Wholesale Expansion for DTC Brands

The rumors of the demise of wholesale have been greatly exaggerated.

It was not too long ago that being direct to consumer was the path to profitability.

And, the logic seemed to add up.

Cut out the wholesale partner and see a lift in both margins and profits. Also, why would a brand even want to be one step removed from their customers to begin with?

The math has not worked out as expected.

Brands that shifted away from wholesale did not see the expected lift in profitability and margins. In some cases, the shift to direct created very significant consequences.

Just ask Nike.

They underestimated just how valuable their wholesale partners to their success. Now, Nike is scrambling to re-assert themselves in the stores of Foot Locker, DSW and others.

The bottom line is that wholesale relationships can be an important component of growth and profitability for any brand.

However, being successful with wholesale is not a trivial matter. It’s very exciting to see a brand tout their success on social media of making it onto the shelves of a Costco or a Walmart. But, many fail to understand the work behind getting onto those coveted shelves.

And, getting on the shelf is only the start of the hard work. Being able to stay on the shelf for a meaningful amount of time requires effort.  

Plus, when does a brand pull the trigger on opening up a wholesale account? What work needs to be done to handle a wholesale operation? Should a brand merchandise for their wholesale partner? And, when is it time to exit wholesale relationships?

That’s where we come in.

There are two main reasons why a brand would want to enter and expand wholesale partnerships:

First, is access to a wider audience that you may not be able to achieve on your own. No matter how big, broad and important you might think you are, there is still a subset of the audience that doesn’t necessarily have access. Creating partnerships with retailers opens up the aperture for brands to capture new customers.

For example, consider brands like ON Running and HOKA who are producing excellent results as of late. This can be attributed to occupying more wholesale real estate when Nike pulled back. With consumers looking for running products at multi-brand retailers, there was a clear gap with the absence of Nike. ON and HOKA took advantage of the opportunity by stepping up to fill the assortment gap.

Second is cost of doing business. When selling direct, you own all the costs. Production, marketing, operations, shipping, warehousing, customer service, returns and so on. Not to mention, the cost of customer acquisition via digital ads is highly expensive. However, when doing wholesale, retailers will either share or cover these costs entirely.

The value of offsetting direct costs by partnering with retailers may have contributed as to why Vuori embraced wholesale very early in their existence. Vuori, an athleisure brand rivaling Lululemon, began their ascent with early partnerships with retailers like Nordstrom and REI. The founder, Joe Kudla, made profitability a top priority right from the start, The financial advantages of wholesale likely played a huge role in establishing relationships them almost immediately.

We should mention that going into wholesale is not applicable for all brands. In other words, wholesale is not a mandatory requirement for success.

We will help you run through the decision making process as to whether or not wholesale is right for you. Then, our advice will ensure that you enter these partnerships smoothly, avoid costly mistakes and see meaningful growth.

To learn more about how you can establish profitable, long-term wholesale partnerships, contact Retail Strategy Group today. We have over 20 years of relevant experience and work with market-leading brands, helping them drive exceptional results.

We are ready to help you do the same.