Will Amazon’s Dominance stop the DNVB Uprising?
Over the past 24 years, Amazon has grown from just a $250,000 loan Jeff Bezos got from his parents to an $800 billion company that pumped out $232 billion in revenue last year, that’s equivalent to making $441,300 every minute.
But that’s not even the scary part: over the past 5 years alone Amazon has gone from controlling 30% of the US e-commerce space to 49.1%. Let’s put that into context for a second: if both your mom and dad bought something online, it’s almost certain that one of them bought from Amazon leaving the remaining 245,000 e-commerce stores to fight for the attention of the other parent.
But with all these facts, why are there still more DNVBs (Digitally Native Vertical Brands) springing up? And more importantly, are they destined to fall to the mighty hands of Amazon?
A Distinction of Purpose
But first, to be able to answer this question we need to understand the primary objectives behind both DNVBs and Amazon. DNVBs are businesses that address a specific problem experienced by a set of individuals by focusing on creating the most appropriate physical solutions while shipping directly to consumers, bypassing retail markup costs.
While Amazon’s primary goal is to offer all the products a customer might ever need while at the same time being able to deliver them to the customer’s doorstep as fast as possible.
Thinking about this critically, you’ll notice that these are very two distinct goals. One is focused on developing incredible physical products while the other, Amazon obsesses over optimizing logistics and fulfillment. This is the driving force behind why Amazon leases over 219,802,000 square foot and hires more than 600,000 people.
Why DNVBs will keep growing
Apart from the clear distinction in purpose which leads both entities to follow different paths, there are certain traits DNVBs have developed that give them a level of immunity against Amazon’s rising monopoly of online trade.
Amazon and the Curse of Passive Income
Since Amazon introduced Amazon FBA, back in 2006, its grown very rapidly to more than a million 3rd party sellers and currently contributes around 50% of Amazon’s total revenue.
And the number is set to continue rising. One of the major reasons for this growth is YouTube creators and other social media channels promoting the notion of using Amazon FBA as a way to make sustainable passive income.
The principle taught by most of these creators is to find products that have low competition but high demand. Thereafter, seek out a supplier in China who sells this product, finally order in bulk for lower prices and sell on Amazon at higher prices.
And the truth is that this strategy does allow you to make passive income while you work a full-time job because the bulk of what you needed to do to run an e-commerce business is being handled by Amazon. No need to worry about advertising, logistics, e.t.c.
This is a key area DNVBs have the upper hand because the core essence of most DNVBs is product research and development. Unlike the average third-party seller on Amazon whose focus is on finding a competent supplier in Asia for an underserved market, DNVBs are not only focused on finding an underserved market but more importantly developing the best solution to that problem. Always giving DNVB products an upper hand in terms of quality.
A great example is Casper, a company that’s aimed at improving sleep for all of mankind. According to their CTO Gabe Flateman in an interview with Inc., he described Casper as a tech startup first before a mattress company.
According to their website, they employ more than 30 researchers and engineers working in San Francisco to design the future of sleep. What do you think happens when engineers who used to work for companies like Apple and Google come together to design mattresses, you can bet that it’s gonna be one of the best darn mattresses you’ve ever used.
21st Century Mom & Pop Stores
One thing that differentiates DNVBs is how personal most of the brands are. Just like the Mom & Pop stores in our neighborhoods, DNVBs aim to create strong relationships with their audiences.
They do this by telling stories about how their companies started, introducing the CEO, sometimes even going as far as prioritizing one-on-one communication between the company founder(s) and individual customers on social media.
Amazon, on the other hand like many other traditional retailers, as always been more focused on providing the most value at the lowest prices to the customer. They’ve done this by aiming to consistently expand their product selection year over year. Stocking over 3 billion products across 11 marketplaces as of last year.
Amazon is price and efficiency driven. This approach has led Amazon to constantly seek new avenues to cut down delivery times like the introduction of Amazon Prime back in 2006.
But DNVBs, on the other hand, are more community and emotion driven. They focus on building stronger communities by being quick-to-respond, authentic and providing helpful advice.
As a result of the relationship these brands have built with their respective communities, their members are more obliged to recommend their products to friends and family who are experiencing similar problems rather than suggesting that the friend check Amazon to find a solution.
This is why you shouldn’t be surprised if I told you that a Digitally Native Vertically Brand like Beardbrand currently providing premium men’s grooming products has more YouTube subscribers than Walmart, Target, and Amazon combined.
100% Happiness Guarantee
In October 2014, Casper introduced a 100 day no questions asked return policy on its mattresses.
At the time it was a huge shift from the regular way online returns worked. In the past, the return processes were complex, often times requiring the customer to go through a long series of questions ingrained within an overall frustratingly long process. If the problem can’t be resolved then and only then will the customer be offered a refund, usually as store credits.
But here came a company that wasn’t just offering to pay customers back cash without the need for any exhausting dialogue but also extended the returns period from the conventional 30-day window to 100 days.
This lowered the barrier to customer conversions significantly because customers, in essence, had nothing to lose anything.
The change in policy sent shockwaves through the online mattress industry which is perhaps the most competitive DNVB market with over 100 brands fighting for the privilege to provide you a place to lay your head at night. This led to a lot of other online mattress companies to adopt the new policy.
This caused a ripple effect across the DNVB space causing other brands to rethink not just their returns policy but also their customer service as a whole. Now the bar has been raised higher than ever before, with many brands no longer seeking “Customer Satisfaction” but rather promising “100% Happiness Guarantee”
By crafting more incentives that allow website visitors to try the products with minimal risk attached, DNVBs are able to neutralize the trust edge Amazon previously held over these smaller brands.
One of the core principles that make DNVBs so successful is their ability to question the current social status quo, and their pursuit to provide more value for less to the customer in industries run by big mammoth corporate establishments.
In effect, stealing market share quickly from the corporate giants like how online DTC mattress companies captured $1.2 billion of the 14 billion dollar US mattress industry in only 5 years or Dollar Shave Club’s disruption of the men’s grooming industry. DNVBs cause already established industry leaders to rethink their current strategies by trying as much as they possibly can to improve the value that they provide to the end user before their dominance wipes out.
At the end of the day, the more critical question we should be asking isn’t whether or not Amazon will cripple the rise of these brands but rather how much DNVB will disrupt modern consumer retail as we know it.