Online retailers are gearing up for one of the biggest annual tradeshows, Shop.org. Put on by the National Retail Federation, Shop.org this year will feature the rise of vertical ecommerce, the trend by which companies vertically control fabrication, assembly, shipping, merchandising, and pricing of its goods.
Shop.org Digital Summit: October 5-7 in Philadelphia, PATo help those interested navigate such a large trade show DataFox has compiled lists of companies exhibiting, sponsoring, and speaking at Shop.org. Each list of companies is infused with business info like location, founded year, headcount, and 20+ additional data points for each company: Want to find a different conference list of companies? Check out ConferenceExplorer.com to search for lists from more than 1,000 conferences!
Vertical eCommerce on the RiseWarby Parker and Stance are two of the hallmark companies within the vertical ecommerce space that are attending Shop.org this year. Warby Parker has been taking the eyewear industry by storm since 2010. Co-CEOs and co-founders, Dave Gilboa and Neil Blumenthal, were in business school at Wharton when they noticed two trends within eyewear.
First, glasses were not being purchased online. Second almost entirely monopolized by one behemoth Italian based company, Luxoittica. By breaking the conventional brick-and-mortar retail model and giving Luxoittica some competition, Warby Parker was able to get a foothold within a massive industry and provide a better customer experience at a significantly reduced non-monopolistic price.
Like Warby Parker, Stance took aim at a sleepy vertical that had not been changed in years: socks. Yes, socks. Before Stance, few people had thought of socks as a staple within one’s fashion forward closet. But the founding team knew they could make socks cool. They had done so six years prior with headphones when they created Skullcandy.
Stance’s litegimacy as the key player within high end socks was solidified earlier this year when it landed a $50M series C financing (total funding $86M to date) and it signed a key licensing deal with the NBA to be league’s official sock.
Origins of Vertical eCommerceThe beginnings of vertical eCommerce is not easy to pin down. Numerous companies claim to have started the movement. The two that are most helpful to understand the history of vertical commerce are Hayneedle and Bonobos.
Hayneedle arose from humble origins. In 2002, hammocks.com launched a site around a very niche product category: hammocks. By launching a site around a narrow product offering, hammocks.com believed it could specialize and compete with larger retailers. The site was a success, and its founders subsequently launched 100+ websites focused on unique verticals. After establishing strong beachheads across so many verticals, the company rolled itself up into what is now hayneedle.com, ranked #84 on the Internet Retailer's list of the Top 500 Retailers.
Bonobos took a different approach by creating an incredibly powerful brand within the mature but under-invented segment of men's apparel. Andy Dunn was attending Stanford’s Graduate School of Business when he started selling good-looking pants out of his apartment. Eight years later Andy’s company has raised over $125M in financing and is on its way to transform men’s fashion.
Competing with a Vertical eCommerce strategyWhy is this happening? How are these seemingly small players able to compete with the likes of Amazon.com and other online behemoths? The answer is not simple, but there are certainly important advantages they have worth consideration.
First, vertically integrated ecommerce sites want to control the customer experience -- from the moment of discovery until the package arrives at customers’ doors. Controlling the experience end to end ensures a direct line between seller and customer.
Second, in the online world, content is king and engagement is queen. Creating content worth a consumer's time to engage with it is not easy. It is even more difficult to do so if a retailer is competing on a horizontal model.
Vertically integrated players are able to create engaging content specific to narrow topics in which they are experts. The Honest Company is a prime example of this. The company focuses on products that are as non-toxic and healthy as possible. To deeply position themselves in this way they have daily blog posts which teach its patrons about healthy living. Posts range from recipes to yoga and even to helping a child fall to sleep.
This leads to the third advantage, understanding the nuances of a vertical. For example, the founders of Casper deeply understood key pain points surrounding mattresses. Mattresses are difficult to move from one apartment to another and they are expensive. Casper solved these pain points by creating an inexpensive mattress that can be shipped in a reasonably sized box for ease of movement.
With these three advantages, vertically integrated retailers can compete with the Goliath’s of online retail such as Amazon.com, Walmart.com, Staples.com, HomeDepot.com, and Macys.com. But what’s the long-term future for these companies? Truthfully, no one knows the answer. However, earlier this year TechCrunch wrote that stated “while [vertical ecommerce] companies are often portrayed and positioned as tech start-ups disrupting retail, they still need to follow the retail playbook.”
Vertical eCommerce as the next big waveThe rise of vertical ecommerce was predicted by many venture capitalists. In 2012 Boris Wertz of Version One Ventures said this would be “the next big wave,” and he certainly appears to be right. More recently, Neil Sequiera of General Catalyst Partners, predicted that that in 2015 we’d see “the end of the ‘superstore’ in verticals [and a] rise of vertical commerce with a unique connection to the customer directly”.
This is a strong statement, but it appears that General Catalyst Partners has hedged its bet on vertical ecommerce with its investment in Jet.com, a horizontally integrated ecommerce company that is taking aim at Amazon.com, Costco.com, and Walmart.com. Jet.com however is the exception these days. For every Jet.com there are dozens if not hundreds of vertically integrated ecommerce sites.
It is likely that over the next two to three years more vertically integrated retailers will continue emerge. It is also likely that three to five years from now these start-ups will start to consolidate through acquisition by horizontal competitors or by teaming together with other emergents to form a new type of ecommerce store.
DataFox doesn’t pretend to have a crystal ball with all these answers about the future, but we do know there is no better place to track its trends than the DataFox platform. Whether it’s the whole ecommerce industry or the individual vertically integrated companies DataFox can help. Follow this newly published list with some of the vertical ecommerce players:Want to find a different conference list of companies? Check out ConferenceExplorer.com to search for lists from more than 1,000 conferences!