You would like and be inspired by her, the 20-something founder of a women’s wear brand over whom everyone is going gaga. Yet, her concerns were more prosaic in our recent chat: wholesale opportunities are scarce as retailers play safe in a challenging environment – and that wholesale demands might overwhelm her business’s capacity. Do you relate? I sure do.
The significance of wholesale distribution has changed in the age of direct-to-consumer brands. Allow me to explain.
Growing your business by relying solely on wholesale distribution will impair your cash flow: retailers expect payment terms of 30 days net, yet your vendors want to be paid upfront. A perfect storm.
Retailers also accrue an overwhelming proportion of your total profit margin and will charge penalties if their packing and fulfillment guidelines are not strictly adhered to. Worse, relying solely on wholesale distribution will shift your focus from serving the final customer to serving the retailer! For my designer colleague, this is a distraction from her core art and mission.
Think Advertising Channels instead: As traditional wholesale distribution no longer guarantees success, startups need new ways to think about wholesale distribution and its role in business development. A better approach is to think of them as advertising channels rather than your breadwinners. By partnering with the right retailers, you can broaden your brand’s reach, open new markets and establish credibility within the industry. Seen in this light, you will be able to justify a lower profit margin on your wholesale accounts if it directly contributes to your direct-to-consumer marketing. Does that make sense?
If you are already selling directly to the consumer, consider offering retailers an assortment based on what you are producing for your direct-to-consumer channel to leverage economies of scale. Specialty stores with smaller open-to-buys and a better understanding of their local clientele might also be more feasible. Consider collaborating with them on a joint advertising and/or social media outreach strategy.
As the upheaval in the retail landscape continues, you need to keep your eye on your customer and have a specific plan for the future. By using wholesale opportunities wisely, you could find yourself in the right position to market directly to new customers.
Please reach out to me if you would like to discuss how these approaches might apply to you. And, oh, if you want to see the amazing work of the designer who empowers women through her subversive take on femininity, click here.