Think Tank: Digitally Native Brands Define Tomorrow

Kaley Roshitsh and Phil Granof

Mon, January 14, 2019 at 5:30 AM UTC

We see a lot of trends in retail, but if there is one we see almost regularly, it’s change. Evolution is a constant in this industry, and for good reason. What consumers want today is not what they wanted yesterday, and it’s not what they’ll demand tomorrow.

Between the narratives of closures and bankruptcies, there’s a set of brands revitalizing in-store shopping and redefining retail: digitally native vertical brands. In fact, they’re growing three times faster than the average e-commerce retailer and are expected to open 850 storefronts in the next five years. It’s all because of their intense focus on the customer.

But most brands are putting the customer first today, aren’t they? It’s what they say, but data suggests it’s not exactly what they’re doing. Forrester’s 2018 U.S. Customer Experience Index found that for three years running customer experience improvements have plateaued. Rather than evolving from the inside out to deliver experiences of value, companies are doing a little here and a little there.

My company, NewStore, found this to be very true in our annual research, which analyzes the omnichannel readiness of 150 leading brands. While 91 percent of store associates seek out customer information at checkout, only 27 percent are able to modify a shopper’s profile with notes. This suggests many brands are still only treating customers as transactions. They’re making it a point to collect data, but they’re not using that data to personalize the shopping experience.

Even more, only 26 percent of brands offer the option to buy online and pick up in-store, or BOPIS. Not only can BOPIS help retailers win in the Amazon Age, as customers want the ease of skipping lines and the convenience of quick delivery, but it can also drive a significant lift to sales. Of shoppers who used BOPIS from Thanksgiving to Black Friday 2018, 64 percent made an additional in-store purchase.

The companies not personalizing shopper profiles or offering modern fulfillment options, among other things, have so much to learn from the 75 or so dominant DNVBs. These brands have produced a blueprint for successful growth, even in an industry rife with change.

Take Glossier, the widely successful beauty company. The brand was born out of founder Emily Weiss’ blog and on social media, where she created an enormous following of women inspired by her focus on real life. The community Weiss has created brings people to the Glossier showroom in troves, where the company does more in sales per square foot than the average Apple store. Impressive, right?

Outdoor Voices is another example of a brand building itself around a mission that feels like home for many. Founder Tyler Haney said she didn’t identify with the “faster, better, stronger” tenet so many mainstream activewear companies preach. Instead of trying to fit into a mold, she created her own credo about “doing things” — for the fun of it, and without pressure. The business has grown triple digits year-over-year since its founding.

Yes, Glossier, Outdoor Voices and many other digital-first brands started online. And they continue to have booming businesses on that channel. But online is merely a starting point.

Digitally native brands are enticing customers back into stores by integrating what they’ve created online into the brick-and-mortar customer experience. How? With technology, but not just for the sake of technology. Not a little here or a little there. It’s about the ubiquitous use of technology for all retail processes, and as the connection point with customers. It’s about having technology as a mind-set from the start.

Most DNVBs that launch online have early intentions to expand into brick-and-mortar. After all, 62 percent of consumers still want to “see, touch, feel and try” product before they buy. The importance of physical retail has not been lost on DNVBs for this very reason.

Remembering what I said earlier about experience being end to end, brings me to omnichannel. This is where DNVBs behave differently than traditional retailers. They know consumers don’t think in channels. It’s not online, off-line, mobile and so on. It’s one retail. With omnichannel technology, these brands take a customer and data-centric approach to every step of the customer journey.

Suitsupply is one digital-first brand flexing both strategies. Not only is the brand using in-store digital signage to engage shoppers and share insider information, but it is also removing the friction at checkout with social payment options. Despite Apple Pay’s increasing adoption, and expectations that it will reach 200 million users by 2020, only 57 percent of the brands in my firm’s research allow customers to use it at checkout.

It is clear Suitsupply exists to serve its customers. It wants to be where its customers are, and when the two meet personalization is a priority. Traditional retailers are still catching up in this regard. They have limited customer visibility which makes it challenging to design effective omnichannel retailing strategies.

In 2019, we will see and hear a lot about DNVBs, but also traditional retailers experimenting with digital native thinking. Walmart is an early example, as it just unveiled a nationwide cross-channel campaign for its grocery pickup. By using recognizable vehicles from major films, it hopes to connect with its loyal online grocery shoppers and bring them in-store.

Digital native brands may be the industry’s risers, but they’re using their stories and technology to define a new measure of success for the entire retail industry.

Phil Granof is chief marketing officer of NewStore, which operates a platform that allows retailers to run their stores on iPhones.

For more WWD business news, see:

“Will Everything Still Be ‘Curated’ in 2019?”

“Embrace the Next Wave of Mobile Commerce”

“Mobile’s Cashless Crusaders: The New Ways to Pay”

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