Fabric has had a long and profitable relationship with wholesale. For decades, volume was equated with brand success in wholesale. To reach consumers, every high quality fabric supplier needed to be physically present everywhere, which necessitated a massive distribution network. The more distribution channels you have, the more volume you’ll have to transfer. Wholesale allowed a high quality fabric supplier to expand and generate revenues without paying the overhead of running a business directly. In wholesale, volume became the success criterion, and the fabric industry as a whole followed suit.
When the crisis broke out
Before the pandemic, brands had recently noticed that this business model was causing issues in their supply chain. Delayed deliveries, quality difficulties, inconsistent brand positioning, and constant discount strategies was becoming common in the business, prompting your high quality fabric supplier to turn outside of wholesale to maintain profitability. The fixation with all things omnichannel had begun. Wholesale’s volume remained an impossible temptation to resist, resulting in a largely unaltered P&L.
Perhaps not. However, times are changing. The year 2020 has seen the rise of new business models. With their new Partner Program, Zalando hopes to become the industry’s first Platform as a Service e-tailer. Inditex brands have begun to sell through other e-tailers, demonstrating that even the most vertically integrated businesses may benefit from wholesale. There is hope for wholesale, but considerable change is also on the horizon. High quality fabric supplier are becoming more choosy in their distribution, looking for partners that will allow them to maintain direct control over their high quality fabrics and brand positioning, establishing new wholesale connections into the future of fabric’s long-loved channel.
The goal of wholesale is to cut costs.
Understanding the variations between sales channels is key to grasping the biggest topic in fabrics right now: margins. Thy margins, oh thy margins! The fabric industry can’t stop thinking about them, and with good reason: manufacturing garments isn’t easy or cheap, and doing so in 2020 will be far more difficult and costly. When done correctly, direct-to-consumer channels give a high quality fabric supplier more control over their positioning, offering, and price, resulting in better long-term commercial success.
Unfortunately, most high quality fabric supplier wholesale share is so large that focusing on direct initiatives alone will not be enough to compensate for the loss. While direct’s revenue has increased by double digits, it hasn’t been enough to compensate for the damage seen.
The road to recovery for wholesale must begin with redefining success. With sales revenue falling, brands must search for strategies to keep their margins from collapsing. Rather than focusing on wholesale volume, brands should focus on their P&L, lowering customer service costs and investing more in digitization to get a competitive advantage. This shift in focus will help companies to maintain margins in the short term while laying the groundwork for future increases once the industry’s recovery is complete. A better wholesale model has a bright future.
The future of wholesale is better sales
The interaction between brands and retailers is at the heart of wholesale. This is a sales-based partnership, with brands selling fabrics to retailers and retailers selling fabrics to customers from a high quality fabric supplier. The essence of wholesale is sales, and it is the key to its future. New digital platforms have aided sales teams in generating revenue while lowering customer service costs. Digital platforms, on the other hand, should not be viewed as a panacea. They can speed up the procedure, but this will not address other, more serious underlying concerns. For this new model to flourish, technology and humans must collaborate smoothly.
If lower wholesale costs equal lower sales costs, then sales performance should be judged in the same way. More sales will not fix high quality fabric supplier’s most serious problems. If the sole action taken is to establish a digital platform, sample costs, poor brand positioning, and order fragmentation will only get worse. A high quality fabric supplier must embrace a better sales mindset, one that prioritizes efficiency above volume, in order to achieve a better wholesale model. One that encourages salespeople to concentrate on quality rather than quantity. One that allows for long-term expansion.
More wholesale isn’t required in the fabric industry especially from high quality fabric supplier. Better wholesale is required. Better wholesaling begins with improved sales. Is wholesale a thing of the past? The old wholesale, at least.