For many DTC brands, the last year was difficult to predict.
As such, many have been leaning on age-old distribution strategies to help with growth and rely less on volatile and expensive advertising channels. New research from Glossy and Modern Retail gives a sense of how wholesale has become a much more important part of the DTC growth playbook.
In a recent survey, we asked 70 direct brands about the performance of sales channels and marketing spending over the last year, and wholesale seemed to be the one with the least amount of volatility.
For example, over 20% of respondents said they spent less on marketing last year, compared to only 10% who said they pulled back on wholesale partnerships. Meanwhile, 12% said marketing spending “increased significantly,” while 18% said wholesale grew at that same clip.
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This tracks with what many brands have been talking about publicly. A number of companies have been trying to rely less on platforms like Meta in the wake of iOS 14, while others have been seeing wholesale as the key way to grow.
For example, premium cereal brand Magic Spoon used to be online only, but has expanded rapidly into thousands of U.S. stores.
“We realized we were getting to a point where the industry and the category was maturing,” co-founder Gabi Lewis previously told Modern Retail. “We were seeing other companies come out with similar products. … And we were also getting to a point where every single day our online customers were asking us, ‘When can I buy you in retail?’”
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It seems this realization isn’t only for cereal brands, but for many DTC startups trying to figure out growth in the current climate.
And it appears things will stay similar in the next year. According to the Glossy and Modern Retail survey, fewer direct brands plan to decrease their marketing spending. But, more of these brands said they are going to significantly increase their wholesale expansion, compared to those that said they greatly increase marketing budgets.
This focus on being in more stores tracks with overall consumer trends. For brick-and-mortar retail, “traffic is up pretty much across the board,” Kelly Pedersen, U.S. retail leader at PwC, previously told Modern Retail. “People are almost over-indexing right now on wanting to go back to the physical environment.”
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