April 7, 2025
Photo by wu yi on Unsplash
How Can Brands Going Direct Avoid Wholesale Backlash?
A recent university study suggests that brands like Nike could add visible store locators on their own websites that guide customers to local and independent retailers to reduce backlash from wholesale partners as they expand in direct channels.
“While the practice may seem obvious, it is surprising how few brands mention their retail partners on their own channels,” wrote the researchers led by Michiel Van Crombrugge, a professor of market insights and innovation at the Erasmus School of Economics in Rotterdam, in a Harvard Business Review article.
The researchers noted that beyond often generating higher margins, direct selling can help brands connect with consumers. Direct can also serve as a “countermeasure” to the increasing dominance of aggregator platforms, such as Amazon in the U.S. or Tmall in China.
The risks of going direct, according to the authors, were shown by Nike, which has lost market share in recent years as moves to exit wholesale accounts while expanding direct-to-consumer hurt demand for its footwear. Under a new CEO, Nike is seeking to recapture lost wholesale space.
According to the researchers, other strategies for reassuring wholesale partners amid direct-to-consumer expansion include offering exclusive product lines or hosting in-store events to help “differentiate the retail channel better from the direct channels.”
Additionally, YETI, which saw direct-to-consumer reach 59% of sales in 2024, “continues to actively support retailers by offering promotional assets and product training through a dedicated platform for their retail partners,” the researchers wrote.
A BCG study suggested that one way to ease wholesale partners’ concerns about sales cannibalization from direct or third-party e-commerce channels is by “making comparison shopping more difficult, such as by offering exclusive products or different SKUs in different channels.”
We Make Websites, an agency that designs Shopify Plus websites, in a blog entry urged brands early on to point out the “upside” of going direct, including how direct works as a marketing tool to raise brand awareness and help increase revenue for retail partners. Other suggestions included sharing revenue from direct online sales with wholesale retailers or enlisting them to fulfill direct online orders to drive consumers to wholesale partner stores.
On its latest quarterly call in March, Nike officials said they’re investing in cross-functional sales teams, reworking commercial terms, as well as refining segmentation and differentiation strategies to revive wholesale growth. Elliott Hill, president and CEO, said, “I continue to meet with wholesale partners to discuss the distinct role each can play with Nike.”
BrainTrust
Carol Spieckerman
President, Spieckerman Retail
Neil Saunders
Managing Director, GlobalData
Jeff Sward
Founding Partner, Merchandising Metrics
Recent Discussions
Discussion Questions
What steps could brands expanding direct-to-consumer be taking to reduce conflicts with their wholesale partners?
Are brands expanding direct still seen generally as a negative to their wholesale partners, or is it increasingly turning into a “win-win” for both sides?
Poll
Loading …
It is perfectly possible for wholesale and direct to consumer models to coexist. The trick is to ensure the two are complementary – perhaps serving different consumer segments or operating in different markets or geographies. Levi’s does this well as its own stores serve a younger shopper while its department store channel serves and older and family shopper. The other thing brands need to ensure is that they put effort into developing and supporting their wholesale accounts rather than seeing them as secondary. The acid test really comes when demand softens, and everyone is vying for market share.
To this point, the brand can address a different price point than their retailer customers. “Complementary” is the operative word. There must be prior communication between the brand and its retailer customers to ensure that there are no nasty surprises.As one example, Ralph Lauren opened its Madison Avenue flagship in the Rhinelander Mansion just blocks away from Bloomingdales – RL’s largest outlet and promoter by far. Both performed well for years. There was an understanding between Ralph Lauren and Marvin Traub and they were both happy with the agreement. I don’t think one could find any item from the Madison Avenue store in Bloomingdale’s but it helped both companies to be that close.
There was also a great halo effect generated by the Rhinelander Mansion. That was early in the days of brand direct stores, and to say that the Rhinelander was a flagship would be an understatement. It elevated the Polo brand. And it was just far enough away from 59th street that the traffic siphoned off was minimal. 59th St. was and is still a very powerful draw on its own. Ultimately, a branded store executed on the level of the Rhinelander Mansion is a good thing for the brand and it’s customers.
Good point about how Levi’s targets its own stores at a different demographic than its department store customers.
I’m not particularly confident you can avoid backlash when your whole point is to (eventually) eliminate the middleman, as Nike’s move was widely perceived to be. Best to start out small and emphasize distribution channels that are currently under – or completely “un” – served (and that can be a big world, particularly for brands with a global reach); if you should saturate that option, competing with your besties is next…but it will always be a rough road.
Distribution diversification is table stakes these days – not risky behavior. Nike was perhaps a bit too cavalier as it lurched between wholesale and DTC. Framing, balance, and consistency matter.
It is vital that brands maintain open lines of communication with their direct-to-consumer partners and ensure transparency about their direct-to-consumer strategies. Having exclusive product lines or special promotions can help wholesale partners differentiate their offerings and maintain their value.
The partnership can also be strengthened by providing marketing materials and training. As more brands and wholesalers have realized the benefits of mutually beneficial relationships in recent years, perceptions have shifted.
It was initially feared that direct-to-consumer expansion would undermine wholesale relationships, but partners now view it as a chance to increase brand visibility and consumer engagement. Each party can enhance its market reach and profitability by leveraging the other’s strengths.
Maybe direct-to-consumer branded stores are not always about eliminating the middle men. Maybe branded stores are first and foremost about building the brand, about ensuring the Brand Promise is communicated to the customer in the best possible way…??? Back in the day, 30-40 years ago, department stores were dying to get Polo Ralph Lauren into their stores. But Polo wasn’t building a brand just so it could sell it to department stores and have them throw it all on 4-ways. Polo required department stores to build full blown shop-in-shops. Then so did Nautica and Tommy Hilfiger. Free standing stores are brands in full charge of their own destiny. A destiny that if left in the hands of some retailers, would just get executed at lowest common denominator levels. Retailers might want to thank brands for investing in their Brand Promise so heavily. That’s what makes the brand important to all customers in all stores.
Whatever happened to the Brand Store as a Brand Statement, a complimentary asset for all the Retail Stores. Full assortments, Full Priced, and not very many of them.
Most brands expanding direct-to-consumer still treat wholesale like an afterthought, and that’s the problem. You can’t expect your partners to stay loyal if you’re competing with them on price, product, and convenience.
If brands want to reduce friction, they need to share traffic, inventory, and give retailers a reason to stay invested. Store locators, exclusive SKUs, and partner fulfillment are good starts, but they’re not enough unless the brand genuinely values wholesale.
Right now, it’s mostly lip service. For it to become a win-win, brands need to stop acting like it’s a one-way street.
More Discussions
How Important Is ‘Vibe’ in Physical Retail?
Not attempting to be too playfully groovy about this question: According to a recent report from…Will Pinterest Translate to Shoppable TV?
Will Pinterest lead the way in shoppable TV?How Can Retailers Improve Shoppers’ Sense of Closure When Concerns Emerge?
How can retailers better provide closure and proper resolution to today’s shoppers?
It is perfectly possible for wholesale and direct to consumer models to coexist. The trick is to ensure the two are complementary – perhaps serving different consumer segments or operating in different markets or geographies. Levi’s does this well as its own stores serve a younger shopper while its department store channel serves and older and family shopper. The other thing brands need to ensure is that they put effort into developing and supporting their wholesale accounts rather than seeing them as secondary. The acid test really comes when demand softens, and everyone is vying for market share.
To this point, the brand can address a different price point than their retailer customers. “Complementary” is the operative word. There must be prior communication between the brand and its retailer customers to ensure that there are no nasty surprises.As one example, Ralph Lauren opened its Madison Avenue flagship in the Rhinelander Mansion just blocks away from Bloomingdales – RL’s largest outlet and promoter by far. Both performed well for years. There was an understanding between Ralph Lauren and Marvin Traub and they were both happy with the agreement. I don’t think one could find any item from the Madison Avenue store in Bloomingdale’s but it helped both companies to be that close.
There was also a great halo effect generated by the Rhinelander Mansion. That was early in the days of brand direct stores, and to say that the Rhinelander was a flagship would be an understatement. It elevated the Polo brand. And it was just far enough away from 59th street that the traffic siphoned off was minimal. 59th St. was and is still a very powerful draw on its own. Ultimately, a branded store executed on the level of the Rhinelander Mansion is a good thing for the brand and it’s customers.
Good point about how Levi’s targets its own stores at a different demographic than its department store customers.
I’m not particularly confident you can avoid backlash when your whole point is to (eventually) eliminate the middleman, as Nike’s move was widely perceived to be. Best to start out small and emphasize distribution channels that are currently under – or completely “un” – served (and that can be a big world, particularly for brands with a global reach); if you should saturate that option, competing with your besties is next…but it will always be a rough road.
Distribution diversification is table stakes these days – not risky behavior. Nike was perhaps a bit too cavalier as it lurched between wholesale and DTC. Framing, balance, and consistency matter.
It is vital that brands maintain open lines of communication with their direct-to-consumer partners and ensure transparency about their direct-to-consumer strategies. Having exclusive product lines or special promotions can help wholesale partners differentiate their offerings and maintain their value.
The partnership can also be strengthened by providing marketing materials and training. As more brands and wholesalers have realized the benefits of mutually beneficial relationships in recent years, perceptions have shifted.
It was initially feared that direct-to-consumer expansion would undermine wholesale relationships, but partners now view it as a chance to increase brand visibility and consumer engagement. Each party can enhance its market reach and profitability by leveraging the other’s strengths.
Maybe direct-to-consumer branded stores are not always about eliminating the middle men. Maybe branded stores are first and foremost about building the brand, about ensuring the Brand Promise is communicated to the customer in the best possible way…??? Back in the day, 30-40 years ago, department stores were dying to get Polo Ralph Lauren into their stores. But Polo wasn’t building a brand just so it could sell it to department stores and have them throw it all on 4-ways. Polo required department stores to build full blown shop-in-shops. Then so did Nautica and Tommy Hilfiger. Free standing stores are brands in full charge of their own destiny. A destiny that if left in the hands of some retailers, would just get executed at lowest common denominator levels. Retailers might want to thank brands for investing in their Brand Promise so heavily. That’s what makes the brand important to all customers in all stores.
Whatever happened to the Brand Store as a Brand Statement, a complimentary asset for all the Retail Stores. Full assortments, Full Priced, and not very many of them.
Most brands expanding direct-to-consumer still treat wholesale like an afterthought, and that’s the problem. You can’t expect your partners to stay loyal if you’re competing with them on price, product, and convenience.
If brands want to reduce friction, they need to share traffic, inventory, and give retailers a reason to stay invested. Store locators, exclusive SKUs, and partner fulfillment are good starts, but they’re not enough unless the brand genuinely values wholesale.
Right now, it’s mostly lip service. For it to become a win-win, brands need to stop acting like it’s a one-way street.