Here is an excerpt from our upcoming ebook: The Whole Sale – Profitable Wholesale Strategies for Brands

You might wonder what holiday movies have to do with brand-retailer relationships.

Well, consider this from The New York Times:

“Amazon Studios spent $250 million to make “Red One,” a comedic holiday action film starring Dwayne Johnson and Chris Evans. Then, the company pushed the film into more than 4,000 theaters, spending tens of millions more to market it. So when the movie racked up only about $80 million in domestic box office receipts in recent weeks — half of which goes to the theater operators — it looked like a huge investment gone horribly bad. Not so fast, Amazon says. “We did this for a very specific reason,” Courtenay Valenti, the company’s head of film, said. And that reason: to make it a streaming hit.”

There are few things to unpack here.

First, clearly people still go to movie theatres.

Second, it’s quite contradictory to release a movie in theatres to make it a hit via streaming.

Oddly enough, many brands tell us that success in their direct selling efforts is supported by having a strong presence on the shelves of multi-brand retailers.

This flies directly in the face of a recent point of view taken by many brands that cutting out wholesale relationships would be the future. The prevailing opinion was that going direct to the consumer was the path to profitability.

And, if one worked through the logic, it seemed like everything added up. Cut out the wholesale partner and see a lift in both margins and profits. Why would a brand even want to be one step removed from their customers to begin with?

Turns out, the math was not working out as expected.

It has been shown that companies that grow DTC sales do not see a notable increase in revenue or merchandise margins. In fact, most DTC EBIT margins are meaningfully below wholesale margins. Brands that shifted away from wholesale did not see the expected lift in profitability and margins.

In some cases, the shift to direct created very significant and negative consequences.

For Nike, the brand underestimated the extent to which consumers wanted choice and wanted to shop at multi-brand retailers like a Dick’s Sporting Goods or a Foot Locker. It was not long before these wholesale partners were being invited to meet with Nike to discuss renewed partnerships with the Swoosh. Nike ran into problems because they became obsessed with where they were selling versus what they were selling. Customers didn’t care about “the where.” Instead, customers were more concerned about the lack of newness and fresh innovation that they typically expected from the brand.

Fast forward to today, Nike has a new CEO and significant challenges that stand in the way of restoring their previous performance.

Clearly, there is a lot of value brands can extract from wholesale relationships.

But the big, more important question is: how exactly can a brand get access to this value? That’s what we intend to answer with this book.

The Whole Sale will be available for sale very soon. The release date will be announced in short order.