Home Retail Why the New Guard of Digital Brands Are Embracing Wholesale

Why the New Guard of Digital Brands Are Embracing Wholesale

by Ozva Admin

Luxury fragrance brand Aeir may have launched online, but it’s betting its future on its ability to grab customers’ attention and noses in the real world.

Aeir’s physical retail debut is an installation inside Neiman Marcus’s Beverly Hills store slated to open in January (the brand began selling its fragrances on its website in September). From a booth designed to resemble a Milanese newsstand, employees will help customers determine which high and low marks work best for them. Along the way, hopefully shoppers will be convinced that Aeir’s $69 and up fragrances are just as luxurious as Jo Malone or Tom Ford fragrances sold nearby.

Wholesale was built into the brand’s DNA from the beginning, said Jana Bobosikova, co-founder and COO.

“Fragrance is emotional,” said Bobosikova. “For us, being successful in retail is very important.”

Aeir joins other emerging digital native brands that see direct-to-consumer sales as one channel among many, rather than a goal in itself. By embracing wholesale retail early on, they are charting a different path than the brands that emerged during the DTC boom of the last decade, many of which raised hundreds of millions of dollars to operate online storefronts and eventually your own brick. -and-mortar places.

They are also benefiting from some big changes in the retail landscape. Multi-brand retailers that used to control brand pricing and merchandising are relying on emerging brands to differentiate their offerings and attract younger, more attractive shoppers. In the decade since Nordstrom started stocking Bonobos pants, they’ve gotten better and better at promoting small digital startups.

Meanwhile, digital brands that cut out the retail middleman found that much of the money they saved went to marketing. A growing number now see wholesale as a way to grow beyond the niche customer base they’ve built online: Allbirds has started selling its popular wool runners at Nordstrom, Glossier has a partnership with Sephora and Parade’s intimate items are stocked at Urban Outfitters.

Still, the old problems with wholesale remain: It’s hard for brands to get customer data from third-party retailers, and there’s no guarantee that shoppers who discover brands in a department store will follow those merchants back to stores. your website. Not all in-store displays can be as meticulously branded as Aeir’s Milanese newsstand.

The sacrifices can be worth it: Brands that structure their wholesale partnerships the right way and with the right retailers can get in front of a larger pool of potential customers.

“There are a lot of people who go on a shopping trip not knowing what brand they want,” said Tom Nikic, senior apparel and footwear analyst at Wedbush Securities. “That’s why people still go to Nordstrom.”

a piece of the puzzle

Before diving into wholesale, DTC brands must decide whether they are looking at their new retail channel to directly drive sales or to serve primarily as a form of marketing.

Bala Footwear launched its online store in January 2021, selling high-performance sneakers for healthcare professionals in five colors. It got its first wholesale accounts just over a year later, starting with smaller retailers like Shoe Mill in Oregon and Jenkintown Running Company in Pennsylvania before expanding to Scrubs and Beyond, which has 116 US locations.

Prior to its launch in retail partner stores, company executives helped train sales associates on how to explain to customers that Bala Footwear’s fit technology addresses the specific needs of healthcare workers who they spend a lot of time on their feet, said Brian Lockard, co-founder of the company. and CEO.

Bala Footwear started with smaller retailers to hone its sales methods in those locations, so when it partnered with larger retailers, its sales could grow rapidly. The company expects 50 percent to 60 percent of its total sales to come from wholesalers in the next two to three years, he said.

Meanwhile, Aeir is working with a handful of high-profile outside retailers, including Violet Gray in Los Angeles and Dover Street Market in Paris. (Aeir is scheduled to sell his scents in those stores sometime next year.) Their goal is to drive brand awareness as much as sales; it anticipates that wholesale will account for up to 15 percent of total revenue by the end of next year.

DTC veteran Allbirds also said it would take a similar approach when the company announced its wholesale expansion earlier this year.

We see third parties [retail] as a highly effective way to build awareness and drive credibility, while accelerating bottom line growth,” Joey Zwillinger, co-founder and co-CEO of Allbirds, said on a May earnings call.

Taking into account the customer

DTC start-ups, especially those with an established following, must also determine which wholesale partners will help bring consumers back to the brand.

Athletic Propulsion Labs, which launched its digital store in 2010, began selling its sneakers, priced at $200 or more, at Net-a-Porter and Saks Fifth Avenue stores in 2015. The brand opened its first physical store. mortar store in 2019 at The Grove, a shopping mall in Los Angeles.

Since only a select number of items are sold at third-party retailers, most of APL’s customers still buy their products on the brand’s site and in its store, and some of those customers come to APL after discovering the brand online. one of their retail partners.

“Customers from other channels come to us for the full APL experience,” said NJ Falk, managing partner of Athletic Propulsion Labs. “They come to us for exclusive, limited editions.”

The challenge of finding the perfect partner has made some DTC legacy assemblies slower to adopt in bulk.

ThirdLove is looking to expand its wholesale channel after nearly a decade of primarily direct sales, said Heidi Zak, co-founder and CEO of the brand. The underwear brand, which operates six independent stores in the US, currently sells at luxury e-retailer 11 Honoré.

ThirdLove’s biggest hurdle in considering expanding its wholesale distribution to brick-and-mortar stores is making sure potential retail partners can replicate ThirdLove’s service by fitting customers to a complex range of bra sizes across the company’s products.

The question is “what are we willing to sacrifice?” Zak said. “With 65 bra sizes… how does that work for the end customer?”

Zak said that upscale department stores with trained customer associates who are used to providing a high level of service would be the best option.

The data split

While multi-brand retailers may be willing to listen to startups when it comes to marketing or training their salespeople, they are still often reluctant to hand over customer data, including information about which shoppers buy which brands and why. .

There are solutions. Aeir is launching a subscription service, Aeir ID, so you’ll be able to connect directly with customers, even if they bought a fragrance at Neiman Marcus or Dover Street Market. Customers who scan their barcodes at a store and pay a $69 fee will gain access to exclusive products on the company’s site and mobile app, said Rodgrigo Caula, co-founder and chief brand officer of Aeir.

Bala Footwear is focused on building trust with its retail partners, which CEO Lockard says will lead to talks about sharing data about which customers buy the company’s sneakers.

“The fundamental problem in retail is a lack of trust, and that takes time,” Lockard said.

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