The retail conundrum: could wholesale make a comeback?

Wholesale has been declared obsolete, dead, resurrected and even necessary. For young fashion startups, having a solid sales strategy in place from day one is crucial to building a budding business. Deciding whether to embrace direct to consumer, invest in own retail or venture the path of wholesale distribution may seem like a minefield, but more often than not the investment capital will decide which routes are the best options.

Considering the bottom line

When considering the bottom line, retailers and sales middlemen cut away at a brand’s margins, and is one of the main reasons companies are taking their sales in-house, shifting to a route of lower risk, higher profits and bypassing physical stores to sell directly to customers. Bigger profit margins and having stronger and direct relationships with those customers is imperative to long term growth.

Social media has allowed for young fashion start-ups to reach a global audience of potential consumers, telling their brand stories in their own way.

Wholesale can be beneficial

But wholesale is not without its benefits, and could play a complementary role to direct sales channels, especially at the time of launch to market. Having key retailers and reputable stockists will boost brand awareness and in the case of mature markets, multi-brand stores remain a shopping destination and can bring unique opportunities which otherwise could be difficult to penetrate. Having a wider customer base and in-store experiences could bolster sales in the early stages of growth.

The problem is discounting

The crux of the brand and retailer relationship is price points and sale. Full price sell through periods have vastly decreased as retailers are competing for the same customers with many selling overlapping brands and discounting earlier in the season.

If a designer delivers its high summer collection in March and retailers go on sale in June, that leaves only two months of full price sales. Many brands don’t want to see their product discounted so early in the season, as it undermines their equity and customers will be used to their products being available at lower price points.

Having a long term retail strategy and redefining the brand and boutique relationship is imperative to both the start-up and retailer. There is no reason why wholesaling cannot be a more collaborative relationship and channel option, where both parties work closely together to support the brand’s sale in store.

Image courtesy of U Clothing