In theory wholesale is the ultimate channel:
- Guaranteed depth in key styles before you place your purchase orders
- Distribution to hundreds of stores in some of the best locations in the UK
- Zero rents or rates for the privilege
- Added brand credibility to your brand
- Potential to gain a flurry of new brand advocates
- Regional extension/relevance to marketing and PR campaigns
- Having a fixed, pre agreed price/margin
So what’s the downside?
Like anything — it is all about your objectives and what you can afford:
Some brands hate losing control of their pricing, brand environment and brand advocacy for the sales team. Brands like to be in the driving seat, so outsourcing their product to anyone, means a different approach and often experience. So many go down the route of the concession model — higher margin, higher risk. For concessions to really scale, you ideally need a store footprint of your own, so you can leverage the benefits of area management or your own visual merchandising team.
Other’s simply don’t have the margin structure to support wholesale with 2.5–3 markups, penalties for late deliveries, incorrect packaging, marketing contributions and a settlement fee for retailers doing brands the pleasure of paying in accordance with the agreed T&C’s.
Some brands might prefer to go down the SOR route, with smaller independent retailers, to reduce their warehouse costs and increase their margin. But this can be troublesome and very time consuming!
Then there is cash flow! Some retailers demand up to 90 days+ in terms! So if you are landing stock from the far-east and have preferable terms, you still need to bridge a 60–90 day gap in funding… Not an easy feat, unless you have the Federal Reserve behind you!
For this scenario, smaller independents and multiples are often a more realistic option, with 30 days terms offered… but then how do you know if they will actually pay on time, or in these uncertain times still be around to pay.
Logistics, logistics, logistics….
The delivery timelines is also another major factor… Can you guarantee stock will not only arrive at your warehouse for 3rd Jan, but be packed in neat boxes, with the right codes on them and picked up by the right courier on the 5th Jan?
Logistics and sourcing are a key backbone to any wholesale operation. You need to be able to turn around stock with extreme speed and efficiency, and this is not for the feint hearted. You have to be a master of high-stake problem solving — ship delayed in rough weather, stock held at customs… you name it, it happens.
Alongside bricks and mortar wholesale, many brands now sell through a plethora of marketplaces online — Etsy, Amazon, Ebay etc. With commission based sales, this enables a greater margin, if you can deliver an effective stock management integration for the warehouse… Which in my experience is never quite as straightforward as a salesperson would have you believe…
This all sounds a little too pessimistic, but whilst the hurdles are real the return on your time and money can be really worthwhile. Some of the best know brands in the UK have built their brand and business on this model, and then taken it global!
So there is a well trodden path, which helps brands cut their teeth in the right places for this channel:
- Focus on Independent Retailers
- 2.3–2.5 Markup
- Coastal and market towns / Regional Hotspots
- Add smaller multiple chains
- 2.5–2.7 Markup
- Major towns and smaller cities
- Add major retailers / department stores
- 2.7–3.1 Markup
- Major cities & towns
The wholesale model can be key to helping brands drive volume and nationwide/international distribution in a very scalable way — Ted Baker, Joules, Ralph Lauren — It’s a key part of any truly multi-channel brand.
But there is limited floor space, so for it to to work for you, you really need a great brand and product offer that stands out amongst the crowd, not to mention the back-end logistical platform to back it up!