Is The Wholesale Sales Channel A Dead End?
The parts and accessories industry is built around the manufacturer-distributor-jobber/retailer paradigm. And while there are lots of reasons to love the wholesale side of the parts and accessories business, there’s also a problem with wholesale: Direct to consumer (D2C) brands are where all the growth is.
Direct to consumer brands have seen double digit annual growth for several years now, powered by efficient online advertising, capable and affordable ecommerce technology, and changing consumer behavior. As a result, traditional retailers have been dying at an alarming rate: Nearly 80,000 (!) retail stores are expected to close in the next five years.
The question is, with all the growth in D2C and the alarming collapse of traditional retail, is wholesale a dead end?
Wholesale Is Often Misunderstood
What generates a wholesale order? Is it:
- A retailer finds a brand and product they’re willing to sell, but won’t order without testing for consumer interest OR…
- A manufacturer sales reps takes a wholesale buyer out for dinner and drinks, and convinces them?
If you answered “2” and you’re a wholesale buyer, please contact us because we’d love to take you to dinner and maybe drinks to discuss a big order. Otherwise, the answer is #1. Wholesale buyers who make large orders without testing for consumer interest first don’t have long careers.
Yet somehow – despite everyone in the industry knowing that wholesale buyers aren’t going to place a huge order without testing for consumer interest first – a lot of business leaders seem to think that the rules for their product will be different. Many business leaders believe that they don’t need to stimulate consumer interest before their wholesale business can grow.
Successful Wholesale Growth Stems From Consumer Interest
Back in the days before the internet, most parts and accessories brand growth was driven by a combination of traditional media coverage and track/trail success. Get your product mentioned in a few magazines and have a few race teams run with it, and sales would grow. As a result, generating consumer interest was relatively easy (albeit expensive).
But this model only worked because consumers had limited sources of information. If a consumer didn’t see a product at the track or the trail – or learn about it in a magazine – the product might as well not have existed. With limited sources of information, generating consumer interest was straightforward.
Today, consumers have access to infinite sources of information. There are hundreds of websites talking about parts and accessories, and tens of thousands of social media “influencers” from YouTube to TikTok to Instagram offering up advice and recommendations. In this environment, retailers (understandably) struggle to stock the products that consumers want.
When a retailer is faced with varied and uncertain consumer demands, they have two strategies:
- Keep fast-turning parts with good margin in inventory. Many retailers keep a limited quantity of fast-turn products in stock, and focus on offering those to every customer.
- Offer everything else that consumers might want via distributor inventory, and live on skinny margins. Since no retailer can afford to stock everything, the only way to offer every product is to sell out of distributor inventory. This effectively outsources inventory to distributors, with the downside being lower margins.
Manufacturers who want to do lots of wholesale orders either need to convince distributors to hold a lot of product or make something fast-turning and profitable that retailers will want to stock.
You Need a Brand To Have Fast Turn, Profitable Products
If you own a retail store that offers parts or accessories, you’d be wise to stock some floormats from either WeatherTech or Husky. Both have great name recognition with consumers as well as strictly enforced MAP policies that preserve margins. While you’re at it, go ahead and throw some Yeti tumblers up on the shelf for all the same reasons.
And what do WeatherTech, Husky, and Yeti* all have in common?
- National advertising (sometimes mass media, but always social media)
- A serious commitment to selling products direct to consumer
- Major investments in marketing – everything from premium photography and packaging to aggressive MAP policy enforcement and comprehensive product warranties
Much like the phone in your pocket, the clothing you wear to the gym or golf course, the headphones you listen to, etc., most of the world’s fast turning and profitable products are from great brands.
*NOTE: We don’t have a relationship with WeatherTech, Husky, Yeti, or any of the other brands mentioned in this article.
Building A Brand Requires Great Messaging and Smart Advertising
Brand development can be as simple or as complex as you want to make it – you can spend a fortune on consultants to help you with your logo, color palette, font selection, mission statement, etc., or you can wing it in an afternoon. Whatever you decide, the key to a good brand is messaging. It’s one thing to say that Yeti coolers are “Built For The Wild,” it’s another to message around that theme:
- Invest in imagery that shows customers using the product in all sorts of cool and interesting ways
- Test the messages you’ll use to describe your coolers, using data to find the most effective copy
- Find people who are doing the cool and interesting things, have them use your coolers, and ask them to talk about your products on social media
While it would be borderline impossible to perfectly replicate Yeti’s brand strategy, perfection isn’t required to succeed. This is because a lot of the companies in the parts and accessories industry don’t actively market or advertise to the public! A shocking number of automotive companies are ignoring branding and burning up the phones hoping to land that big wholesale order.
But while your competitors are waiting around for wholesale orders, your brand can market and sell directly to the public, build consumer interest, and make things happen. Developing great messaging and advertising online requires a minimal budget, and you can use modern marketing tools to test and refine everything.
Is Wholesale Really Wholesale If It Starts With Brand Level Marketing?
- The fastest growing retailers are all direct to consumer brands
- Retailers will no longer make big wholesale orders without demonstrated consumer interest
- Consumers are only interested in products with good brands
- You can build a good brand by testing your messaging and steadily refining your advertising
- If you build a good brand that has the attention of the consumer, the wholesale orders will come
Granted there are some semantics here, but ask yourself: In the here and now, is B2B wholesale business really B2B wholesale business? And if not, than what is it?
Whatever you want to call it, we believe that traditional wholesale is a dead end. The days of making decent products, putting them in a nice package, issuing a few press releases, and then working the rolodex are coming to a close. Retailers are under more competitive pressure than ever before, and as a result they only want to stock products that are guaranteed winners.
If you want your brand to be a “guaranteed winner,” you must test and refine your messaging, refine your ads and ad targeting, and invest in brand development. It’s not a revolutionary plan, nor is it new. But the proof that it works is all around us.
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