Clicks to Bricks: Pros and Cons of DTC Wholesaling
Direct to consumer brands were born in the world of ecommerce. But after changing the way that consumers seek out goods, these brands set out on a new adventure in recent years: The world of physical retail.
But there are so many ways to approach the storefront that the decision could be overwhelming. Should you go directly for the flagship? Test the waters with a series of pop-up shops? Partner up with a larger retail space to open a shop-in shop? Or some combination? What about going old-school? Why not simply aim to get some display space allocated in a retailer? It’s an option, and it could be the right one if approached correctly.
Note: This is part of our much larger clicks-to-bricks series. Be sure to check out the rest of our posts on moving a DTC brand from digital to physical:
- The Rise of DTC and the Path to the Storefront
- Top Reasons DTC Brands are Opening Retail Spaces
- What Makes for a Successful DTC Retail Space?
- Clicks to Bricks: An Introduction to Flagships
- Pop-Up Shops and Why They Matter
- Shop in Shop 101
And stay tuned for the rest of our series by signing up for our email list!
Understandably, after exploring the many ways you can create a space of your own, we’d be remiss to ignore the most traditional way you can get your product into a store.
A Brief Primer on Wholesaling
Direct to consumer brands were built on eliminating the middleman. Dollar Shave Club and Harry’s went out to disrupt the industry. Now they share space with the category captains they set out to supplant. Add to this a parade of brands like Casper, Quip, BarkBox, Native, Public Goods, and so many more who have begun to grace store shelves, and it could seem like a logical option.
And in certain cases, it is a logical option.
Wholesaling provides brands guaranteed shelf space. It encourages co-marketing. It generates buzz. It exposes online brands to shoppers who might not want to subscribe to a good.
But it also presents a whole new set of questions to ask and challenges to consider. Will the shelf space be good? Will you be able to scale your operations to fill thousands of stores? Do you have the right connections in Bentonville or Minneapolis, Deerfield, IL or Woonsocket, RI?
For DTC brands, the opportunity is there—if you’re ready to take on the risk. Think of it like this: getting your product in 9,000 Walgreen’s stores would be a gamechanger. Ramping up your operations to supply those stores—only to get unceremoniously dumped a few quarters later—could be devastating.
So today, we’re looking at the pros, cons, and things to know about if you’re looking to get your products in store.
Pros and Cons of Getting Your Product into Stores
The journey to wholesaling may be the toughest one of the four we’ve mentioned during our series. But for the companies who don’t have enough SKUs to open their own spaces, it might be the only option.
Pro: Better Access to Consumers
Getting your product on a store shelf is exciting—and profitable. Once you make the sale and ramp up to meet the orders, you just found access to a massive customer base. Some may know who you are, others may decide to pick up your products, but boom. You’re in.
Con: It Takes a Big Investment Just to Get a Meeting
The problem, however, is the journey you’ll need to take to gain access to these customers. It’s not as easy as submitting your information into a portal. You’re going to need to make connections. You’re going to need to hire people who know the space.
You’re not simply advertising to a shopper, you’re marketing to someone who sees thousands of companies like yours every year. It’s not easy and it’s not cheap.
The journey often starts with a broker, according to CO, who notes that even finding a rep is a challenge. Steve Shriver, CEO of Eco Lips, who shares his company’s path into a big box:
“After a solid year of trying to find the right people, we were finally introduced to a local Bentonville, Arkansas, rep group that was able to get us a meeting” [with Walmart].
From the day you decide it’s a good idea, you need to focus people and money on a pitch that may never come.
Pro: Large Orders Boost Cash Flow
If you’re successfully able to pitch a buyer on the value you’ll provide to a store’s customers, the buyer will come back with a purchase order—and it’s all hands on deck. For smaller brands, this can be lifechanging money, and if you’re able to meet it in the time provided, you’re on a profitable path.
Con: Ramping Up to Meet Massive Orders
However, meeting this order could be a bit of a challenge.
Instead of simply planning around seasonality, advertising campaigns, or anything else that may cause a boost in sales, you’re stocking big box space and need to meet the significant volume of product needed to pull it off.
For companies with limited cash or production capabilities, this is going to put a reasonably intense strain on your capacity and cash flow. An order for 1,800 stores-4,000 stores is going to make for challenging times, and this sheer magnitude could break a DTC brand, according to ThingTesting.
Maybe you already have a factory—or at least have one available. But even this is a challenge. Meeting certifications, safety standards, insurance, and the like can be a mess. Meeting the production demands can be an even bigger challenge. And you have to do all this with lower margins.
Pro: Quick Movement of Product
Pitch the buyer, meet the order, and things are humming along. Money in, product out. You’re selling more than you ever have. And if you can keep it up—life will be good.
Con: Say Goodbye to DTC-Level Margins
DTC brands live on agility and a short path to the customer. It’s the reason companies like yours have been successful. But now, you’ve ramped up production and secured warehousing space. And now you’re expected to sell your products at the same price as you did online. Big order, small margins.
If you can handle it, embrace it. But know what you’re getting into. And prepare for OTIF scoring. Failure to deliver a continued flow of products on time and in full could result in fines—cutting further into your margins.
Pro: Diversity of Marketing
When you get in stores, you have a new market. New packaging. And a change in the way you can target customers. With the right agreements, you can plan a memorable display—whether you get an endcap, gondola, a shelf, or a permanent display, you have some intriguing ways to show off your goods.
Con: Less Control
You might have access to options—but you might lose some control along the way. From the way you stack your pallets to packaging counts, size, and shape, you’re playing under someone else’s rulebook. In the CO article, founders highlighted some of the things they recommend for brands like yours:
- You might have certain pack sizes you have to make for them. For example, if you normally sell products in 12-packs, they could need six-packs—and you need to match it.
- You’ll get a packet of shipping specs, requiring you to change the way your warehouse works. You might need to change the way your warehouse stacks pallets to meet the store needs.
- You have to update packaging to fit a planogram. Know how you catch a customer’s eye, know how to make your product fit, and know how to remain compliant.
A Unique Challenge, a Lucrative Opportunity
It’s going to be a challenge to get in the door, and if your branding is strong enough, you’ll get a bit more freedom. For instance, drop by a Target to look at the Manscaped display or Harry’s endcap. But then look at companies in your niche. See how you’re going to compete.
Taking your DTC brand into the world of physical retail is a challenge—no matter which path you take. But by combining data, investment, and smart pitching, you can make it work.
Your Path to Physical Retail: Custom Fixtures by Morgan Li
We might not be able to help you get into someone else’s store, but if you need fixtures, furniture, or graphics to equip your space, we’ve got you covered. As a custom manufacturer in Chicago Heights, IL, we’ve helped a wide range of direct-to-consumer brands transform their spaces into brand consistent and unforgettable experiences.
DTC brands and their designers know that when they turn to Morgan Li, they’re getting exactly what they need. Metal, wood, acrylic, and more—if you can envision it, we’re here to engineer it.
If you want a partner with the background, capabilities, and craftsmanship to get the job done right, let’s get in touch.