FEATURE ARTICLE: Wholesale Curtailed. Is Retail's Favorite Model Faltering?

The following article synopsizes key takeaways from Episode 21 of the Spieckerman Speaks Retail podcast.

We used to hear the term “wholesale” more often, mainly because it had been the dominant model driving retail for decades. Today, a mini-movement is underway, as brands like Nike and Under Armour announce pullbacks on their wholesale relationships.

Late last year, Nike announced that it would withdraw from a handful of middle-market regional players like Belk and Dillard’s. Nike went on to draw a major line in the sand by shutting off direct distribution to Amazon. Just this month, Under Armour announced that it will be closing 2,000-3,000 wholesale partner accounts.

 Why are they doing this?

The short answer is, “because they can.”

What’s really going on is a power shift. These days, the platform owner has the power. Sometimes the platform is a retailer, sometimes it’s a brand. And retailers that are just places that sell brands no longer have a compelling platform, particularly if everyone else carries the same brands.

 Nike’s been building out its platform for a while, and now it’s a multi-format retailer that runs a physically and digitally connected brand empire that powers its direct-to-consumer sales and brand loyalty. As its platform amps up, wholesale relationships can be seen as a liability that compromises the Nike brand, price control, and profitability.

 Nike now has the platform power to eliminate intermediaries, many of whom were just retailers that sold brands rather than being brands themselves.

 Although it’s in the earlier stages of platform building, Under Armour’s decision has a similar rationale. For now, Under Armour has the brand power to back away from some wholesale relationships. But if its direct-to-consumer aspirations pan out, Under Armour will have the platform power to break ties with many more.

 To add a bit of spice to the story, Nordstrom also said it is leaning into non-wholesale partnerships. Nordstrom has the customer experience platform and brand equity to pull off its own retreat from wholesale and selectively shift to a concession model.

The curtailing of wholesaling will accelerate as more brands exercise their options, build out their platforms, and strive to take ownership of their destiny (and data). This movement will fuel brick-and-mortar expansion as brands trade intermediary-based relationships for direct-to-consumer models.

 Even so, very few brands will abandon wholesale completely. The retail scene will look more like a hybrid situation for the foreseeable future. Wholesale isn’t played out just yet.

Check out the full episode on wholesale and tactics for retailers, suppliers, and solution providers

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Carol Spieckerman weighs in on the future of brick and mortar

Carol Spieckerman is a retail speaker, strategist, and frequent media contributor. As an advisor and coach, she helps companies accelerate business development, define market messaging, and increase thought leadership in the retail space. She also speaks on retail trends at events around the world on her latest Retail Trajectories - calls to action that transcend trend and cross categories, borders, business models, and touch points.