3 Things Wholesale Companies Should Know Before Going Retail

Founder and Managing Director

Online shopping puts people closer to the products, brands, and stores they love. With only a few clicks, it’s easier than ever for shoppers to find exactly what they’re looking for, and forward-thinking brands know that it’s vital to make themselves available any way they can — both online and off.

Wholesale brands are following this trend, too. In the past, creating a direct channel for customers meant opening a physical store; now, if your retail partners are selling online, you can, too — making a bigger sales margin and forging stronger relationships with the people who love your brand.

Take Tea Collection, for example. It began as a wholesale company but moved its business online to work directly with consumers. It meticulously built a direct business by figuring out which marketing channels worked best for its brand. Now, it has a loyal customer base, dedicated marketing partners, and a thriving online business.

Making the switch from wholesale to retail doesn’t have to be a difficult transition. But it is one that must be approached with consideration, preparation, and care.

Know What You’re Getting Into

Before you can make the switch, you have to assess your situation. Often, wholesale strategies simply don’t apply to retail businesses, and vice versa. Here are three important differences that companies looking to transition should know:

  1. Success looks different. Success in the wholesale world means trade shows, conferences, and large account relationships. But retail interactions are based on smart, profitable multichannel customer acquisition. For example, retail businesses depend heavily on a thorough understanding of digital marketing, but for a wholesale company, this isn’t essential yet.
  2. Shipping matters. Retail marketing requires seamless shipping and customer service. After all, instead of sending boxes to retailers, you’re sending them right to your customers. This requires investments in people and technology, and it changes your warehouse inventory as well.
  3. Focus big, not small. At a wholesale company, the 80/20 rule still applies: You can focus on a few large accounts to carry your business. But for a retail company, you need to focus on building brand loyalty to create a large customer base.

Becoming a Switch Hitter

You can’t begin building your next customer-facing channel online without making sure you’ve prepared all of the elements of your new retail business. Not entirely sure you’re ready? Here are a few indicators that it’s time to make the transition:

  • You have great brand awareness. Do you already feel the love from your customers? Does your core demographic like to buy online? Are your retailers seeing a lot of success online? If the answer is a resounding “yes,” you’ll probably do well in your own online space.
  • Your business focuses on customization. Make it easier for your customers to personalize your product, and you’ll be rewarded for it. It’s easier to personalize from one location and one inventory set than to have to work with several individual stores’ products (e.g., necklaces with different letters). Furthermore, the Internet allows for great personalization technology that previews the product for end users before the customization has taken place.
  • You have a small retail footprint. If your range only covers a small portion of a country or region, you may be leaving a lot of money on the table. Going direct will expose your business to more people and could net you more loyal customers.

On the other hand, here are a few indicators that you’re not ready quite yet:

  • It’s hard to ship. If shipping is prohibitively expensive, then a direct channel may not be a good fit for your brand. Your company could end up competing with a company like Amazon that has a better shipping value, so you’ll end up doing the marketing without getting the sale.
  • People don’t know your brand yet. If people aren’t aware that your brand exists, opening a new channel won’t help your company. Focus on building better brand awareness before you raise your marketing costs with a new property.
  • You don’t have the capital. It’s important to have the capital to invest in a team with the right skills and experience. A team that’s experienced in wholesale marketing won’t necessarily be successful in direct marketing.
  • You’re not ready for the fallout. Sometimes, wholesale partners aren’t happy to discover that their vendor is competing with them online. This is why many retailers will sell for a higher price online or only offer a limited selection of items to reduce direct competition.

Remember, there’s a significant investment in building a new business. And that’s exactly what transitioning from wholesale to retail is: rebuilding your business for new goals, new strategies, and a new purpose. It’s vital to outline a plan and budget and make the right investments in technology, platforms, and people. Do it right, and you’ll open your brand up to a new world of possibilities and customers.

Robert Glazer is founder and managing director of Acceleration Partners, a digital strategy firm focused on profitable online customer acquisition for high-growth consumer businesses.