3 Questions to Consider Before Vertically Integrating Your Brand
If Italian eyewear brand Luxottica — which controls 80 percent of the frames and sunglasses market — is an 800-pound gorilla, then Warby Parker is a chimpanzee: lean, agile and smart enough to shake things up.
Where did Warby Parker Co-Founder Neil Blumenthal get the gusto to take on the incumbent ape? Before starting Warby Parker, he led nonprofit VisionSpring. While training low-income women to sell eyeglasses, Blumenthal realized customers were paying exorbitant prices for mediocre frames and subpar service.
His solution? Vertical integration. Thanks to its direct-to-consumer (DTC) model, Warby Parker is building customer-friendly frames, pricing them affordably and backing them up with world-class service.
Why Vertical Integration?
Historically, brands like Luxottica sold to retailers, which then sold to consumers. Retailers handled the marketing, sales and service, cutting brands out of the customer interaction.
But now, forward-thinking brands are bringing operations in-house. By owning the customer handshake, vertically integrated brands strengthen customer relationships and communicate in ways that best represent them. They use customer data to influence decisions about product style, production and merchandising.
That’s not to say, however, that vertically integrated brands are relegated to cyberspace. With a clear understanding of its customers, Warby Parker has retail locations around the country.
That’s the beauty of vertical integration: Without middlemen, sales, marketing and service decisions are entirely up to you.
3 Questions to Ask Before Vertically Integrating
While going vertical offers greater control over your brand, it requires vision, infrastructure and smart marketing. To know if you’re prepared, ask yourself three questions:
1. Can I provide value through DTC relationships? Andy Dunn, founder and CEO of e-commerce apparel company Bonobos, mastered the customer handshake before anyone else. Dunn realized that by creating a digitally native vertical brand (DNVB) — a term he coined — he could provide a better customer experience while improving profitability.
By understanding that a truly sustainable business can come only with intimate customer relationships, Dunn positioned Bonobos to bypass department stores through “showrooming.” The model has put Bonobos’ Net Promotor Score “off the charts,” according to Dunn, helping it become one of the nation’s favorite menswear brands.
2. Can I trust my manufacturer? Unless you’re tackling manufacturing, too, you’ll need to cultivate a relationship with a reputable manufacturer. If you’re a large brand, draft a RFP to solicit bids. Startup entrepreneurs should leverage personal relationships to find a great manufacturer.
When evaluating candidates, look for consistency and, above all, trustworthiness. How many products out of 1,000 fail a quality check? Are products delivered by deadlines? Can the manufacturer scale alongside your business? Has the manufacturer secured the necessary certifications to produce your product? Beware that some manufacturers may present your ideas to competitors to secure business, so choose long-term partners carefully.
3. How strong is my marketing strategy? Going DTC requires a compelling brand story delivered through direct-response digital advertising. Paid search, influencers, email marketing, social media, affiliate marketing and content marketing are all necessary avenues one needs to explore.
“Find a way to be personal with your customers and connect with them on a human level,” Corporate Innovation President of Vision Critical Andrew Reid wrote in Entrepreneur. What real-world problem are you solving for customers? How is your product designed to better their lives?
Today’s fastest-rising brands aren’t selling to retailers; they’re braving the jungle alone, mastering sales and marketing, and owning the customer handshake.
Gene Ku is the founder and chairman of Mobovida, a customer-driven, vertically integrated mobile accessory brand delivering fashion-forward products direct to consumer.