Managing multiple distribution channels takes finesse, but the payoffs of maintaining a robust wholesale business are worth it.
Successfully producing outdoor gear used to be such a simple endeavor: Make great product, then sell it through retail partners, or directly through a catalog or your own store. These days, the formula has become a lot more complicated. With the option to distribute through a suite of channels—specialty retailers, big-box retailers, directly to consumers via ecommerce and/or your own storefronts, through Amazon’s Vendor Central or Amazon resellers—brands must pull off a delicate balancing act and juggle a network of relationships to get their gear into customers’ hands. The good news? This swirl of channels also presents an opportunity to reach consumers wherever they are, telling a vibrant brand story while enhancing the shopping experience like never before. Over the next few weeks, SNEWS will take a closer look at best practices for vendors in an increasingly omni-channel world.
The challenge: Appreciate the power of retail
At first glance, it sounds like a great strategy: Cut back on wholesale to focus on selling directly to your customers, thereby controlling your brand message, gathering instant feedback, and maximizing your margins.
But is it?
Building a DTC business can be a profitable endeavor—as long as it doesn’t mean abandoning years of customer goodwill and relationships with retail partners, stresses Mike Massey, founder of Locally and owner of Massey’s Outfitters. “Wholesale business has developed the reason customers go to a [brand’s] website in the first place,” he says. “It’s very difficult to stand up a brand purely online without any access to in-store marketing.”
One major reason: Many customers are first introduced to a brand through their local gear shop. And winning the approval of a trusted specialty retailer and its employees helps customers feel more comfortable about spending money, especially on big-ticket items like ultralight tents, skis, and kayaks. “The retailer can serve as a powerful third-party endorsement,” says Kristin Carpenter-Ogden, founder of Verde Brand Communications and host of its Channel Mastery podcast. “It brings authenticity to a major purchase.”
Local gear shops are masters of word-of-mouth marketing, Massey adds—when a retailer loves a particular brand or product, it spreads through the outdoor community. More ominously, when a vendor abruptly disappears from the shop’s shelves, customers will hear about that, too.
The emotional connection shoppers feel to their community retailers is backed up with data, Carpenter-Ogden points out. “There’s qualitative research that shows that when a brand decreases their presence in a region, their direct sales drop off their website,” she says, citing data gathered by the omni-channel software company, ShipEarly. Those shoppers aren’t simply declining to buy from that one brand, either: “That customer is going to find a solution in another brand they can touch and feel.”
So vendors that turn their backs on the wholesale channel risk severing critical connections with their consumers and losing sales to competitors. What’s worse, argues Rich Hill, president of Grassroots Outdoor Alliance, is that the perceived benefits of selling direct aren’t even as good as they seem. “There’s this fallacy out there about the additional margin in the DTC model,” he says. “The truth is, the costs associated with that model are dramatically higher,” due to the difficulty of attracting and maintaining a loyal customer base.
"They’re trading full-price business for off-price business, and that’s going to come back and bite them in the ass,” says Rich Hill.
In fact, Hill says, “When you look at [some] DTC-only businesses, the only reason they’re growing is they’re roasting investor dollars” rather than maintaining a sustainable, standalone business. Other brands with both DTC and wholesale channels resort to aggressive discounting to attract shoppers to their websites, undercutting their own retailers. “They’re trading full-price business for off-price business, and that’s going to come back and bite them in the ass,” predicts Hill.
[excerpted from SNEWS]