3 Best Practices for Fashion and Apparel Brands Transitioning to Wholesale

For apparel and fashion brands poised to grow their business, expanding to wholesale offers tremendous business opportunities and advantages:

• Connecting directly with customers
• Simplifying the ordering process
• Generating larger orders (Increasing revenue)
• Gaining greater exposure
• Expanding market reach

In today’s omnichannel landscape, wholesale distribution is a strategic channel for many companies. Depending on your product and target audience, you can sell through specialty retailers or elect to partner with big-box players such as Walmart, Nordstrom, and Target. But, before you sell into the wholesale channel, there are 3 things you should ask yourself:

1. What is my production and sales strategy?
2. Am I using the best pricing model for the best profit margin?
3. Do I have the right technology to support the transition?

Production and Sales

So you want to go big?

First, consider how you will manage the expansion of production and sales. Fortunately, as an established enterprise, you’ve already tested the market and have identified your top sellers. Still, ask yourself whether your product will inspire the same demand in a mass market or identify the advantages you have over other wholesale businesses selling similar products.

Next, decide whether the production of those items can be scaled to order – that is, if your current manufacturing, production and logistics can handle an increase in demand.

How prepared are you to increase capacity in shipping and inventory? Although you may have supply chain systems in place, most likely you won't be set up for electronic data interchange (EDI) and logistics to manage wholesale volumes.

Is your current supply chain system – from production to warehousing to shipping –  adaptable? If the answer to these questions is “somewhat” or “no,” do not be discouraged. You can get there, and now is the time to begin planning.

After product and production considerations, next in the process is developing a marketing and sales strategy.  As a wholesaler, your primary task will be getting your products in front of retailers.

If you want to go big, you must also think big. Industry conferences and trade shows are two key venues where you can directly market and sell your product to a niche group of buyers. MAGIC and Womenswear in Las Vegas are two events to consider in the fashion and apparel industry.

Finally, do not underestimate the power of social media, such as Instagram, Facebook or Twitter. Having a social media presence not only signals to big retailers that you are keeping an eye on emerging trends in the industry, but also that you care about your brand’s image and relationship with the customer.

 

Pricing and Profit Margins

As you prepare to move into the wholesale channel, choosing the right pricing model can be one of the most important decisions you will need to make. Even if your current pricing model has worked well for years, profits in wholesale production behave differently and, if not chosen wisely, can work for or against you.

For example, if you decide to price your products below the competition, sure, you might get a ton of sales, but you also might find you are losing money when you tally up your expenses at the end of the month. By pricing your products above the competition, you could attract a more cost-appropriate clientele, which makes up for sales volume. However, this approach also narrows your sales base, placing your business in a more risky position, if and when the market changes. So which one do you choose?

The Retail Owners Institute has benchmark performance metrics for 52 retail segments available at no cost. You can find it in the section labeled Benchmarks. Find the closest match for your retail segment, then find gross margin. It shows you how much of each sale is left over after paying for the merchandise. In this scenario, you will want to adjust up or down, based on what makes sense for your business.

Still, benchmarking is just one approach. Keystoning -- a popular pricing approach – is when a retailer simply doubles the wholesale cost. For example, an apparel item that costs $10 to produce gets sold in the wholesale market for $20. The retailer then doubles the wholesale price to come up with a retail price of $40, while other retailers may add a little more to allow for discounting. However, Keystone pricing may be simple math, but it doesn't always maximize prices when customers would be willing to pay more. Survey all of the various retail pricing options available, such as anchor pricing, loss-leading pricing and MSRP, to decide which one is right for you.

Wholesale Technology

Expanding your company’s capacity into wholesale presents new challenges in production, inventory and logistics, and it requires the right technology to support your growing business. Three very important digital solutions to consider are your company’s Enterprise Resource Planning (ERP), EDI and B2B eCommerce tools.

Your company’s ERP system will play a critical role in the efficiency and effectiveness of this transition. Implementing a good ERP software solution will guide the flow of information across your internal and external operations throughout your production lifecycle, from accounting to human resources, planning and production, and shipping to distribution. ERP systems will automate and streamline your processes, make the business more cost efficient, and aid in communication.

EDI is the most widely used standard for integrating and automating business-to-business data exchange between retailers and suppliers, reducing the amount of paperwork and emails needed to communicate between businesses. EDI compliance has been required to conduct business with retail partners for a long time, which many see as a cost to doing business. But when EDI is fully integrated into your supply chain and ERP, it adds additional value in streamlining your supply chain activities. In fact, as retailers increase pressure on supply partners to fulfill orders more quickly and accurately, fully integrated EDI is more critical than ever for omnichannel success.

According to research conducted by Supply Chain Insights and presented in the report “EDI: Workhorse of the Value Chain,” comprehensive adoption of EDI, leading to completely hands-free order processing, can decrease a retailer’s order-to-shipment cycle by 50 percent. To learn more about fully integrated EDI and its role in your end-to-end supply chain, click here.

Finally, as you attend various industry-related conferences and trade shows to meet with buyers, you will need to showcase your product catalog and manage your orders. With a B2B eCommerce mobile solution, you can ditch the emails and print catalogs. You can also build dynamic digital catalogs with images and videos, capture orders, view inventory and sell through analysis in real-time. B2B eCommerce is a flexible method to engage with buyers, enhance the buying experience, reduce costs and drive sales.

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For retail suppliers poised for growth and considering a move into wholesale production, managing the demands of wholesale planning can feel daunting. Meeting and overcoming these challenges is possible, as long as you focus on the big picture elements, including building the right production and sales strategy; choosing the right pricing model; and equipping your enterprise with the tools and technology to automate, streamline and integrate supply chain processes to provide your company the most competitive edge.