Brand distribution 2020: Wholesale is the new retail

2014 began with a surprising bulletin from New York’s Ralph Lauren: “Net revenues for the full year 2013 increased 7% … wholesale revenues up 11% …”. Did any other fashion brand recently achieve more wholesale growth than retail growth? Has our long-time favourite for best practice growth strategy, finally lost it? Or is RL leading a new trend in brand growth strategies? The future on RL is not decided yet, Brand Flagship Ralph Lauren in Parisbut we strongly believe in a revival of strategic wholesale priorities. To understand why, one needs to understand today’s commercial realities in multichannel distribution.

The term ‘multichannel’ was coined for many when internet distribution entered the scene, but already ten years before the birth of internet many brands were distributing multichannel; in wholesale, shop-in-shop, franchise stores, catalogues (all wholesale distribution), concession, own full-price stores or factory outlets (retail distribution). Multichannel is brands’ daily business since the 1990ies, in different business models – own, third-party, licensed – for different parts of the collection, in different parts of the world. In fact, multichannel competence was the key success factor for many best-practice growing brands, including Ralph Lauren.

Brands are e.shop latecomers

When e.shops became a commercial distribution channel for retailers, for brands it was only the 10. distribution channel. Therefor many needed some time before arriving with an own e.shop. In 2010 40% of Europe’s top brands still didn’t have an own e.shop in their home market, rather grew in other distribution channels. By 2015, all leading brands have launched their e.shops, but many are still not addressing all European top markets yet. More critical, many brand e.shops still provide a mediocre online shopping experience, 20 years after the launch of Amazon.

But it may stay that way some time, as despite all online hype consumers‘ frequency of online searches and visits for fashion brands is still far lower than the annual window traffic of an average European high-street. In Germany, fewer than 15 fashion brands have five million visitors in annual online traffic. European Highstreet TrafficYet there are more almost 50 German high streets with anual traffic upwards of five million; not to mention another 20+ shopping centres. It is not hard to predict, even with another five years dynamic online growth the average European brand e.shop will not achieve the footfall of a mediocre European high street.

Consumer expectations moved next level

Many studies underline brands’ e.shop challenge and show internet pure players (e.g. Zalando), mail order (e.g. Otto) and vertical retailers (e.g.H&M) with growing online shares, while brands struggle to provide basic consumer services. Just three examples:

  • Less than 50% of European fashion brands offer a store locator that provides a full view on the brand’s point of sale in wholesale, retail, franchise and own retail.
  • Only 1 of Europe’s top 30 brands offers consumer an in-store availability look, including size and colour.
  • More than 90% of Europe’s brands don’t accept returns of online purchases in their own retail POS (not to mention partner stores).

Don’t get us wrong. From working on multichannel strategies and processes with some of Europe’s best-practice companies, we know about cost and complexity behind a seamless cross-channel approach. But, explain this your consumers: How come an app like “Labelfinder” provides more transparency on your brand’s POS than your store locator? Or, why do you want customers to return online purchases to DHL locations, rather than serving them at your store? The answer is simple: Brands don’t invest enough to provide consumer a superior online-offline experience. And if they did, it was often very basic, while internet pure play companies grew consumer experiences and expectations to a new level.

“Showrooming” a favourite Distribution Mode

The commercial future of brand e.shops remains to be seen, but the strategies look familiar: “Let’s try to become professional online retailers with small financial commitment.” and you can predict, distribution history will repeat. It was the 90s that major brands started downtown retail. Yet, to this day less than half of the brand industry found a way to operate its full-price division with a really good profitability. Many hide that factory outlets are actually securing retail growth and profitability. To this day the average downtown full-price store stays below 10% EBIT and many don’t t pay off investments.

Full-price retail is not a successful distribution channel, as “showrooming” is the favourite downtown operation mode. It doesn’t take much to foresee that “showrooming” is also the future of many e.shops, if brands don’t catch up with investments in consumer services.

Brand distribution in 2020

We see smart operating brands will focus on going wholesale in e.com, selling to Amazon, Zalando & Co., before they push marketing budgets for own e.shop traffic. With e.com growth via third parties, wholesale will regain its strategic importance, supported by leading multibrand retailers with superior cross channel experiences.

In 2020 a majority of industry executives will have learned that D2C distribution was a great way to grow sales, but brought little profit for many of their ten distribution channels. In some cases these “decathlon” investment strategies will have exhausted brands and will open the field for a strategic review of distribution strategies. Growing flexibly and opportunistically in all directions is no longer a key success factor. “Capital-light growth strategies” or “Efficient multichannel experience” will be the new best practices in brand growth strategies.Multichannel Distribution Cloud

We believe in 2020 many brands understand that online is their most important communication channel, and Asos, Yoox or Net a Porter are very attractive wholesale accounts, allowing to reach consumers with economies of scale and high service standards. “Smart” growing brands will benefit from growing via internet pure players rather than investing millions for high traffic in own e.shops.

It is therefor that in 2020 the mother of all distribution channels, wholesale, will have a revival. In 2020 a growing wholesale sales share is “Brand KPI of the year”, and indicates a brand’s new healthy growth track. Still, creating a high D2C profitability will remain the biggest management task, and we are looking forward to continue to work on this.

Schlagwörter: , , , , , , , , , ,

Kategorien: English, featured, Strategie, Vertrieb

Ihr Abo für Retail Management Impulse

Damit Sie uns nächsten Monat nicht vergessen, ziehen Sie sich ein Abo. Wir melden uns in Ihrem Maileingang, wenn es spannendes Neues gibt. ihr retail intrapreneur

Es gibt noch keine Kommentare.

Ihre Meinung zu diesem Beitrag?

Trage deine Daten unten ein oder klicke ein Icon um dich einzuloggen:

WordPress.com-Logo

Du kommentierst mit Deinem WordPress.com-Konto. Abmelden / Ändern )

Twitter-Bild

Du kommentierst mit Deinem Twitter-Konto. Abmelden / Ändern )

Facebook-Foto

Du kommentierst mit Deinem Facebook-Konto. Abmelden / Ändern )

Google+ Foto

Du kommentierst mit Deinem Google+-Konto. Abmelden / Ändern )

Verbinde mit %s