The team at NuORDER by Lightspeed and Drapers recently caught up with Einar Svensson, Commercial Project Manager at ACNE Studios, and Sean Hullah, International Third-Party Commercial Manager at Charles Tyrwhitt to discuss their wholesale plans and where they see risks and rewards in this coming year. We pulled together some great insights from the session. If you’d like to catch the full discussion, you can watch the webinar on demand here.
Graeme Moran: The last few years have seen a few shifts within the wholesale market. In today’s landscape, is wholesale on the rise again? What trends do you think will impact the market through 2024 in particular?
Tom Groves (NuORDER by Lightspeed): The wholesale market and the retail landscape has been volatile over the last five years. The market shift has been frequent, with the focus moving from B2B to B2C and back again. It's important to keep focus and keep looking forward to ensure brands are best placed to take advantage of the current market dynamics that we're seeing play out through 2024. An omnichannel approach is critical going forward to take advantage of both B2C and B2B routes to market.
It’s clear that brands are shifting their focus back to wholesale in 2024. We see brands want to find new ways to reach customers globally but they've still got to ensure sustainable profitability while trying to scale.
One thing we have seen this year is an increase in big brands aligning with retailers to reach a slightly different demographic - think Gymshark in Selfridges - as a way to shift their brand to a wider audience. This is a definite shift from the last two or three years, when some of the big luxury brands took back a lot of wholesale distribution to try to own their relationships with clients in all channels.
Sean, obviously you've seen some great growth over the last year or two. Are you really focusing on the more independent retailer going forward in international markets? Or is it more of these big box department stores?
Sean Hullah (Charles Tyrwhitt): We have seen huge growth. Over the past three years, our wholesale business has grown 20 fold. We are looking at various opportunities in international markets to grow brand awareness and presence in the markets we're not already in.
Wholesale is one of the best ways to do it. It allows us to try the products, try out partners. In some territories, the independents are the way to do it because we want to test what that market looks like on a grander scale. But then in other markets, it's better to go with the sort of big box chains.
Einar Svensson (ACNE Studios): We started with wholesale, and coming from the other direction, starting with your online catalogue way of working, reaching new markets is, essentially, wholesale is the most important way to do it, because it's hard to do research and analysis of a new region or a country or territory.
If you find the local key players they already know their customer, they know their clients. If they believe in your brand, then they know that the end consumer might do so as well. So it's definitely the way to go. That's still what we are doing when we want to approach new markets.
What are the biggest challenges and risks for the year ahead and beyond?
Sean: There’s a risk we're not seeing that growth through some department stores, because their argument is, “Why should we put all of our cash into inventory?” Then, we do have footholds in international markets and we are exposed to broader macroeconomic risks.
What about ACNE Studios? What risks do you think about?
Einar: It's gone from becoming as big as possible, to now, where profitability is a lot more important. Sell-through is key to focus on. That's one of the challenges we're seeing and what we're really trying to focus on — and on the right partners.
Tom, what are the challenges people are relaying to you?
Tom: Understock or overstock. It’s key to have a close relationship with your retailer to understand the right level of stock to hold in different areas of the market, in different stores, and in different countries — and take advantage of consumer demand.
Market saturation is another challenge. A lot of brands are playing in the same space.
Risks like supply chain issues can lead to delays in production, affecting a brand's ability to meet wholesale demand. That's why having good retailer relationships is so critical to get through bumpy times.
What about the bright spots and opportunities?
Einar: A wider distribution is where we will see the most growth. Over the past years we have grown with some big accounts. But when you become too dependent on those, it’s a bit more shaky and can create profitability challenges. So what we've seen in recent sales is that our total growth comes from wider distribution and adding new clients.
That’s a huge way of growing our presence, our profile and our awareness as a brand in new, exciting territories which we can then build on.
If we can help curate collections with our partners on what's on offer in the store, that drives customers back into their location, which is good for them, which in turn is good for us.
And what about wholesale when growing overseas?
Einar: We are a Swedish brand and are in some ways competing in a luxury market and there aren’t that many luxury consumers in Sweden anymore. So, we've always been looking outside of Sweden when it comes to distribution.
If you want to grow outside of the region you're in, you really have to define your brand and then be very consistent in what stores and partners you start working with. Otherwise you might get lost in taking opportunities as they come, and you don't think long term. That’s the most important when it comes to finding sustainable growth for years to come.
Going directly to market in a different country is higher risk than going via wholesale, but how do you choose which partner to go for?
Sean: We assess the market and who the players are, and what are the opportunities as well. For example, When we looked at the Middle East, we saw who were the players, what was available. We saw franchise opportunities out there, but wanted to go wholesale first because of the risk initially.
We partnered up with Al Shire, the Al Shire family, the Al Shire group out there, and we've been wholesaling and selling into 18 of the Debenhams stores across the region. We've turned them almost into a shop in a shop. We branded them, kitted it out with the fixtures and made sure there's significant brand presence in those locations. That's driven a significant halo effect to our own business.
Our own business online has grown 80 percent year on year in the first year and a further 70% the year after. It’s a nice ecosystem that it can deliver.
Does wholesale cannibalize DTC sales?
Sean: Absolutely not. We’re a very young brand internationally, so we feel we've got a long road to go down but we're always mindful of that cannibalization risk and that level, we're aware of it.
Einar: When we entered new markets, we first pushed ourselves to become part of a denim floor somewhere in department stores, and then we entered ready to wear, and pushed into ready to wear. Then we ended up on the designer floor and suddenly had a great turnover somewhere and then you want to shift that into retail. As we've opened the retail stores in locations that we haven't had retail presence before, we've seen that the brand awareness has increased. So, to say that wholesale cannibalizes retail, that's rarely the case for us ever.
It just creates even better reach because often the wholesale partners serve completely different clients in many cases. That's one of the key strengths with wholesale, that you reach different customers compared to who you would reach with your own channel.
Sean: Internationally, it’s sort of diversifying the risk profile. We're very conscious of where and when we do it because we want to offset where one country could be down, another country could be up. We found that balancing acts as a key driver of where we go next. The other thing that we do when we think about international is with some of our territories we've wholesaled into initially, they've converted those locations into Charles Tyrwhitt franchise locations.
So, what does success look like in wholesale today? Is it being in a store you've always wanted to be in, or is it all about sales? Is it sustainable profitability?
Sean: Right now, our focus is making sure we can do wholesale authoritatively, credibly, successfully, and sustainably for our partners —and sell-through is key.
Einar: Full price sell-through for profitability. You have to make sure you're in the right space, that you have great positioning and great representation. Good brand adjacencies also help the end consumer understand who you are and to understand the brand in the correct environment.
Tom: We work with brands of different sizes. Some well-established brands, but also some new brands and new-to-wholesale brands. New brands often think everything's going well with their businesses. For example, sometimes they ignore telltale signs that there might be a problem with their wholesale network.
The wholesale channel needs to deliver value for every party. How can it be a win-win-win for the brand, retailer, and consumer? Well-managed inventory is key. You have to keep your eyes on the merchandise in real time. Obviously partner with the retailer to understand the trends, historical data, and sell-through.
This is where a B2B tool that can connect, collect, and analyze stock and sell-through can support brands and retailers in using data-driven insights to make informed decisions and take full advantage of consumer demand. That's definitely a key success factor.
Sustainability is also key. Successful wholesale brands often incorporate sustainable practices into their operations, such as reducing carbon footprints and minimizing waste.
At a base level, wholesale is a partnership between a brand and a retailer. Do you have any advice on a successful partnership?
Einar: Some of the mistakes you might make as a smaller brand when you're starting up is to take those short-term wins. Then as soon as the retailer feels the brand is not performing, you might get kicked out. So, always establish a relationship with a long-term perspective and have discussions, like, “Where do you see us within the coming years?”, “Where do you think we should be?” State, “This is what we see ourselves,” and make sure you have the same vision going forward.
Sean, I know you agree. Why don't you tell us, tell us your approach to this?
Sean: Yeah, absolutely. Charles Tyrwhitt is 95% one shareholder and 5% one other shareholder that's been with us from the beginning. That ethos starts at the top and oozes all the way through the business. Everything we've always done has always taken the long-term view. Partnerships over anything. They’re not our “accounts”, they’re our partners.
Tom: Yeah, I completely agree. For the wholesale channel to be successful, data sharing and collaboration has to be a continued focus area going forward. That transparency is more important than ever. That’s why technology and integrations are more of a need than nice to have.
Finally, if you could highlight one strategy that your business has focused on in terms of success in the wholesale space, what do you think a brand should focus on?
Sean: I would say, do the right deal, not the highest margin deal. There are multiple people out there in different areas. Someone may offer what looks like the golden path right here right now, but is that the right one in five years time?
Einar: If I had one piece of advice to a new brand, it's “define who you are and then go for that”. That's what you're going to tell all the partners that you go out to meet. Make sure that you have a good idea of who you are and go for that, position yourself where you want to be, and then stick to that because otherwise you might get lost, I would say.
Tom: Yeah, I agree. Don't put all your eggs in one basket. As you grow, obviously as a new brand, you're probably going to look at one channel to begin with. But as you start to grow from there, then start to look at other routes to market. Obviously B2B is a key one and the one we work in. But also going direct to market, via your online website, potentially even looking at marketplaces to help grow your brand in different regions as well. Look at diversification to support the business growth as you go forward.
If you’d like to watch the webinar on demand, click here. Or for further information on how NuORDER by Lightspeed can help your brand, request a demo today.
