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Wholesale retail: definition and challenges

Wholesale is the sale bythrough various sellers, multi-brand retailers, outlets or corners. On the other hand, retail is the direct sale to the end customer of individual items. This involves either own shops or an eshop.

These are therefore two distribution methods that are completely opposed: the structure of the business model, logistics, storage, prices, image, retail and real estate exposure, staff...

Let's try to sort out preconceived ideas and real strategic choices.

For the rest of the article, let's first take a bias: you have a product and it's good!

Develop your brand through retail or wholesale?

When you question your distribution model, you ask yourself the question of brand development.

Developing your brand means opening new horizons; in terms of type of customers, geography, distribution formats... As such, and because the allocation of resources and capital is a challenge and a constraint for all brands, wholesale business is dressed as a superhero: opportunity to reach all markets, from the city center to the periphery, from France to the world, no or few staff in stores, no or little investment or capex..

Fast growth, increased brand and product awareness, and by extension, the appetite of other distributors for having you in the catalog!

However, growing fast and far away is move away from its base, it is to make the barycenter less representative of all the points. And in less mathematical terms, it's lose responsiveness.

On the contrary, being in direct contact with the end customer allows better understand trends and anticipate them. Total control “from well to pump” as Rockefeller said. From production to the eyes of your customers. This Close to the whole chain allows a increased reactivity.

Les vendors Besides, are your first source of information (before your checkout!!!!). The seller is in direct contact with customers, he knows the reasons for buying or not buying, the impressions, enlightening verbatims on everything that makes up your brand, from the material to the price, including the color or the name. Trust him and ask him questions! Store this information and process it in your CRM.

On the one hand, speed and the abolition of borders, on the other hand, control and adaptability. Your development is therefore structurally impacted by the model you choose.

The business model issue

Who says model, says business model. Here too, wholesale and retail are fundamentally opposed.

“Justice, just heaven [...], my money was stolen. What has he become? Where to run, where not to run? ” While Harpagon's success is global but more lasting than Hollister's, it mainly raises the question of running in vain.

Retail business is based on very high investments and operating costs. Opening an own store involves acquiring business, paying rent, arranging the premises, and engaging a sales force with a limited sales volume. It is therefore a long-term, financial commitment that requires financing capacities and therefore a solid and stable history. The opposite of wholesale business where only stocks require funds. In the same way, sales volumes are in favor of wholesale, which makes it possible to reach much larger customer volumes.

In contrast, the margin structure is diametrically opposed. Les distributors or multi-brand retailers buy at much lower prices see in drop-shipping. Moreover, this does not ensure that stocks will be removed from the brand's balance sheet. Conversely, The retailer has much more comfortable margins and can adapt its prices.

What is the impact on the customer experience?

Because yes in the end and at the risk of opening windows, whoever buys is the end customer and the image they have of the brand is essential.

And again, we are going to oppose two concepts: reputation and loyalty.

Making the brand known to as many people as possible ensures brand awareness and therefore sales. But it is necessary to go beyond this reputation to move towards customer engagement and the creation of a community.

When you entrust your product to a distributor, you also entrust them the responsibility to transmit the image and identity of your brand with the consumer/end user. You also have to align marketing, which is often your responsibility, with brand expression in-store that will highlight your multi-brand retailers and differentiate you to stand out from the crowd.

The retailer has the possibility to target a tailor-made clientele, that is, to adapt marketing and brand image to a highly identified clientele and particularly likely to be interested; to train its sales force with a perfect knowledge of the spirit and codes of the brand. But this clientele is limited to the environment of its own stores.

It is therefore necessary to take into account the personality of the management team and the mentality of the teams, the identity of the brand, the target and the way to reach it in order to agree on the most suitable strategy.

Is it really necessary to choose wholesale or retail?

Of course, there is nothing to prevent doing both. On the one hand, optimize customer contact and market fit and on the other hand, develop rapidly thanks to wholesale business, based on these retail lessons.

However, the best of both worlds is never without a trade-off: the competition between your own products, the price problem and the identification of which costs are borne by which products can be major difficulties for brands.

Retailers can make space in their store (off or online) for products that share their DNA, values and profitability model. It is an opportunity to expand his range to retain customers, to make better use of his spaces... He then becomes a wholesaler for other brands!

So there is a possible compatibility of the two models in which the leading brand takes on other players in its wake and plays the role of locomotive.

Finally, brands can opt for mixed models (showrooming, flagship) associated with distributors to bring the exclusive brand image to life without cutting themselves off the weight of distributors.

How to choose between wholesale and retail?

Many groups that had historically opted for wholesale (cosmetics for example) have now made DTC (direct to consumer) a priority for development because customer contact has become king. But it is also because they have established a strong reputation on years of wholesale that allows them today to try the experience. This is not easy in the face of the discontent of traditional distributors (Sephora, Marionnaud...) and in the face of the structural changes that this implies (change in corporate culture, new jobs, etc.).

Actors like Veja are now choosing distribution in their own name. Since 2008, 20% of multi-brand stores have also disappeared.

They will structure precise databases to allow them to have a better knowledge of the end customer, and to be able to serve them better.

But the recent turmoil and the exponential rise in customer acquisition costs can reshuffle the cards.

How to integrate wholesale into your strategy?

There are several implementation strategies. All involve integrating and dedicating a team to be present in the field, with your retailers. As you will have understood, the challenge is to maintain a value proposition faithful to your brand identity and to convey your DNA.

Internal recruitment

You may decide to build your own sales team. She, trained in your brand DNA, will be in charge of training and leading teams directly at your retailers.

Commercial agency or independent sales

You can also choose to outsource the management of reseller teams by using sales representatives external to your business. You can either entrust them with the development of your wholesale strategy in its entirety, or use their services on an ad hoc basis (depending on your seasonality for example).

Trade shows and press relations

Finally, you can choose to establish yourself within a network of specialized distributors (pharmacies, delicatessens, etc.). A good way to gain visibility in this case is to trigger positive word of mouth, to develop your presence at BtoB shows to discover, test and convert potential resellers or even to rely on press relations to reassure retailers in its category.

Wholesale vs retail example: watch brands

Eight major players stand out (Rolex, Richemont, Swatch Group, Swatch Group, LVMH, Patek Philippe, Bulgari, Chopard and Gucci) who control over 90% of luxury watches.

Swatch Group and Richemont alone own 27 of the main watch brands (18 at Swatch Group, 9 at Richemont) among the most prestigious: Breguet, Blancpain, Omega, Jaquet Droz for Swatch Group; Cartier, Piaget, Droz for Swatch Group; Cartier, Piaget, IWC, IWC, Jaeger-LeCoultre, Vacheron Constantin or Baume & Mercier for Richemont.

The distribution and retail sale of watches are still largely carried out today by third parties, in Switzerland and abroad.

The grouping of brands is beginning to change things, in fact, the means available are different. After initially integrating and concentrating their production, watch groups would covet the comfortable margins of distribution. Swatch Group, the world's leading watch group, thus “depends” on a network of around 40,000 independent sales outlets around the world to sell its watches and to provide part of the after-sales service.

Watch groups are increasingly seeking to integrate the distribution chain as far as possible in order to reach the end consumer. This is how, in recent years, we have seen brands increasing the number of opening exclusive stores, in their own name, or in partnership with retailers. Since 2006, we have seen the opening by Audemars Piguet of an exclusive store in Paris, by Vacheron Constantin in Moscow. During the same period, IWC opened a store in Zurich.

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