Key points:
- Wholesale success doesn’t automatically translate to retail capability
- Retail is a capability shift, not just a channel shift – requiring new skills, systems and investment
- Retail demands broader product ranges than the specialist focus that works in wholesale
The allure of higher margins and direct customer relationships in the retail world is more than a little tempting next to your established wholesale model.
Many manufacturers eye the bright lights of direct retail, with its higher margins, direct consumer relationships, and brand control, daydreaming of one day owning the entire customer journey.
But the path from bulk orders to individual sales is far from a simple switch.
When direct-to-consumer is played well, it unlocks new possibilities. You’re shaping the story, choosing how your product is presented, and putting it directly into the hands of customers.
Get it wrong, and it’s hard to recover in a challenging market like this one.
Learning from Nike and Ecosa
One of the best-known examples of a wholesaler that changed lanes is Nike. The footwear and fashion giant largely dropped their wholesale/retail business in the mid-2010s in favour of direct-to-consumer.
Around the time that was happening, the Australian mattress and furniture retailer Ecosa was founded and made the decision to go along the direct route from the outset.
So how did it play out? Nike’s move wasn’t a disaster, but less than a decade after its initial pivot, the manufacturer started to rethink its plans and re-embrace traditional retail channels.
This wasn’t a failure of vision, more a recognition of the operational complexities and value of diverse distribution channels to their brand.
For Ecosa, they have retained their mattress-in-a-box model and doubled down, opening bricks-and-mortar stores at a time when some retailers are retreating or at least investing less in physical footprints.
Their success highlights the importance of a clear direct-to-consumer strategy from inception, coupled with adaptation to market demands, even if that means old-school physical retail.
Fundamentally different business models
Wholesale is about moving large volumes efficiently, managing a small number of big accounts and creating a predictable cash flow from bulk orders.
The dynamics of direct retail include managing hundreds, maybe thousands, of small transactions daily, delivering an exceptional customer experience, and balancing inventory in real time across multiple locations.
The skills, systems, and culture that make you successful in wholesale don’t automatically translate to retail.
Are you assuming your star wholesale people will be equally adept at the direct-to-consumer game, and that brand recognition will be enough to see you through? These are potential errors that put brakes on growth.
The biggest risk in moving from wholesale to retail is assuming it’s just a channel shift. In reality, it’s a capability shift.
Retail operations expertise in staffing, training and store management is a must, as is data analytics to understand customer behaviour and designing a customer experience that reflects you but resonates with the people.
It requires significant upfront investment and strategic planning.
Wholesalers have faltered because they badly underestimated the value of retail capability, and were not humble enough to listen and take advice from those who already had trod the path.
The product range challenge
There is something to be said for focusing on your core products and doing what you’re best at, but that’s one of the hardest things about retail – you can’t just offer a single product or a very narrow line.
While specialist and core products are perfect for wholesale, a successful retailer needs a broader range to meet customer preferences and provide a compelling shopping experience.
The brands that succeed enter retail with eyes wide open, capabilities in place, and a clear plan for execution. The ones that don’t may find themselves stuck with higher costs, lower margins, and a damaged brand.
