Brick and Mortar retail square footage is getting smaller each season, making the competition for getting your brand and product on store shelves fiercer than ever – which put you at risk of reducing your brand’s footprint, or perhaps even eliminating it entirely. Unfortunately, the Battle Royal with your 3 or 4 main competitors for shelf space isn’t your challenge – you’re also competing against hundreds of competitors online and offline.
Even IF your retail partners add your brand and products to their online assortment, who can find it?!
- Your brand is lost online and meaningless. You are fighting against “online exclusives” and your product doesn’t have the advantage of merchandising anymore.
- You double down on building your business partnerships hoping to set your brand and product apart so you agree to a dropship partnership you’re your retailer, forcing you to spend more of your own margins on fulfillment and shipping.
- On top of it all, retailers themselves are challenged and are closing at an unprecedented rate – leaving you scrambling to figure out a way to get your goods to market if your retail partnerships shutter down.
As you sit back in your office developing new strategies and awesome new products for your retailers, you continue to have the uneasy sense that as hard as you may try, there might not be a solution to get your business back on track. You know the market is just getting smaller and smaller, the prices are getting lower and lower, and your wholesale business’s profits are dwindling. But what do you do?
You can go direct to consumer.
With the direction of the retail market over the past few years, direct to consumer has continued to gain steam as wholesalers are seeing the value, and profits, of this model. This week’s Insights analyze and breakdown the reasons you need to get a DTC strategy in place.
An Omni-Channel Empire
Why have one channel when you can have many? Today’s retail environment is all about reach. Customers have more choices than ever before and you need to reach them, before your competitors reach them. Putting your brand in as many visible, but appropriate, channels as possible is necessary for survival. Having a website is an absolute today, and you don’t exist without it, but many wholesalers aren’t leveraging it to drive sales.
Creating an ecommerce channel on your website is the simplest way to get started with your new omni channel empire. Sell your products online through your website to get started, and continue to build from there. You can tackle additional channels via social media and even third party sellers (ahemm….Amazon) to get maximum exposure for your brand. I’m not saying that selling through every channel out there is right for every single brand, - each wholesaler needs to come up with their own unique and appropriate omni-channel strategy focusing on delivering a consistent brand message. However, by offering multiple sales channels you will reach more consumers and make it easier for the consumer to shop your brand, all while creating a unified brand message.
One aspect of going DTC that many wholesalers underestimate is the level of control that comes with this strategic initiative. Wholesalers sell in product but then are notoriously reliant on the retailer to drive sales through other critical attributes to product success – placement and promotion. However a DTC channel will give you back total control of your brand and products. You control every aspect of your brand from:
- inventory management
- and most importantly...customer experience
You are able to make the key decisions for your brand and share your brand’s journey every step of the way.
Not only do you take back control of your brand and products but also you strengthen your brand because you are making decisions with only one outcome in mind, your business’s success. You remove the politics, favoritism, and unknown fate that frequently comes along with doing business with retailers and instead, replace it with total control over your brand. Doesn’t THAT sound appealing? Your sole focus is on your brand and products and you make better decisions for it.
This one is a no-brainer, and in today’s retail environment of non-stop promotions margin is everything. When you remove the third party retailer and go DTC you will gain increased margin dollars. Yes, there will be initial up-front costs and investments that need to be made to get your DTC off the ground. Marketing, advertising, inventory, staffing etc. – those things aren’t free. However with a dedicated strategy and increases in margin over time, your DTC investment will end up being more productive and well worth it. Start slowly online by adding ecommerce capabilities to your website and grow from there.
Closer to the Customer
Going to DTC means removing a link in the chain and ultimately you are one step closer to your customer. That step is a big one because now you are positioned to gain more accurate and more frequent insights about your customer. You can gain intelligence and data from your new channels and customer interactions that provide you with your customer’s behaviors and ultimately their product wants and needs. This information is critical to developing future strategy to keep your customer coming back for more. This type of intelligence doesn’t just benefit your strategy but is also a competitive advantage for you in this challenging retail environment. The closer you can get to your customer, the better decisions you’ll be able to make for them.
Diversification Means Less Risk, More Reward
In today’s retail world, diversification is critical to survival. Diversify your own brand portfolio from just wholesale channels and develop a DTC retail strategy. Diversification like this gives your business a stronger and more stable foundation because you aren’t putting all your risk in one business segment.
By spreading the risk, and reward, across these different go to market models you not only diversify your brand but also build in flexibility and quick responsiveness when times start to get tough. If the environment isn’t right for one model, get focused on building and executing the other. Now the responsibility to make the necessary decisions comes back on you to manage your brand. You have total ownership of the brand and strategy and are empowered to make key decisions carving out its future success.
(Retail) Friends With Benefits
Having your own DTC channel doesn’t mean that you have to give up on your traditional bread and butter retail model either. At the core of it DTC is another sales channel and opportunity for additional brand exposure. DTC doesn’t have to be in competition with your retail partners but instead it can be positioned as providing your retail partners with additional brand awareness. You are fostering brand awareness through your DTC model and now offering retailers more channels to gain data and intelligence. Increased positive brand awareness will lead to increased sales.
In addition to brand awareness, DTC channels also offer another great feature: data. Instead of constantly relying on your retail partner for consumer data, use your own data to deliver stronger, more profitable assortments for your retailer. Leverage best sellers from your DTC assortment and create product updates and unique product assortments that are exclusively available to your retail partners. It could be a unique style, fit, color, or graphic but offer them something that is a proven best seller customized for their retail customer. Retailers DON’T turn down best sellers.
The future state of wholesale is only going to keep getting tougher in today’s retail industry. As retailers continue to update their own model, go after the new, hot wholesale partner, or sadly go bankrupt, the old school wholesale model will continue to become increasingly challenged to remain profitable.
DTC isn’t just a great idea for the reasons I detailed above, it’s also the direction the wholesale industry is moving. Wholesalers need to embrace this omni-channel model if they want their brands to remain competitive, relevant, consumer friendly, and most important profitable.
Interested in going to DTC but not sure how to get started? Mod. Merchant can help. Contact us to get your DTC strategy and business established and start driving more profits.
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