The Foremost 50
The Lead’s Head of Research breaks down the selection process & key takeaways from 2018’s winning digital native brands.
BY Awais Khan | Head of Research | The Lead
We are pleased to present the 2018 Foremost 50 List, a group of break-out digital native brands and retailers that are reinventing and redefining the future of fashion and retail. Creating this list of 50 companies was not done lightly, and there were more than a few heated debates as we narrowed it down to the final selections.
At The Lead we are specifically focused on innovation across the apparel, footwear, accessories, beauty and home markets. So while it was hard to resist outstanding drug, grocery and health companies, we made it a point to stay within our sweet-spot.
These 50 companies were chosen less for their products and more for their business execution. Our goal was to build a list that not only recognizes break-out companies, but also acknowledges the collective trends and best-practices that signal where the fashion and retail industry is headed. The products are not to be overlooked, but our predominant focus is on marketing and customer acquisition, customer experience, technology implementation, channel diversity and capital efficiency. We wanted to highlight companies that not only represent the future of the industry, but are also taking risks while creating investor value — Not an easy lift.
Researching The Foremost 50 was a process of several months. We began by broadly reviewing the nominations of more than 300 companies, then defining a short-list, and ultimately conducting interviews with the companies’ CEOs. Our process employed the same seven criteria we use for The Leading 100 list, only weighed for a different business model. This analysis focused on private companies and their execution across innovation, commercialization, media buzz, competition, team, market opportunity and investor value creation.
Our partners in this process, Rosenthal & Rosenthal, helped us maneuver the back-of-the-house analysis. With decades of helping brands navigate their own growth, financing and cash management, our technology oriented
team was well balanced by their financial know-how and experience.
These 50 companies, taken together, are a bellwether, a leading indicator of the fashion and retail industry’s future. By understanding this group of rising stars, leaders across the industry can extract best practices, apply new business models and anticipate consumer expectation. Below are some of the findings we have discovered from our research.
Trends and Insights
DNVBs (digital native vertical brands) are already capturing nearly 2% of the total $453 billion U.S. e-commerce market, and are growing nearly three times as fast as the average e-commerce retailer.
Brands of the 20th century took nearly a decade to open multiple stores and reach $100M in revenues. Those brands relied on cash flow and profitability to keep their businesses going and livelihoods afloat, and were profitable almost immediately. In contrast, digital native brands, took four years on average to achieve $100M, but many are yet to be profitable, even after being in business for six or seven years.
There are some digital native brands that built very successful businesses without taking any (or minimal) VC funding. However, they are not profiled in the Foremost 50 list as they had recent exits. Examples – Purple (Mattress brand) had a $1.1B merger (two founders made close to $850M) and MVMT (watch brand) was bought by Movado Group for $100M.
Customer acquisition cost – with the exception of perhaps inventory – is the highest and most variable cost for a digital native business.
As they mature, DNVBs commonly expand via third-party retail partnerships, or by opening their own physical stores. However, these retail outposts are deeply integrated with the overarching brand experience, and their openings are heavily marketed with influencers and promotions.
DNVBs continue to gather immense data on their customers; they will have to be increasingly wary of the European (and, potentially, the upcoming domestic) data privacy legislation.
See the full list here.