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In Banner Year for DTC, Are Brands Really Fleeing Wholesale?

The coronavirus crisis has prompted an undeniable evolution at retail. While brick-and-mortar businesses continue to languish under a new wave of restrictions that have hampered scores of stores, consumers are turning to the web in droves to complete their holiday shopping.

But according to business-to-business e-commerce platform NuOrder, this year’s Covid-driven changes are merely an acceleration of existing trends. A survey of 688 fashion industry employees working for brands large and small revealed that the standard wholesale model that has driven retail for generations is well overdue for a reckoning, or at least a deep reexamination.

Prior to the surfacing of 2020’s manifold challenges, traditional retailers were struggling to maintain costly physical storefronts in an age where online and mobile commerce has proven more convenient and cost-effective. What’s more, traditional retailers have lagged in harnessing the power of consumer data as effectively as their direct-to-consumer counterparts, relying instead on outdated ordering processes and fashion calendars, analysts said.

While brands are continuing to invest in wholesale as an integral part of their distribution strategy, NuOrder’s survey respondents pointed to a lack of standardization across processes (20 percent), a dearth of sell-through data (about 12 percent) and an absence of proper support from retail accounts (around 13 percent) as their biggest pain points.

Despite the fact that the majority of brands (more than 50 percent) plan to invest most heavily in e-commerce, and more than 40 percent plan to channel their efforts into online retail, the dependence on wholesale is a hard habit to break. Close to 25 percent of survey respondents cited wholesale as the retail channel they plan to focus on as their primary growth strategy.

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That’s because “there’s a trust that’s been built up between brands and retailers,” according to Sarah Sandberg, vice president of customer success for NuOrder. “While this current Covid challenge is unique, many of our brands have forged relationships with retailers that span decades, and have ‘been through the fire before.’”

Brands trust that retailers can weather the current fluctuations in consumer spending, Sandberg noted, and they also believe in the trust that stores have built with their customers. “Many brands reported they are confident in the loyalty the end consumers have for their local shops,” she said, especially in a moment where shopping small and local retailers has become a driving force for shoppers.

“And wholesale isn’t just brick-and-mortar,” she added. “Wholesale can also be feeding into online-only boutiques, or retailers with a strong trusted online commerce solution.”

Sandberg listed time and capital as the two primary hurdles preventing brands from building out their own e-commerce channels as a means of bolstering margins. “Both of those luxuries are sparse for many,” she said.

What’s more, shoppers’ expectations for the online shopping experience have skyrocketed along with the channel’s popularity. “We expect two-day, free shipping, a full return policy, a great website, and unique products,” Sandberg said. “It’s a tall order to deliver on this, and partnering with retailers that have already solved for this can be incredibly advantageous.”

Only 13 percent of brands said they were actively moving away from wholesale toward DTC, while 43 percent said they maintain a positive outlook on the future of wholesale. Another 46 percent said they were actively trying to broaden their base of wholesale partners, while 41 percent expressed a desire to sell more to their existing retail network.

But in order to truly maintain their relevance, wholesalers will have to make some changes, Sandberg conceded. Brands overwhelmingly cited a lack of standardized processes as a hindrance to their relationships with stores. “When you submit orders, how you submit them, how you present the line—these things can vary greatly,” she said. “You have to sell in a different way for each retailer—in some cases using different systems entirely—and that puts a lot of pressure on the brand.”

Luckily for wholesalers, though, 36 percent of brands reported having seen “a lot of change” in processes, with nearly half (49 percent) of employees who have worked in the industry for 6-10 years saying they’ve experienced more collaboration between brands and retailers.

Software tools to streamline those relationships have also gained in popularity. The vast majority (71 percent) of survey respondents said they had used or were currently using a B2B platform to manage their wholesale relationships, with one-quarter saying forecasting and planning were their most important objectives. More than one-fifth (23 percent) said that they found digital line sheets more compelling, while 22 percent said that a digital platform made for easier and faster selling to retail partners.

But despite improvements to process, some brands are pulling the plug on wholesale altogether. Earlier this month, Fast Retailing Group, parent company of denim label J Brand, announced plans to “rearticulate” the company’s business model through a total focus on DTC. Beginning next summer, all J Brand denim will be sold exclusively on Fast Retailing e-commerce channels.

While the industry may continue to see similar strategy shifts, Sandberg believes that the future of wholesale may be difficult to predict. “2020 handed us something no one anticipated,” she said. “As a result, brands were thrown headlong into a period of experimentation like we’ve never seen before.”

“Of the brands we heard from, they are continuing to push their wholesale strategy, while also infusing e-commerce and other online strategies,” she added. “I expect that we will continue to see different strategies pop up as brands find their footing.”