Wholesale’s channel reduces participation due to eCommerce push
The limits for Brands between the different channels are becoming more diffuse and their convergence is a reality: customer wants it and current Omnichannel environment – now reality – allows it. This convergence makes it increasingly difficult to accurately attribute the weight of each channel, and often the results of Retail + eCommerce are grouped under the same roof to hide possible decreases in productivity in physical stores.
The analysis performed by MHE of 20 relevant Brands (with presence in Wholesale / Retail / eCommerce channels) in the fashion sector (USA) reveals that wholesale channel’s evolution in the last 5 years has been negative, losing participation steadily (-6 pp) due to the unstoppable boom of eCommerce which represents a significant weight of 10% of sales. Retail channel managed to maintain its weight (35%) in the same period through a constant evolution and improvement of the shopping experience in the physical stores.
EBITDA’s evolution (for all channels) in the same 5-year period has been slightly negative.
Brands with better results have managed to improve and increase Retail channel’s weight
For the Brands with better results, we note that the reduction of the wholesale channel weight is even greater. On the other hand, it outstands that they have achieved a greater participation of their physical stores and at the same time a spectacular growth of eCommerce (CAGR of + 34%).
Traditionally, Wholesale has been a refuge with high ROI for brands, as it does not require the same level of investment as the retail channel and allows rapid and accessible expansion into new international markets.
Wholesale compulsory reconversion
The decline of the department store format, a privileged environment for wholesale is not making things easy to avoid the drop of this channel. Best retailers become a solid destination for the accessible luxury segment.
Traditional multi-brand stores have a difficult reconversion, except for those cases where they achieve a specialization – differentiation.
Brands have the task ahead, not always easy, to maintain a consistency in: product, pricing, display and experience in this variety of different formats and channels. Management in third-party environments requires better planning / selection of the assortment and an effective merchandising logistics.
New hybrid formats with eCommerce
Due to this new environment, there are new hybrid “Wholesale” formats that are appearing strongly:
- Shop in shop in eCommerce operators (Asos, Zalando)
- Design/products teams of the Brands that act as real implants – embedded- within eCommerce operators to develop and manage their collections of their products.
- “Direct To Consumer” (DTC) through Amazon. Recent case with Nike
Everything indicates that the Brands will continue their transformation in order to continue being closer to the final consumer.
Pay attention to your partner… This dance continues!
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