With the internet growing at an increasingly fast rate in the past decade companies are playing catch up in terms of how to best leverage the internet for their brands. This has lead to the rise of what is called a digitally native, vertically-integrated company. This model allows companies to stay competitive, and when it comes to a country like India, it may allow them to enter the market and succeed where others failed. What is a vertically integrated, digitally native company? And why will it allow for success in India?
Let’s first break down what digitally native means. In lieu of a brick and mortar store, companies are finding more success with starting their entire operation in the digital space, making them digitally native. American companies like Bonobos, Warby Parker, and Dollar Shave Club have all seen great success following this model.
There are many reasons why being a digitally native brand leads to success in the digital age. One of them is a lower cost of doing business. You can save money by not having to hire retail employees, or pay rent on a storefront. In turn those savings can be passed on to the customer, leading to lower prices. And everyone loves lower prices.
While being digitally native is one way for companies to stay competitive in the digital age, another way companies are finding success in this new era is by becoming vertically integrated. Vertical integration is when a company owns one or more aspects of the supply chain. An example of vertical integration is Netflix, who has begun to create their own content, and avoid having to use a middleman to produce the product they are delivering to the consumer. Again, this equates to a cost saving measure, and also allows companies to have better control over their products and business.
While American companies have found success in the United States by using a digitally native, vertically-integrated model, how will this style of business translate overseas, and particularly to India, where the growing economy is attracting companies?
Delivery is one answer. Owning the means of production is one way that companies can become vertically integrated, another is by owning the ways that they deliver their products to consumers. Agam Berry, the co-founder of the digitally native, vertically-integrated company, Quantified Commerce, is looking into just that. “We already own our own brands, factories, warehouses and call centers, and we’re beginning to look into purchasing our own trucks,” says Berry, “that way we can have a faster delivery rate. In India it takes most companies 5-7 days to get their product to consumers, but if we were to integrate trucking into our business, we would be able to lower it to 24 hours.”
This move, along with owning manufacturing and warehouses allows a company like Quantified Commerce to hold less inventory, saving them money, which could then be passed on to the consumer, all without sacrificing quality. This allows a company to get around India specific problems, like the cash-on-delivery problem.
While vertical integration is an essential step a company must take in order to become more profitable, being digitally native is a way for a company to increase presence and effectiveness. There are 300 million smartphone users in India, this means there are 300 million customers that a company is able to advertise to directly through smartphones.
Quantified Commerce is making ground in this new form of advertising. “People are beginning to use their phones to consume content more than they use other devices,” said Berry, “this allows companies to leverage content on Youtube and Facebook in order to get their message out to consumers.”
This is a more efficient use of advertising. When a user sees an advertisement for a digitally native brand on their mobile device, they can click on the ad and be brought directly to the marketplace. This has a much better chance at conversion than a non-digitally native brand, whose advertisement may be viewed, then forgotten about an hour later.
What does this mean for the future of India? Well, for starters it’s projected that by 2022 “India will become a trillion dollar economy,” said India’s Electronics and IT Minister Ravi Shankar Prasad. While this sounds like a bold prediction, it’s not. Right now the digital economy in India, which includes e-commerce, is estimated to be at $270 billion.
With an already large digital economy that’s growth is being backed by government initiatives, there’s no reason why companies shouldn’t follow a non-traditional distribution method and become digitally native. This is proven by companies like Quantified Commerce. The company has anywhere between 100% and 300% every year. Which they achieved by being digitally native and vertically integrated, and thus more efficient.
