyrocketed in the last 10 years with the help of venture capital, largely in the USA & some parts of Europe. The reason — disposable income. People in the west have a higher disposable income than anywhere in the world so they can afford to spend a little bit more on most things & they generally have a higher pool of HENRYs (High Earner, Not Rich Yet).
But like any trend, it naturally finds itself to other countries. South Africa is one of them. Though most DNVBs are concentrated in CapeTown there are some in Johannesburg. Like Andy, I will list some of them alphabetically*:
Rich Mnisi — Premium Clothing Brand by designer Rich Mnisi
*will add more as & when
The Goliath in South Africa is the Takealot group & a DNVB will have to find some form of proprietary experience + proprietary merchandise in order to win in the long run.