Why Opening a Wholesale Channel Matters

Brands are constantly looking for any competitive advantage that they can get. Whether that’s leveraging data that they own or testing out a new tool, the most innovative brands are successfully finding ways to expand their reach and increase profitability despite increased headwinds in the market.  

And while it seems like a new innovation is popping up everyday that helps brands grow, one powerful, reliable “old-school” growth strategy that often gets overlooked is for brands to either open-up or grow their wholesale channel. More brands are turning back to wholesale channels as evidenced by the fact that 45% of brands are hoping to sell into more retail accounts this coming year. When done successfully, wholesale can become a powerful, revenue driving channel for your brand that can determine your brands fate. 

Before we go any further, let’s define what exactly wholesale is. Wholesale is a business model where products are purchased in bulk at a discounted rate to retailers, who then sell the products to consumers at a higher price. The wholesale trade model contrasts with the direct-to-consumer (DTC) model, where brands sell directly to the end customer. Some wholesale agreements come with contractual terms, but it isn’t necessary to formalize a wholesale relationship. By leveraging wholesale, brands can distribute their products to a wider audience through various retail outlets.

In this piece, we will outline why we see brands opening up a wholesale channel as an absolute must today for brands looking to scale their entire business operations. 

Wholesale Allows you to Move Bulk Units 

One of the most compelling reasons why wholesale is impactful is because it provides brands the ability to move large quantities of product at once. Instead of selling individual items to consumers, which can become costly and difficult to manage, when you sell through wholesale channels, you are selling high volumes at once. This is beneficial for several reasons, including:

• Logistically, you don’t need to worry about shipping individual items which can be costly, even if you are only shipping within the United States (and aren't conducting any commerce internationally).

• You don’t need to hold as much inventory on hand, which will free up your P&L, more on this in a moment. 

• You can become smarter in your inventory planning when you have more regular, predictable orders coming in, unlike most DTC businesses, which we will go into further details below. 

Having a regular “always-on” channel in which you are able to move through bulk orders faster, only translates to positive news for the rest of your business. And having a wholesale channel allows you to do just this. 

Increased Profitability

Going hand-in-hand with the ability to move lots of units at once is that when you open up a wholesale channel, you are able to more profitably operate your business. As touched on above, you no longer need to sit on inventory for long periods of time (which can have a negative impact on your balance sheet)  if you have lots of bulk orders coming in on a regular basis. Additionally, when you have a reliable wholesale channel, you can likely achieve economies of scale with your factory when it comes to production, which will translate into the reduction of the per-unit cost of production and shipping. 

Not only will moving more units, faster, while also achieving economies of scale help boost your overall profit, but growing a wholesale channel requires less of a marketing expenditure. On the DTC-side of the business, marketing costs are at an all time high, rising over 222% over the past eight years. When you combine the costs of goods sold increasing with added marketing and shipping costs, it’s getting less and less efficient to run a DTC business. 

Building and scaling a wholesale business allows you to become more nimble, strategic and profitable, while opening up avenues for you, all of which are becoming increasingly more difficult to achieve on the DTC-side of the business. 

Expanding Your Audience

As we highlighted above, marketing costs are at an all-time high. And as you scale, marketing costs can be one of, if not the most substantial expenses for a brand - sometimes blocking your ability to grow profitably.  

However, having a wholesale channel allows you the unique opportunity to grow your business, while not having to spend thousands of dollars on marketing. Getting your brand into a new retail account is a win because you are not only moving inventory and making money, but you are also getting brand exposure as your product sits on the shelves of the retail location that you are in. This allows you to capture brand visibility that will either translate to more customers purchasing your products in that retail location (potentially triggering a reorder from the retailer) or lead an interested consumer to come to your website to explore your products and brand in a bit more detail. 

Opening up a wholesale business can help you build a robust brand exposure flywheel that leads to building a profitable, sustainable business. 

An Always-On Retention Strategy

Once your products are successfully sold in a retail store, it sets the stage for ongoing business, provided your products sell. This is why when you begin to prospect potential retail accounts, it's very important that you take the time to prospect accounts that target a similar demographic that you are trying to target due to the potential for reorders coming through. 

Retailers are very likely to reorder products that sell well, which in turn creates a consistent revenue stream for your brand. This "always-on" retention strategy ensures that your products remain available to consumers and maintain their presence in the market. Reorders from retailers signify steady demand and provide a reliable source of predictable income, which help your brand grow profitably. 

Simplified Logistics

While DTC brands tend to get all of the attention and fanfare, they are rather complex to operate logistically. A brand needs to oversee hundreds, potentially thousands of individual orders at once - with each of them having different contents and a unique shipping address. As you can imagine, this requires significant capital to operate with shipping errors and returns bound to happen, which in turn leads to stress on your customer service teams end.

Brands that are selling wholesale have far less to worry about when it comes to picking, packaging and shipping orders. Typically wholesale orders are packed in bulk and each brand has far fewer wholesale orders going out than DTC packages, making it easier for them to manage from a logistical standpoint.   

Better Inventory Planning

Wholesale orders often come with advance notice, sometimes as far out in advance as 6 months. This allows for you in turn to better plan your inventory. Knowing the quantity of upcoming orders helps you manage production schedules and inventory levels more effectively. This problem solving foresight reduces the risk of overproduction or stockouts, ensuring that you can meet demand without incurring unnecessary costs.

Opening a wholesale channel is not just a supplementary strategy, it is a vital component of a successful business model. From moving units through bulk orders to increasing profitability and expanding your audience, wholesale offers numerous advantages that can drive your brand's growth. Additionally, the logistical simplicity and improved inventory planning further underscore why wholesale matters. By embracing wholesale, you can create a sustainable, scalable, and profitable business that reaches a broader audience and maintains a consistent market presence.

If you haven't yet considered wholesale for your brand, our opinion is that now is the time to kick off a project to at least explore adding this channel to your mix. The benefits are clear, as we outlined above and the potential for growth is immense. Start leveraging the power of wholesale today and watch your brand soar to new heights.

Interested in starting to start and scale your wholesale business? Learn more about how Vanik can help you streamline and scale your wholesale retention business.