How to Go From Wholesale to Direct-To-Consumer

For companies reliant on multi-brand retailers for sales, developing a direct business has never been more important. But how can you go DTC in the middle of the pandemic? Here’s BoF’s guide to pivoting online during a time – and cash – crunch.

NEW YORK, United States — Audrey McLoghlin was preparing her largest wholesale shipments of the year for her two labels, Frank & Eileen and Grayson, when cancellations started to come in a month-and-a-half ago. Now, spring and summer merchandise originally destined for over 350 retailers across the US, including Nordstrom and Anthropologie, sits in storage.

Before the pandemic, wholesale accounted for over 60 percent of McLoghlin’s business. But with stores closed, she’s pivoting to her own e-commerce as fast as she can. She’s redesigned both of her brands’ websites to make shopping easier and taught herself to use Instagram Live. She’s also bought ads on Google and social media – prior to the virus, her digital marketing budget was nonexistent.

“This just forced us to test it out and try new things,” McLoghlin said.

Plenty of wholesalers may have been looking to grow their direct business before the pandemic, but the move to e-commerce has taken on a new urgency, now that stores are closed and major retailers like Neiman Marcus and J.C. Penney are considering bankruptcy.

But while anyone can set up a Shopify account and buy some Instagram ads, building a sustainable online business takes strategy, creative know-how, and, of course, capital. Brands that have relied on wholesale partners for marketing and distribution won’t find it an easy transition, particularly when many are strapped for cash and have unsold clothes stashed in their warehouses.

“The biggest challenge is muscle memory,” said Mike Duda, founder of Bullish, a venture capital firm and creative agency. “If you’re used to selling to Kohl’s and JCPenney, it won’t be easy to create a direct relationship with consumers.”

Still, brands that manage to find their own customers online will be better equipped to weather what could be the worst stretch for retail since the 2008 recession.

"This is a game changer. It’s never going to be business as usual again."

“I would rather be smaller and more direct than go back to how things were before,” said Deirdre Quinn, chief executive of contemporary label Lafayette 148, which had an online channel that made up about 40 percent of total sales. In the next year, she hopes that share will grow to be 65 percent. “This is a game changer. It’s never going to be business as usual again.”

Bring in the Experts

Going direct won’t be easy for brands that have never interacted with customers before. If a brand has little e-commerce experience, its first step should be to bring in outside talent, whether it’s a consultant, creative director or even a new investor.

With unemployment spiking, there are plenty of designers, web developers, social media managers and marketing specialists looking for work as well.

Have a Clear Reason for Existing

Consumers are watching their spending as the pandemic sends the economy into recession. More than ever, brands need to give people a reason to buy their products.

Rather than posting an entire collection for sale online, brands should pick the most relevant styles to push for their e-commerce customers. These are products that have the strongest value proposition, whether that means they’re the best-selling ones or have a competitive edge against other players in the category. During periods of low consumer confidence, brands need to be crystal-clear about what they stand for – and why they need to exist. Simply being mid-priced jeans available at Nordstrom or Bloomingdales alone is not a brand identity – either differentiate, or lower prices to create a higher value for shoppers.

“We’re thinking about what she needs in her closet right now, and adjusting to how comfortable our design should be,” said Lafayette 148’s Quinn. “We still believe people are going to want to wear a suit jacket, but not right away.”

It may be tempting to pivot to loungewear, as comfortable clothes designed for working from home are selling well right now. But soon enough, people will want to dress up again as lockdowns lift and they head back out into the world.

“We’re entering a different phase of this new normal and a brand can simply bring escape, joy and inspiration,” said Ruth Bernstein, co-founder of creative agency Yard NYC.

Be Scrappy

Going direct doesn’t necessarily mean building out an entire e-commerce site immediately. Take 260 Sample Sale, a platform that allows brands to launch sample sales in a matter of days.

For more than two decades, Assaf Azani’s family handled liquidation sales events for brands like Diane von Furstenburg and Proenza Schouler, operating behind-the-scenes and leaving promotion up to the labels themselves. In 2017, the company began marketing events on its own website, with a long-term goal of holding sales online as well.

Those plans were accelerated by the pandemic. With in-person sample sales halted in mid-March, the company used Shopify to set up a basic e-commerce site and worked with a creative agency to design the user experience. The first online sale, for Oscar de la Renta, was on April 22 — it generated more site visits in one day than the physical stores did in a week.

The investment on the website so far, Azani said, has been minimal. The 260 team plugs in many functions manually, and plans to build a more-robust e-commerce operation over time, such as allowing online customers to shop items for sale at in-store sample sales.

"Right now, just to release something barebones is the most important thing to engage with our customers."

Brands can test the waters with a bare-bones e-commerce site, using those initial sales to guide investment in integrated inventory management systems, sales platforms and dedicated customer service teams. At first, wholesale brands can work with their existing warehouse operator to ship online orders, or even ship from the designer’s home or studio.

“The real investment will come later,” Azani said of 260 Sample Sale’s e-commerce plans. “Right now, just to release something barebones is the most important thing to engage with our customers.”

Ari Bloom, founder and chief executive of holding company A-Frame Brands, was able to launch his direct-to-consumer hand soap brand Keeper in less than a month. Between locking down the logistics and formulating a marketing strategy, he set up the entire operation while being stuck at home in quarantine.

Bloom, an investor and former Gap merchandiser, used Shopify as his e-commerce platform, and instead of opting for a distribution warehouse, he’s shipping packages out of his garage in Los Angeles. And instead of custom boxes — which cost upwards of $5 each — he ordered custom stickers and stamps. For now, he’ll also be the one-man customer service team.

“I did it four weeks but I would say you could do it even quicker,” Bloom said.

Take Advantage of Cheaper Online Advertising

Advertising on social media helped build the first wave of digital brands. But many latecomers found advertising on Instagram and Facebook had become prohibitively expensive, with too many brands competing for the same customers.

But with companies cutting back on marketing, and consumers spending more time on social media while self-isolating at home, digital ads are regaining some of their former lustre, said Trevor Testwuide, chief executive of digital marketing analytics firm Measured. Costs are back to 2017 levels, and response rates from consumers are up, he said.

Testwuide recommends brands test different digital marketing tactics, including search, Facebook, Snapchat, TikTok and streaming video, then stick with whichever channels prove most effective.

Since paying for social media ads, Frank & Eileen has seen a 233 percent increase in revenue from sales that came from Facebook and Instagram, compared to last year.

Take Community Building Seriously

Beyond paid marketing, organically growing a community of loyal customers on Instagram and email may be even more crucial. Wholesalers are used to relying on their retailers to reach customers. Now, vendors need to foster their own base of fans, who can create demand among themselves.

McLoghlin, for instance, is more active than ever with posting on social media, setting up a makeshift Instagram Live studio in her house and participating in meet-the-designer events in partnership with retail partners that carry her labels.

These sorts of partnerships are key to fast-track growth on social media, according to Melissa Duren Conner, managing director at public relations firm JBC.

“Invite like-minded brands and thought leaders to join you on Instagram Live or Zoom,” she said. “Look at a woman’s organisation like Ethel’s Club – just reach out and say, ‘Hey, would you be interested in doing a talk about women in the workplace or a styling event?’”

During a time of crisis, people are more inclined to collaborate. It could also be an influencer or brand ambassador solicitation, according to Singer, from Traub. “If you’re a sportswear brand, you could reach out to someone who you know loves your brand and say, ‘Hey, we saw you wearing my product when you were playing tennis the other day, would you be interested in hosting an event? A percentage of proceeds can go to a charity of your choice.’”

Consumers today are also looking for emotional connection, so if a brand could provide that by showing the personal lives of its founder and designer, this could be a way into building a relationship with potential customers, according to fashion financial advisor Michael Flanagan.

“Brands need to personalise their voice and try to provide their followers with what they’re looking for versus trying to sell something they probably already have,” he said. “Why not show the designer cooking in his home, or using humour to comment on these trying times.”

For now, brands should be doing everything they can to broaden their direct business. Even if it means a total overhaul of its operation, finally going direct will be “the best decision they’ll ever make,” said Singer, pointing to the enduring changes brought upon by the ongoing pandemic.

“Ultimately, no one can sell in one channel anymore. The surviving brand is the renaissance brand – the one that’s comfortable wearing many hats.”

We’re tracking the latest on the coronavirus outbreak and its impact on the global fashion business. Visit our live blog for everything you need to know.

Credit/Source: Business of Fashion by Cathleen Chen

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