Why the classic wholesale strategy is dying.
We all know the phrase: The client is king. Brands will go above and beyond to satisfy the needs of a (potential) customer. For example, last week, in the Netherlands, there was a whole uprising about a new yacht that Jeff Bezos had made in Rotterdam. In itself, not a big problem. Apart from the fact that they miscalculated that the vessel cannot actually reach the open waters because of a historical bridge that cannot open that high for it to pass through. The solution? Let's dismantle the bridge!
This is just an example of how far the client wishes and the willingness to satisfy these wishes can go. A 'no' simply cannot be sold anymore. A few years back, you only had a handful of car brands, and the colors these cars had were available in red, blue, green, and yellow. And, that's it! Nowadays, your options are almost limitless. If you desire a pink car with leopard print all over it, I am positive that you will find a car dealer willing to deliver.
Traditional wholesale setup
The traditional wholesale setup where brands' responsibility stops after designing the goods, presenting them at trade shows for their potential customers, and having the collections produced and sold towards the retailers will no longer stand for. The biggest driver for this outdated flow is the customer. Fashion and trends change all the time, and we humans are in this time of age able and allowed by society to express ourselves in our clothes and accessories. Whereas women were obligated to wear heels and skirts a few years back, it is now perfectly normal for women to wear jeans and sneakers. Brands need to listen to what the world wants them to produce. Because if they blankly ignore, they will lose potential customers and, bottom line, lose revenue.
So, what needs to happen is switching the chain around. Instead of the brand manufacturing the items, placing them at the retailers, and leaving further responsibility to sell with them, the customer's buying behavior needs to fuel the brands with the correct data. "We sold 300 jeans in our store only this week and 0 skirts. Let's produce fewer jeans and more skirts!" Said no one ever.
Let's be honest, who better to fuel the brands with sales information than the retailers themselves. Take the last 2 years, for example. The fashion industry saw a high rise in sportswear. Working from home, people often would slip into their adidas sports pants while having a buttoned shirt neatly ironed on top. It would be foolish for sports brands to ignore this consumption trend and not produce more sweat and/or sport pants. I mean, you only really see the top half of you when in a zoom meeting anyway, and I bet half of the world thought this way during the pandemic.
From a retailer's point of view, they can state: "I can't fill my warehouse with goods for which I can't plan the demand in advance." But then again, nobody can do that with 100% certainty. Because the consumer is too dynamic and can access an infinite offer - anywhere.
Shared risks make for a fairer chain
What can we conclude? The fairness of the shared responsibility for the whole supply chain has shifted. The risk of not selling the items is no longer the retailer's issue now but goes all the way back to the brands. The classic wholesale setup will become redundant. The one-way thinking, the unfair spread of risk, and no speedy responsiveness to adapt to dynamic consumption simply don't fit the current market. But does that mean we will introduce a whole new structure, or will we welcome a wholesale 2.0 version?
Considering that the trend currently shows that we have a complete verticalization of the strategy (read more about this in our D2C blog), we are preparing ourselves for the D2C (direct to consumer) structure. Why? Short and sweet on the advantages: Control, speed, and transparency. Values fitting today's customer wishes.
But D2C can also exist within the wholesale business. Think about concession, i.e., renting space, or agreements such as depots and Shop-in-shop. In these business structures, brands and retailers work together and actively manage the POS as a team. As long as the central question remains: "What can we do together to make this structure work" by zooming in on the strengths of each component in the value chain.
Change always leads to questions. Will this type of business transform into an even more vital role? Is this the next step of the transformation in wholesale? How will the cooperation between retail and brand have to adapt or intensify? And an equally important question: how will the order processes change? Will we continue to have a classic order with samples, which indeed transmits haptics, design, and message better to the retailer, but also costs valuable time on the other side, or not?
All-in-all, you can state that our beloved fashion industry is at a turning point. Processes will be rethought, and consumer input is at its highest importance. And not only input but also global trends like sustainability influence the industry. And this trend particularly, the sense of responsibility for a sustainable business, is becoming a crucial driver for customers to purchase items with a particular brand, yes or no. Learn more about sustainability and the meaning of fast fashion in our site story - Let's get ethically fashionable!
The traditional wholesale structure is disappearing, if not already entirely disappeared. There is no way around it. The question is, are you ready to turn your value chain around and jump aboard this value-chain train?