8 ways to be profitable in fashion wholesale.
Fashion wholesale does offer a slimmer margin than what you will receive via your own DTC sales – fact! Therefore, it is even more important that you know what it takes to be profitable in this operating model.
This advice comes from 8+ years of working with brands in Australia, the UK and the US and by being partnered with 30+ wholesale platforms around the world. This broad experience has taught me the exact areas that brands need to focus on from the offset to ensure they protect their profitability and aim to achieve a gross wholesale margin of 20+%.
Here are the 8 ways you can be profitable in fashion wholesale:
1. Achieve landed margin of 70%
2. Remove the bells and whistles!
3. Focus on fit!
4. Build an agile omnichannel network
5. Complete a competitor analysis in the wholesale platform’s market
6. Up-price to absorb operational costs
7. Reduce costs based on your increased volume
8. Negotiate the right deal for you!
1. Achieve landed margin 70%
My tip for brands is to plan for a worst-case scenario to then overachieve.
If you aim to improve your landed margin and produce a collection with an overall landed margin of 70%, this enables you to negotiate a W/S discount or MU of less than 69% or 3.1, therefore ensuring that you achieve a profit.
Factors you need to include when calculating your landed margin are; COGS, freight, duty, taxes, packaging and any additional costs. For more information on how to price your collection for wholesale read this article.
2. Remove the bells and whistles!
You might be wondering what the heck are you talking about?! So let me explain …
Bells and whistles are all the added extras you will have added to your design that are simply not needed when you’re selling into an e-commerce platform.
I recommend that you take a photo of each individual product on your phone, and ask yourself what can you see and what is actually needed in the design. For example, if there’s a special stitch technique or a pleat detail that you simply can’t see that is purely there as a design feature remove it.
This tip is going to help you to reduce the cost price of your product and make them e-commerce commercial.
3. Focus on fit!
If you’re experienced in selling your fashion brand via stores as well as e-commerce, you will be very aware of how much higher return rates are online.
The main reason for this is simply the fact that you can’t try before you buy! Therefore meaning a lot of customers intentionally buy multiple sizes and brands to try at home which the intention of returning the worst fitting and quality styles.
If you monitor and ensure you sell good fitting clothes across every channel you sell through, you will not only be delighting the end customer but also the platform, as you will be driving a high-sell through, therefore requiring a lower markdown spend.
To perform well in fashion wholesale and drive profit, your performance is not only judged on your seasonal sales but your sell-through rate and return rate.
All 3 are connected so focus on the fit in every single style you produce.
"To perform well in fashion wholesale and drive profit, your performance is not only judged on your seasonal sales but your sell-through rate and return rate."
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4. Build an agile omnichannel network
I recommend all fashion brands that I work with, focus on one territory/market at a time when starting out in fashion wholesale.
Why?
Because if you focus on one territory say the UK and Europe, you are streamlining and focusing your resources in one place. Meaning is it a lot easier to ship multiple, larger orders to one location. It’s easier to expand onto multi-channels in one area as you raise your brand profile there. But most importantly, you are concentration your stock holding in one area meaning if you have a strong sell-thru on one fashion wholesale platform, but not on another, you can pick up and transfer the stock a lot easier than if you spread your efforts across multiple territories at once.
Build a smart, focused omnichannel strategy now to ensure profitability in fashion wholesale.
5. Complete a competitor analysis in the wholesale platforms market
If you’re an Australian brand for example, you will 100% know who your competitors are in Australia which is great and needed to secure your position in that market. But that is not enough when working in fashion wholesale.
When you join one of the major fashion wholesale platforms like NEXT or ASOS, you are joining a huge network of global fashion brands, therefore your competitors are no longer just local brands but global brands! You need to find out who they are on every single platform you connect with and remember you are looking for competitor brands in that market but more specifically on that wholesale platform.
Why?
Like with any competitor analyse, the reason you’re doing this is to give you the competitive advantage by learning from what they doing well at as well as what missing. This applies to their product, service as well as pricing.
6. Up-price to absorb operational costs
To understand more about wholesale pricing I recommend that you read this article, as this will give you a base foundation first.
The reason I am recommending you to up-price your pricing (RRP) is that it is 100% not possible to sell the exact same product into a new market with all the extra added costs (duty, tax, freight etc) and produce the same profit as you would on your own website, therefore you need to consider up-pricing.
First, you need to conduct a pricing analysis of that market and your competitors to understand what the average entry and exit price points are for your category, therefore highlighting to you what % increase you can up-price your product by to still remain competitive. Then, you need to calculate the additional costs and what that looks like as a % of your RRP, the result is how much you are able to up-price by to ensure you’re still competitive and profitable in fashion wholesale.
7. Reduce costs based on your increased volume
A huge benefit of choosing to go into fashion wholesale is increased volume. Gaining wholesale orders enables you to go to your factory and to your logistic provider and to negotiate a lower cost price based on giving them a higher volume.
I recommend that you give your manufacturer your projected growth units ahead of each season which includes your own website orders as well as wholesale, and push to gain lower costs prices.
Use volume as your bargaining power, in which you reduce your costs, increase your landed margin and therefore increase your fashion wholesale profitability.
8. Negogiate the right deal for you!
You know you like no one else. So negotiate the right deal to suit your fashion brands needs and capabilities without putting the wholesale platform off.
To work this out ask yourself:
- What are your shipping capabilities?
- Does the marketplace model suit you best?
- What is your landed margin and how great a discount can you afford?
To learn more about what a good wholesale deal looks like check out this article.
