As many direct-to-consumer (DTC) brands are learning, there’s no one-size-fits-all strategy for growth. And in a world where thousands of brands are being pushed to consumers by the second, it’s crucial for DTC brands to stand out and make an impact. That’s where retail partnerships can play a major role.
A wide range of formerly online-only brands—from mattress brand Casper to beauty brand Native—have expanded to wholesale to realize the benefits it can deliver. In this article, we’ll explore omnichannel sales structures and what DTC brands should know about adding retail partners to the mix.
Omnichannel retail allows DTC brands to create an integrated customer experience across multiple sales channels. It focuses on creating a seamless, holistic shopping experience for consumers by enabling customers to shop online and offline, switch between devices without losing their progress, and move through different touch points while maintaining an ongoing dialogue with your brand.
This can be a valuable addition to your sales strategy, as it allows customers to purchase products in the way that best suits them. Expanding into retail can also help DTC brands overcome the customer acquisition challenges that come with selling only online.
An omnichannel sales structure can be broken down into three main components:
A retail partner is a business that agrees to carry your products and promote them through its own channels. This could include large retailers like Nordstrom and Walmart, small business owners, specialty shops, or even online marketplaces like Amazon. By working with a partner, you can gain access to new customers, increase brand visibility, and expand your reach. Working with a retail partner allows you to take advantage of their existing infrastructure, reaping the benefits of their physical footprint and marketing dollars.
One of the most recognized DTC early risers, Warby Parker, has since opened 200 stores in North America alone. DTC all-stars like Allbirds, Casper, and Dollar Shave Club have also recognized the need to be where their customers are and recently added retail partnerships to their overall growth strategy.
The direct-to-consumer model was born out of a purposeful shift away from middle-man retailers, but the rules have changed in recent years. Learn more about the shift to retail partnerships in The New Direct-to-Consumer Playbook.
Securing a retail partnership can be incredibly beneficial for your DTC brand, but any partner you choose must be the right fit. Consider their customer demographic and assess whether they can help expand your reach and visibility in your target markets.
For example, if you sell baby clothing or household products, partnering with a retail giant like Target can help you reach a broader audience than selling only online. On the other hand, if you sell more niche or specialty items, working with smaller boutique stores that focus on similar products may be a better choice.
Once you have the bandwidth to manage the accompanying fulfillment complexity, you can look forward to the many benefits of selling through retail partners—including an increase in sales and an improved customer experience.
Retail is a pivotal channel for modern DTC brands—Airhouse research found that 60% of them sell through partner retail channels today. That’s because a retail presence can help extend your reach and visibility and provide customers with a more tangible shopping experience.
Here are some benefits of partnering with right-fit retailers:
As consumer privacy continues to be prioritized and third-party cookies are phased out, it’s become more expensive to market to online shoppers. DTC brands have to move into retail to capture more of their target audience and gain clarity on buyer behavior.
A retail presence can make your DTC brand more visible in the marketplace, leading to improved brand recognition and loyalty. Think about how many times you’ve seen a product in-store and immediately recognized the brand behind it. Maybe you saw it on social media or another website. The more your brand is in front of consumers, the more likely they are to remember you.
Retail partners are an effective way to increase sales and reach new customers. By being in more places, you can make it easier for potential customers to find and purchase your products. If they run out of your product and don't have time to wait for it to ship, they can run to the retailer where your product is sold and easily refill without having to switch to another brand for convenience. This is a win-win situation for everyone involved.
Customers want what they want when they want it. And having a retail presence can make it easier for them to find and purchase your products. Retail partners also provide an opportunity for customers to interact with your product in a tangible way, which can reduce the perceived risk in trying a new product (especially when it comes to verticals like apparel) and create positive experiences that boost loyalty and sales. This can attract new audiences and returning customers.
Retail partners can help you acquire customers at a lower cost than your own marketing efforts because the partner’s existing network of customers is already familiar with them. Retailers also have their own promotional campaigns that you can leverage to drive more visibility and sales.
For example, DTC supplement and multivitamin brand Ritual started pursuing brick-and-mortar efforts in 2022 with an exclusive retail partnership with Whole Foods. This allows Ritual to reach a broader market with an already established customer base that matches its target audience, lowering its marketing costs.
While partnering with retailers can be incredibly beneficial for your DTC brand, it’s also important to understand the inherent challenges involved. Here are a few common pitfalls to consider before entering into a retail partnership:
Many brands make the mistake of assuming—incorrectly—that wholesale is just another sales channel like their own ecommerce site. In reality, retailers have complex ordering and fulfillment standards that require additional coordination.
When launching a retail distribution model, you’ll need to ensure the retailer receives the product according to specific compliance and technology requirements. Unlike DTC orders, which can be dropped at the customer’s doorstep at any time, wholesale orders require coordination with the retailer’s distribution network.
You’ll also need to have enough inventory available for these orders, which may tie up capital and requires rigorous inventory management. This can put a strain on your internal team, so focus on one or two strategic partnerships while scaling your efforts. Outsourcing fulfillment to a third-party logistics (3PL) or fourth-party logistics (4PL) company can also help you avoid many of the unforeseen headaches that come with retail distribution.
The larger the retail store brand, the more specific and rigid its rules tend to be regarding product placement, packaging, pricing, and other aspects of the retail relationship. If you don’t adhere to these expectations, commonly referred to as rulebooks, you could face chargebacks, or your product could be removed from the shelves.
For example, Walmart imposes strict guidelines on all supplier relationships. These rules extend from product delivery and showcasing to how the product's operations are run in their own facilities.
There is virtually no standardization among retailer rulebooks and data standards, further complicating wholesale fulfillment. Many 3PLs familiar with ecommerce needs struggle to meet compliance and technology requirements, which include sending shipment data to the retailer’s in-house software system within a specific timeframe. In order to successfully execute on wholesale fulfillment, the 3PL must have EDI capabilities.
Retailers typically mark up products anywhere from 30 to 65%, leaving you with a much smaller margin than if you were selling directly. This means that you’ll need to negotiate a fair margin with the retailer to ensure it’s worth your while.
Additionally, retailers often charge suppliers back for any product that doesn't meet quality standards—if the product is broken, has missing parts, is outdated, or doesn’t meet the retailer’s unique requirements, for example. These fees are steep and will eat at your budget.
When partnering with retailers, it’s important to ensure they uphold your brand standards and pricing. Many retailers have marketing campaigns and messaging that may contradict yours, so you’ll need to ensure they stay aligned with your overall strategy.
Retailers often partner with multiple brands, which can result in a lot of product overlap. This can make it harder for you to stand out from direct competitors and drive sales. You’ll need to be creative with your marketing and merchandising strategies to distinguish yourself from the competition.
Expanding into brick-and-mortar retail can be a great way to gain visibility and drive more sales for your DTC brand. Do your research and look for potential partners that have customers who are likely to purchase your product. You’ll also want to evaluate the retailer's buying power and the margins they are willing to offer. Finally, make sure you know their exact rules and expectations before signing any contracts.
Take the time to consider all of these factors, and you can ensure that you pick the right retail partners for your DTC business and take advantage of a powerful omnichannel sales strategy.
By creating an omnichannel experience with a focus on a successful retail partnership, DTC brands can ensure their customers have the best possible shopping experience and create a connection that goes beyond buying a product. This strategy can help increase customer loyalty, build brand trust, and ultimately lead to increased sales over time. And in today’s competitive market, businesses need to leverage every tool at their disposal to stay ahead of the pack.
Connect with a fulfillment expert at Airhouse to learn how we can help simplify order fulfillment and logistics as you scale your business through retail partnerships.