Is There a Retail-Wholesale Balance?

Brands across many industries once relied exclusively on middlemen to reach their customers. However, eCommerce made it easier for manufacturers and suppliers to sell directly to their customers. Can business strike that retail-wholesale balance?

Retail-Wholesale Balance and the Middleman

A brand teams up with retailers to increase sales at volume without a lot of added marketing expense. When small, growing manufacturers go wholesale, their retail partners do the marketing, and they enjoy higher revenue.

Meanwhile, some big brands move in the opposite direction. They nurture direct-to-consumer sales through eCommerce and online marketplaces. This “wholesale bypass” in which manufacturers relies less on middlemen and more on direct sales emerged most notably in the fashion industry.

For example, Nike has expanded its direct-to-consumer efforts over the last few years. This culminated in June with the announcement that Nike would sell directly to customers on Amazon using the marketplace’s brand-registry program. Thus, Nike will eliminate third-party sellers on that marketplace and gain more control over branding and reap more revenue.

(Incidentally, Amazon intends the program to get rid of brand knock-offs from its marketplace and 2,000 big brands have already registered).

News of the Amazon-Nike deal sent big retail stock value plunging, with Foot Locker dropping by 11%, for example. But Nike has already reaped huge benefits from wholesale bypass. As PAYMNTS reported in early June, its direct-to-consumer business accounted for 27% of its $8-billion revenue this past quarter.

Inventory in the Balance

Technology makes it easier than ever for businesses to strike the retail-wholesale balance. The issue becomes how to manage and market products to make those channels work in harmony. And this boils down to considerations about inventory management and overall strategy.

First, how much stock will you need to carry for both direct-to-consumer and higher-volume wholesale channels? Secondly, will wholesale pricing cover your costs? And lastly, how will you keep from competing against retailers that carry your product?

These and other questions will directly reflect your business model. But, on the practical side, the technology is there to help you manage your business for both retail and wholesale.