Photo: Yeti
Yeti is leaving Lowe’s to focus on DTC and key wholesale accounts
Yeti has decided to end sales to Lowe’s after two years. The premium cooler and tumblers maker cited supply chain disruptions and a heightened focus on core wholesale and direct-to-consumer channels as motivating the move.
“To be clear, Lowe’s has been a great partner, and has worked closely with us as we have continuously experimented with how to best serve their customers and shopper patterns,” said Matt Reintjes, CEO, Thursday on Yeti’s fourth-quarter call. “As we have evaluated our growth areas, our focus and optimization mandate and the current supply constraints, we ultimately believe we can be more productive better serving our Yeti customers across our strong existing wholesale partnerships, our owned direct channels and our growing international opportunities.”
Yeti started rolling out to Lowe’s in late 2019 after seeing opportunity in the space. Mr. Reintjes said in October 2019, “Beyond the opportunity to intersect with additional consumers within home improvement, we were attracted to Lowe’s strong position in Pro, outdoor, and seasonal categories, areas that align with many of the pursuits that we support.”
By February 2020, Lowe’s head merchant Bill Boltz was calling out Yeti’s national rollout. He said on a quarterly call, “Our expanded product offering highlights our commitment to providing our customers with relevant, innovative, best-in-class products.”
Yeti’s DTC sales, however, have expanded to 60 percent of sales from 50 percent two years ago due to store expansion and accelerated e-commerce growth.
Supply chain challenges have had Yeti scrambling since fall 2020 to overcome inventory shortages amid elevated demand for its products.
Finally, Yeti has been instituting an “optimization” that includes trimming its wholesale base to approximately 3,000 independent accounts. Management made the move to improve merchandising and overall execution, including inventory allotments at key independents, regional players and national accounts such as Dick’s, Bass Pro and REI.
Mr. Reintjes said Lowe’s exit was in line with those optimization efforts. “Ultimately, it came down to: we’re going to focus on building the strength of our existing wholesale partners that have been with us that we had already kind of taken through the merchandising and the presentation and the cadence of how Yeti operates,” he said.
Discussion Questions
DISCUSSION QUESTIONS: What would be the right and wrong reasons for Yeti to stop selling to Lowe’s? Do you think Yeti made the right call?
Poll
Loading …BrainTrust
Yeti’s announcement sounds like sales at Lowe’s weren’t meeting expectations and the company is better off putting product where people are buying it. If that’s the case then this was absolutely the right decision.
The reason to stop selling to Lowe’s would be they are either losing money or it is damaging their brand. Hard to know if Yeti is making the right decision without knowing more information about their operations and cost/revenue structures. Whether through retail chains or DTC, supply chain and logistics issues will still exist. However the visibility that a big box retailer provides to manufacturers is often better than they can generate themselves, and going to a DTC model could mean the loss of a very large source of revenue.
Smart. Yeti can definitely stand alone and has the brand power to go DTC all day long. Smart of them to take a page from Nike’s playbook and get right to their huge following directly, cut out the middle. PS: if you want to see a real “store of the future”, visit the Yeti store on the river in Austin. Love it.
Good points Lee. I look forward to visiting the Yeti store in Austin in a couple weeks. It sounds like Yeti is making a strategic decision to channel their supply to D2C and retail outlets that probably offer the highest margins. Consumers that want a Yeti product have ample choices of stores (online and physical) to shop and many may not think of a home improvement store as their source for insulated coolers and mugs. I don’t think the move to leave Lowe’s will hurt Yeti financially.
Pretty difficult to say why Yeti is stepping away from Lowe’s without being in the room – but it’s likely just a low sales volume or a case of a retailer having too many hoops to jump through. I don’t see a brand perception issue here, but it also might not fit squarely in the middle of their move forward positioning, so best to move on!
Yeti has built up their brand reputation and recognition to a point where they can begin calling their own shots. With their diverse product range they are smart to focus on directly connecting to customers and controlling the shopper experience from end to end. I think they have evolved beyond the standard DIY environment, however I might recommend they try repositioning with Lowe’s instead of leaving. Given the interesting new direction Lowe’s is heading with aging in place products, pet care and more, Yeti might do very well as a full on store-within-a-store instead of their current POP placement.
I suspect that we’re only getting part of the story. While Yeti has the brand power to sell directly to consumers, walking away from a national account that aligns well with their brand leaves me wondering what else might be going on. Sales or margins weren’t meeting expectations? Supply chain issues were making it difficult to fulfill commitments to Lowe’s? In my past merchandising roles I’ve walked away from brands because they were difficult to work with, and I had brands walk away from me for similar reasons. Yeti has a rock solid fan base because they understand their customer and their products so well.
The other reason could be that Lowe’s is going to produce this product in their own private label/in-house brands. This is the path that a lot of retailers are taking to offer this type of product at a better cost and better margins.
Companies actively manage their customer base all the time and Yeti’s decision to exit Lowe’s is not earth shattering. I’m sure sales were not meeting expectations and perhaps the supply chain chaos was a contributing factor as well. This decision won’t hurt either brand. On the positive side for Yeti, the decision to invest more in DTC is smart for a variety of reasons. Getting closer to the end consumer always ends with goodness.
This actually sounds like a win/win. Under supply constraints it makes total sense for Yeti to sell through the (presumably) higher margin channel – DTC. This was a worthwhile experiment, but it may turn out that — metaphorically — Rolls Royce (Yeti) was trying to get more distribution by selling at a Chevy dealership (Lowe’s). Both are very able brands, but the marriage was not making sense in the eyes of Lowe’s customers. (I remember needing a cooler and going to Dick’s to look at Yeti. I was shocked at the price. Almost $200 for the size I was looking at. I spent $39.99 at Target.) So maybe Lowe’s wasn’t getting the productivity it needed from the space and inventory investment. And maybe they can come out ahead by reinvesting that space and inventory in better turning product. Win/win after an experiment that made sense and lessons were learned.
We are all guessing why Yeti made this decision. I suspect that the margins with the Lowe’s deal weren’t there. There are places to sell that make more sense than Lowe’s, including DTC. There are natural retailers that could sell Yeti — outdoor stores. The 3,000 wholesale accounts are likely a better fit for the products than Lowe’s.
Usually reduced distribution leads to lower sales. Maybe Lowe’s negotiated a price point that is hard for Yeti or maybe they have such severe supply chain problems that they are out-of-stock too much at Lowe’s Just going to Lowe’s website I see a lot of their product line is not available for shipping or BOPIS.
Yeti continues to expand their brand value and with over 50 percent of business from DTC channels, the Lowe’s distribution channel no longer bears the same fruit. The Lowe’s deal isn’t exclusive and Yeti also seeks to brand themselves in a different way than a home improvement store. Customers during the pandemic continue to buy in outdoor and seasonal product sets, but Yeti has been doing fantastically well outside of the Lowe’s channel on their own. Good move for Yeti, and little consequence for Lowe’s.
Looking at the consumer trends and the numbers, DTC can be a very good move for Yeti. 79 percent of consumers bought something from a DTC company in 2020. That leveled-off to 60 percent in 2021, but the trend towards DTC for consumer goods looks here to stay. Nike is indeed out-front here: 39 percent of Nike’s $44 billion in 2021 revenue came from DTC.
In addition to potentially healthier margins, as they transform their digital capabilities, consumer goods companies realize both the potential brand control and first party data benefits of DTC enabled direct relationships with their customers, especially their most profitable customers and brand champions.
Yeti was founded in 2006 as a brand primarily for the outdoor enthusiast. This commitment still appears to hold true, and a partial disconnect with Lowe’s might be here. Lowe’s horsepower as a retailer and wide draw of customers is strong, but being positioned in a place known for bathroom remodeling and light fixtures is a different game, as shoppers are entering to accomplish a task at home. Yeti’s sales strategy and alignment at Dicks, REI and Bass Pro make more sense because their customers are shopping to go, be, and do outdoors. Brand alignment was probably in order, so Yeti remains in greater control of the target customer.
This was a Lowe’s decision, not a Yeti decision. Yeti may be announcing it, but the total consumers that Lowe’s enjoys for its base, offer Yeti a much greater opportunity to increase sales, profits and reach.
I applaud Yeti in streamlining their distribution. The trend had been more doors, more customers, more sales; but brands need to do more with less to control their UX/product presentation. Strong brands will attract customers and don’t need a “find it anywhere” approach to sales. I am a Yeti customer and have purchased the product directly from the brand site as well as from Dick’s; both experiences were strong and the product was well-stocked and mostly available. Web site exclusives were well used as well. I did not see the synergy with Lowe’s.
This also signals that the brand never made sense to sell into Lowe’s to begin with. Does a coffee cup, cooler or lunchbox make sense on a genuine construction site (or at the house during a Saturday morning project)? Absolutely. But the nature of Yeti’s marketing is geared more toward the luxury thinking side of the brain than it than it is toward the practical. The person might be one and the same, but they aren’t thinking “let’s pick up a $60 water bottle” when they’re about to be covered in drywall dust in the attic.
And few actual construction workers are about to try and explain the receipt for a $400 cooler to their boss.
The “overegineered” marketing they’ve been so loyal to (their word, not mine), works great at an REI. Clearly not at Lowe’s. Yeti’s is a luxury product, whether they originally set out to be or not.