Brands have become more sophisticated in their digital practices, and are using their newfound knowledge to strategically drive growth in their retail accounts.
That’s the conclusion in NuOrder by Lightspeed’s annual Study of Wholesale, which found that brands are using digital tools to fuel their key priority in 2024 of doubling down on existing retail accounts, as well as finding new retail partnerships.
In past years, the priority was centered on operational challenges, given post-COVID supply chain and inventory management issues. However, the adoption of technology solutions over the past five years and the rise of wholesale as their number one distribution channel has shifted the focus of brands.
The study found that wholesale continues to be the “most profitable investment channel” for brands, accounting for an average of 60 percent of total company sales. The business for brands are almost near evenly split between big-box retailers at 57 percent and specialty and boutique retailers at 45 percent.
On average, the 259 brands surveyed in the study plan to invest more in the next year in wholesale to fuel business growth over direct-to-consumer or e-commerce. But brands now say that the two big challenges are finding new retailers and improving the buying experience so they can sell deeper into their existing retail partners.
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The need to find new retail partners has been fueled in part by the post-pandemic store closures in the outdoor and footwear space, as well as retailers buying more conservatively instead of upping their open-to-buy dollars. Brands are also looking at new lines to fill different niches in the market, as well as target new retail sources to sell into those channels.
The digital maturity of brands have them leveraging sales data and growth rates to optimize sales strategy and distribution. The top five types of data relied on to inform on the wholesale process include sell-through data at 62 percent, growth by account or retailer at 61 percent, sales trends reports at 60 percent, reorder or replenishment rate at 53 percent, and the average order value at 47 percent. And technology also has enabled brands to automate their marketing outreach to acquire more retail partnerships, as well as sell deeper into existing accounts. The study found a 7 percent increase from 2023 in the reliance on digital as the preferred method of communication.
Given their greater savviness in using digital tools, brands also are focused on utilizing their B2B software to maximize the retail buyer’s user experience and scale their wholesale business online. Sales expansion via dropshipping, shipping integrations, and email campaigns remain among the most used B2B e-commerce features.
“Our retailers really want the ease of online shopping when it comes to a B2B platform—they want it to look exactly like the shopping experience they have on any B2C eComm site,” said one unnamed brand in the survey, according to NuOrder.
The survey also found that brands are focused on improving the overall retail buying experience, with operational benefits—inventory management, projection and forecasting—now taking a slight back seat to more selling-focused benefits, such as digital linesheets that are more visually compelling.
But that doesn’t mean brands have given up the personal touch. In years past, personalized outreach was focused on securing retail partnerships solely on trade shows. Now that outreach also includes showrooms.
Looking ahead, respondents said new challenges surfacing that were unseen in the years before include a lack of visibility with retailers, fewer pre-orders, and a lack of streamlined tech. Among the anticipated wholesale challenges include recession/reduced customer demand at 24 percent, increased business costs and inflation at 17 percent and excess inventory at 12 percent. Supply chain instability is less of a concern, now at 7 percent versus 15 percent a year ago.
Despite the challenges, brands are more optimistic about their growth prospects this year, up 6 percent from year ago levels. The anticipated growth of the wholesale channel is up 5 times more than in 2020. In contrast, online retail growth is faltering, with online-only retailers expecting a 4 percent decline in marketshare versus 2023 levels. Brands that sell into physical retail doors are also expected to invest in their B2C e-commerce businesses as they maintain the pace with consumer shopping behavior.
There are several reasons why brands see the value of investing in a wholesale strategy. Fifty-seven of respondents said retailers help to market their brand. Not far behind at 56 percent was the rationale that large orders help scale revenue. Rounding out the top five reasons were the ability to offer produce in new regions at 43 percent, wholesale provides good profit margins at 39 percent, and wholesale orders are the fastest way to get product out at 31 percent. Also making the list for the preference for wholesale was the high cost of overhead when operating company-owned stores at 19 percent.