EXCLUSIVE Q&A: How a DTC brand should enter wholesale
Wholesale presents both an opportunity and a challenge to direct-to-consumer brands.
Chain Store Age recently spoke with Liza Amlani, principal and founder of Retail Strategy Group, about how the wholesale market can be a profitable channel for direct-to-consumer (DTC) brands, if they pursue the proper strategies and outcomes.
[READ MORE: Exclusive Q&A: How retailers can get to know their customers]
Why should a direct-to-consumer brand open a wholesale channel?
In many cases, you find that DTC brands don't have or were never exposed to retail fundamentals. They're an expert in their space, such as a running enthusiast launching a running brand, but they've never learned about retail or been exposed to retail fundamentals.
So not only are these DTC brands looking at the wholesale channel for new customers, brand awareness and more profit, but also to help guide them in learning things like how to do a line sheet.
How does a wholesale merchandising strategy differ from DTC?
A wholesale merchandising strategy involves selling into another channel where you don't own things like marketing, distribution, or in-store display. When you partner with a retailer, you're getting in front of that retailer's customer, which I like to call the customer's customer.
In terms of the merchandising strategy, it's very hands-on, because it's not only about partnering with the retailer to get in front of their customer, but it's also about determining if those retailers are right for you to begin with.
You need to know where your competitors are and what shelves they’re on. Does a retailer align with your DTC brand’s DNA? When you're thinking about merchandising strategy for wholesale, you first need to determine if those channels and retailers are right for you.
Then it’s about execution of seasonal strategy and working with your retail buyer’s product knowledge, so that the retail buyer understands what product you're selling and what your brand stands for.
Wholesale merchandising is more about teaching the retailer about your brand and then selling to their customer instead of your own customer that you probably already know.
What should a DTC wholesaler look for a retail partner?
There are three questions that you need to ask before you go into a wholesale partnership with a retailer. They are, is the retailer targeting the customers that you want to shop your brand, is the retailer a direct competitor, and does a retailer align with your brand DNA.
For example, if you're a brand that is premium, a mid-priced department store retailer might not be the right partner for you; maybe a luxury retailer would be a better partner.
How can a DTC brand build an effective wholesale assortment?
It starts with the merchandising strategy, such as product distribution and pricing. This means what you sell, where you sell it and at what price point. Then you build on that, curating the assortment to align with the retailer that you're either selling to or wanting to sell into or grow with.
What are some common wholesale issues and how can a DTC company best resolve them?
Let’s start with negotiation. A lot of brands don't realize that they can negotiate a few things up front, like product placement, pricing, and marketing and markdowns.
It's common for retail buyers to not share their markdown strategies with brands up front. But as a former retail buyer, I can tell you that in many instances, buyers plan for the year because they want to buy the right product for specific markdowns or promotional events like Black Friday.
So getting ahead of some of these promotional surprises and negotiating things like markdown cadence and promotional activity up front will help a brand offer higher-margin products or exclusives for those promotions. This is something that you can actually negotiate with your retail buyer.
Product placement is something else that can be negotiable. So before you even approach a retail buyer you want to make sure you're retail-ready, which means doing your research before you meet that buyer and telling them what the ideal adjacencies are.
When a brand visits a store, before they even meet the buyer, they should do something that I like to call comp shopping. It’s an industry merchant term that means going in the store and seeing what your competitors are doing to find out if there are any gaps in the market you can fill.
A brand should come into a meeting with a retailer prepared with data like line sheets and product knowledge to help build a better partnership with that retail buyer. That’s how a brand should look at working with a retailer, that it is their partner and it's ideal if they both win.
Editor's Note: Liza Amlani is co-author with Raj Dhiman, Ph.D. of the new book “The Whole Sale: Profitable Wholesale Strategies for Brands,” from Retail Strategy Group.
