For fashion brands, retail channel expansion is an important growth driver. However, investing in the cost of fitting out and operating additional stores, and/or online platforms, in the current UK retail environment carries a level of risk.

One option to reduce this risk is to enter the wholesale channel, which presents an opportunity to grow your business, either in your home market or in new markets, while balancing the risk and reward of expansion.

Gant, the fashion brand, operates 15 retail outlets in the UK, but increases its points of sale to 318 through its wholesale business, worth £20 million in 2014. Other apparel brands, such as Superdry, Ted Baker and Joules, also operate wholesale businesses, albeit via different models, generating between 20% and 30% of their revenue in this channel.

While brands have traditionally looked to physical outlets, such as department stores, to increase availability, online marketplaces, such as Zalando and Very, have an increasingly important role to play; all of the above-mentioned brands are listed on both websites.

Yet, entering this channel typically means ceding a degree of control – over price, promotion, in-store marketing and stock control – and gross margin to the chosen partner(s), and this may be daunting for brand owners. For those brands that have a clear strategy and have managed the risk appropriately, however, the rewards are tangible.

From our experience helping retailers expand into the wholesale channel, we consider the following steps as critical before entry:

  1. Address your brand’s consumer objective. Select the options that support your strategy. For example, to raise awareness, a high profile department store may be an appropriate option, whereas to increase penetration and frequency, high street independents and online marketplaces are likely to be more effective
  2. Understand your partner(s). Ensure the partner can provide an appropriate retail and commercial environment for your curated product range. The brand should not feel out of place in terms of price and brand image
  3. Build operational capability. Establish a proficient account management team and adjust product design and buying cycles as required to meet the planning needs of your partner
  4. Recognise any financial implications. Plan for the cost of additional stock and insure against credit risk
  5. Test and learn. Develop a phased plan to enter the channel and be prepared to adapt if and when the situation requires it

With the channel successfully established, the business challenge switches to effectively managing the accounts while attempting to migrate customers, their data and spend to owned channels. But that’s a whole other story.

Tony Reynolds