As a brand with a direct-to-consumer (D-to-C) focus, you value your customers. And as a brand that values its customers, you’ve probably been advised — by any number of articles that come up with a quick Google search — to focus on D-to-C as it gives you the most control over the customer experience.
This is still true. However, today’s consumer choice economy dictates that successful brands serve the customer how they want to be served. You need to be everywhere your customer is, which includes channels outside of your e-commerce site or brick-and-mortar stores.
There’s a lot to consider when you’re evaluating wholesale expansion, but for many brands, it’s an effective way to get in front of new shoppers, keep current customers happy, improve margins and increase revenue.
When to Think About Wholesale Expansion
While your D-to-C efforts will never be perfect, it’s good to think about wholesale expansion when you’re confident in your brand’s steady growth and solid strategy, and have the bandwidth to accommodate even more growth.
You know that D-to-C is a great way to establish brand loyalty, but wholesale is where you can get in front of new audiences at a larger scale. This is especially useful when you’re expanding into a new market. For example, one of our customers, a San Francisco-based luxury shoe brand, had established and consistent success in the California market in both its D-to-C and wholesale efforts. The company was interested in expanding into Texas, but it felt risky to open a brick-and-mortar location in Austin before having confidence in market fit. It instead chose to work with department stores in the area to gauge interest and viability. This strategy enabled the retailer to test market fit with minimal investment.
It’s also important at this stage to think about your current team as well as how you would like to grow your workforce. If you’re in retail because you love product creation and working behind the scenes to improve product offerings, but you hate the marketing aspect of running the business, wholesale is a great option. If selling is what drives you in retail, you might still want to consider wholesale, but you’ll want to think about how important branding is when evaluating retail partners.
What to Consider When You Expand Into Wholesale
Many brands hesitate when considering wholesale expansion for fear of losing brand identity once their products are lumped together with those of competitors. This is a valid concern, and to ameliorate it, you need to be picky. Consider starting with one or two trading partners — you’ll learn a lot in the process and know what to look for with future partners. It’s important to take the time and do the research to ensure your first wholesale partners are great fits, otherwise you’ll not only miss out on sales, but the learning opportunities that will help you grow and make smart decisions in the future.
It can be more expensive to choose only those retailers you feel you can trust with your product, but if your focus is customer loyalty and selling a lifestyle, it’s well worth it. You’ll see smaller margins but can retain more control over how your product is positioned, both aesthetically and verbally by well-trained sales associates.
You’ll want to be sure to articulate these expectations in your dealer agreement, which isn't one to skim through. Some brands have been surprised to find their products discounted on Amazon.com, only to realize they never specified their retail partner couldn’t do this. Return policies are another contentious topic within dealer agreements. Once it’s end of season, if your product hasn’t sold, who is responsible for the products? You’ll also want to consider a retailer’s willingness to purchase product from you as opposed to working on a consignment-first model, which places significantly more risk on your brand.
There are many factors to consider within a dealer agreement, so truly take the time to think about the reasons you’re choosing to expand into wholesale and make sure you’re working with partners that can help you reach these goals.
Be Everywhere Your Customers Are
There are many strategic reasons behind a wholesale expansion, but in today’s retail landscape the No. 1 reason is simple: to keep your customers happy. In today’s consumer choice economy, you need to reach both current and potential customers how they want to be reached. For many, that’s through a wholesale outlet.
Before you can be a successful multichannel seller, you’ll need the operational backbone to support your brand being everywhere your customer is. To meet stringent inventory requirements from wholesalers while also reducing out-of-stocks or overstocking on your D-to-C channels, you’ll want all of your inventory synced in a central hub where your whole team has visibility into where a product is at all times.
With the right systems and people in place and the best retail partner(s) for your goals, wholesale is an excellent way to increase brand awareness and sales while having someone else do (most of) the heavy lifting.
Brandon Levey is the founder and CEO of Stitch Labs, an inventory management software provider.