Welcome to The Merchant Life where founders, VPs, and C-Suite executives come to seek out valuable merchandising insights.

In this edition, we talk about elevating profitability through selling.

Specifically, we’re talking about selling wholesale. Turns out, there is a bunch of talk about brands and their wholesale strategy.

“Should we do more wholesale or should we be direct? How do we do it? What wholesale partners should we have?”

So it made sense to talk about brands going wholesale and introduce our principles of wholesale selling.

Or, as we like to call them: “Wholesale-ism’s.”

Let’s go.

If we flip through recent headlines, DTC brands are jumping into wholesale partnerships. This helps them to access different customer segments while shrinking acquisition costs. The most recent example is ButcherBox entering BJ’s Wholesale.

We have also seen the pendulum swing the other way. Nike axing wholesale partnerships to go DTC.

But the direct-obsessed strategy might be losing steam. In fact, Nike apparel will re-appear in Macy’s stores by the Fall.

Wholesale might be more valuable than first thought. Better yet, it might be a key driver of growth and profitability.

Under Armour is a notable example. We found the following statement from CEO Stephanie Linnartz in UA’s most recent earnings call:

“In our wholesale business, we have solid relationships with best-in-class sports specialty, department stores and pure-play e-com companies. Still here, too, the critical mass in our U.S. business is oriented towards good-level products. So we have an opportunity to build out the better and best part of our segmentation.

In addition, we continue to evolve our strategic partnerships towards areas where we believe we are underpenetrated, including the mall and run and golf specialty shops as examples.

To wrap up, this becomes our third strategic priority, which is to drive U.S. sales. Improving our U.S. business is critical to growing our global business.

As a most profitable region, growing faster here means more future dollars to invest in product, marketing, and our international business as well as increasing returns to shareholders.”

The bottom line: driving performance in wholesale growth means driving profitability.

Revenue from wholesale sales comes from two (obvious) sources:

1. Existing Accounts.

2. New Accounts.

Emerging brands skews hard toward new accounts. Established brands, of course, have a greater percentage of existing accounts.

There are things to keep in mind about existing and new accounts:

1 - With existing accounts, taking business for granted is fatal. You fight for valuable open-to-buy (OTB) dollars every year. $20K in spend with your brand one year is not guaranteed to repeat itself the following year. Also, wholesale business can vanish due to factors beyond your control.

2 - Consistently growing the book of business is non-negotiable. This goes beyond retail - ALL elite sales pros, regardless of industry, proactively grow their book of business.

Now, there are a few ways to increase wholesale revenue.

One is to increase prices. But, is there an increase in the perceived value of the products? If not, then that’s a turn-off.

There are three better and simple ways to get the job done:

1. Sell MORE stuff to existing accounts - Get them to throw more of that OTB budget your way to buy more of the current assortment.

2. Sell NEW stuff to existing accounts - Get them to carve out room in their OTB to invest in new products.

3. HUNT for new accounts - Expand the current book of business.

These methods are not anything earth-shattering.

Rather these are the approaches that any good sales team worth their salt would pursue. If we go back to Under Armour’s approach to growing U.S. sales, it is clear that they are engaging in these methods.

We have sat in the retail buyer’s chair for over 20 years. So, we have seen both strong and weak sales efforts from brands.

And, everything in between

As such, we present our seven principles of profitable wholesale selling.

a.k.a. Wholesale-ism’s.

The intention of coming into the relationship is usually transactional. But, that is not long-term thinking.

The real goal of partnering is to work together to serve the customer. So, it's ideal to build a partnership where relevant product and customer information is shared. This will improve product fit, aesthetic and assortment ranges. In turn, this drives more full-price sales.

Leverage sell-through, full-price selling, and inventory turns. Come to the table prepared to replicate success by pre-populating the new season’s buy. It’s also important to recognize that not all buyers are created equally. Some like to take an entire assortment apart and put it together themselves and others are more hands-off.

Understand what sells like hotcakes and what are the duds. Have alternatives ready to go to replace the duds. Talking to customers means understanding who they are, what their day-to-day is like, and what they want to accomplish.

Elite B2B salespeople know that what they do has an impact on the customer of their customer. This means keeping on top of trends in the market and becoming a source of insight for your partner.

Prepare line sheets and include your brand story plus marketing material. Outline your point of difference and suggest adjacencies (the brands you will sit next to on the shop floor). Ensure that you comp shop. See the brands already in store and price position products around the brands you want to be next to. Preplan mini-assortments along with delivery drops in your line sheets.

Finally, go visit the stores. Understand the store layout because space constraints will limit what you can sell.

Selling wholesale is a dance of negotiation. That means having the ability to structure a deal that is tenable for both sides. Experienced retail buyers know exactly what they want and where they have flexibility.

This means that you need to know what variables of the deal can be modified. For example, you could offer a competitive markup in exchange for the retailer spending more with you. For a new account, consignment for the first order; prove to the retailer their customer will buy the brand and assume the risk. Or, offer exclusivity for a period of time. Finally, you can offer to take back sizes of products that do not sell and rapidly swap them for best sellers.

If your products don’t sell, it’s not a good look for the buyer. And, that means no repeat purchases for you. Prepare selling tools for your retailers and their brand ambassadors. Product knowledge, styling advice, and care/content information are great add-ons. These save significant time for the buyer in having to create these. Offer product training to the retailer that they can use in the selling season.

As a former department store buyer, I had brands call me to carry their line in my stores every single day. One of those brands was Kors by Michael Kors. They were launching in Canada and wanted Sporting Life to be one of their key accounts.

The trouble was, I had already spent most of my OTB. I had no intention of buying the collection.

I ended up taking the appointment because this was a brand I had never seen before. Also, the “lookbook” I read in advance showed me items that could fill a gap in my current assortment.

Walking into the showroom, the collection looked great. My mood quickly shifted as the salesperson was very pushy - telling me what to buy when it seemed she didn’t have a clue who my customer was or what the stores looked like. I had to educate her about constraints in both space and OTB. Although it was in her best interest for me to buy the entire line, that was no bueno for me.

Because I am a seasoned buyer, I drove the rest of the process and made a deal on my terms. I agreed to carry the brand for the next 3 seasons if they took back products that didn’t sell. I also secured a markup of 62%. On average, a brand’s markup will range from 50% to 58%.

I bought a small part of the assortment and it sold very well. Later, I would buy greater quantities and more categories. My relationship with MK grew stronger over time, but it didn’t start out smoothly.

If only The Merchant Life was published back then, Wholesale-ism’s would have made things easier.

But at least they can help you.

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The 2023 Accessories and Essentials Issue of Running Insight magazine has just been released. We contributed an article to the issue titled “Lost in Space.”

We talk about how specialty retailers can maximize in-store space to sell more accessories. The full edition of the magazine is found here and our article starts on page 12.

The Interline is set to release its comprehensive 2023 PLM report. In it, you will find a detailed benchmarking of the PLM market for fashion plus profiles of key vendors.

You will also find our opinion piece titled “Velocity to Market.” We discuss why digital transformation without process innovation is almost certain to fail.

The report will be released later this month.