Consumers are becoming brand agnostic and DNVB's seem to be holding on to their loyalty by appealing to internet-first consumers. It's expensive but for some DNVB's, there may be a positive outcome.
Read: From a digitally-native gold rush to an impending bloodbath
One passage stood out when I read Richie Seigel's latest for his Loose Threads
project. While many people believe that Digitally-Native Brands have both larger addressable markets and cheaper acquisition avenues to realize their potential—leading to this influx of capital—there is little proof that these theories will result in long-lasting or profitable companies.
Building a successful brand takes time. While many Digitally-Native Brands have tried to take shortcuts—raising more money and spending it faster—many of these companies find themselves in precarious positions, with investors breathing down their necks, employees’ livelihoods in their hands, and uncertainty about what comes next.
When I reached out to a prominent (profitable) DNVB founder / CEO to discuss this prediction, we both agreed that it had merit. There will be many bad DNVB exits. But there will be even more heritage brands that will fail along with the stores that propped them up for years.
You know that age old adage, you only have to outrun one person to escape a bear's pursuit? In this analogy, heritage brands are the ones being outrun by DNVB's.
Of the heritage brands that Seigel lists in his second para, the publicly traded ones are trading at an average of -25% on the year. This includes Columbus's own L Brands
(owner of Victoria Secret); VS is a heritage brand that's anchoring a crumbling stock due to inbound intimates competition from a growing number of DNVB's.
In addition, most heritage brands rely upon department stores and costly ten-year leases to bolster sales. Most of these investments are quietly financed by toxic amounts of private equity. Someone check on J. Crew for us.
Wal-Mart, who invests heavily in DNVB's, understands the importance of the internet as a platform for retail. They are doing something interesting to compete against Amazon:"Wal-Mart Stores Inc. is near a deal to add Lord & Taylor to its website, part of a broader effort by the retail giant to build an online shopping destination that can compete with Amazon.com Inc., according to people familiar with the matter."
This is why Wal-Mart is doing this:
They will now sell fashion's heritage brands through Walmart.com
, becoming a new-aged destination for all things department store: including Patagonia, Ralph Lauren, Nike, and maybe even Commes De Garcons.
This is while their six most recent acquisitions
are also helping them appeal to new audiences. Jet.com
has already announced a private label. And it's no secret that Wal-Mart is building a strong case with Mark Lore's new strategy. In time, Wal-Mart will be a machine capable of launching new private-labeled brands that target the consumers of the heritage brands of old.
Mark Lore's recent Lord & Taylor
move has Bezos' tutelage written all over it.
Amazon, Alibaba, and Wal-Mart are vying to become this century's version of the department store. And every brand should be nervous but it's the (eCommerce-lagging) heritage brands that should be most afraid of the bloodbath. These brands have invested little in eCommerce and even less in the types of communities that innovators like Stitch Fix seems to have fostered.
As consumers become more brand agnostic, heritage brands are closest to being devoured by the bear