Selling to department stores and boutiques is something that many designers strive for. But is it the best decision for your clothing line or fashion business? Selling to boutiques and department stores has many benefits, but like anything else in this world, it also has its drawbacks. So before you decide to invest time and money in creating a wholesale channel, it’s important to assess the positives and negatives when it comes to selling to retailers.
*Note: If you are just now working on a fashion line, check out this post, How To Start A Clothing Line That Sells!
Yes, retailers will order more units than individual customers. Boutiques will usually order a full size-run and department stores will order anywhere from hundreds to hundreds of thousands of units, depending on what the actual product may be. The more stores the retailer owns, the more units they’ll order. That is why department stores and chain stores are desired by a lot of designers to sell to.
This one isn’t totally true. When selling direct to customers, you charge them your retail price. But when selling to retailers, you charge them a wholesale price, which is at least half of your retail price. That means that if your dress retails for $200, you sell that same dress to a retailer for $100 or under. The reason is retailers need room to resale that same dress to the customer for $200, which is your retail price. So, if you were to sell 6 dresses to customers at $1200 and 12 dresses to a retailer at $1200, you end up making the same amount of money. The only difference is the number of dresses you sold. That is why this statement can sometimes be true or false. However, imagine getting a 20,000 unit purchase order from Target for $7 per unit. That equals to $150,000, which is a sale that’s appealing to any designer!
Once it’s out of your hands, it’s up to the retailer to make sure it sells, right? WRONG! It’s in your best interest to make sure that your merchandise sells so that the retailer will place future orders. That’s why brands help retail stores promote their merchandise.
This is a huge expense that retailers take off a designer’s hands – the cost of creating a store, managing a store, hiring and managing employees, training employees to provide customer service, the cost of supplies, and the overhead cost of renting a store. Even if you opt for an e-commerce site, you still have to build and maintain that website and hire people to fulfill and ship out orders.
You cannot sell to retailers the same as a customer. Why? Because customers shop for themselves. Retailers shop for their customers so that means that there are several factors that they consider before placing an order:
Selling to department stores and boutiques requires serious infrastructure. You’ll want to build a sales team, get an order and inventory tracking system, and eventually have a budget for tradeshows and market weeks. You’ll even need special ordering software that big retailers require you to have for them to even send you an order in the first place. This software is called EDI. Without it, you can’t even receive an order to fulfill. But most all, you’ll need capital to go into production. Retailers, especially big chains and department stores, don’t pay right away so you’ll need to secure the capital to fund those orders into production. Brands usually work with factors, who are lenders who loan them money to pay for their production costs.
This statement is true for designers who want to sell their collection on their own. If you don’t have sales experience, then getting the hand of selling to a retailer will take some time and practice. That’s why I recommend that you do some rehearsals. Recruit a friend to act as a buyer and have him ask you a list of questions that buyers will typically ask brands. Practice will help prepare you, which is a great way to build up your confidence for the real sales meeting with the retailer.
Selling to department stores and boutiques is a lengthy process, especially for designers who want to do it on their own. You have to get in contact with the buyer, peak their interest, schedule the sales meeting, conduct the sales meeting, follow-up, follow-up some more, and then maybe, you get the order. This process is even longer when dealing with big retail chains because of the corporate red tape and chain of commands. So, don’t expect to get an order right away. But once an order has been placed and the merchandise sells well, you can expect to get more orders in the future for even bigger unit buys.
It’s typical to wait anywhere from 30-90 days after you’ve shipped the merchandise to the retailer. That means you have to have enough capital to sustain the lack of cash flow in your business. But once you do get paid, it’s a nice hefty sum! It definitely beats one-off sales that you get from direct to consumer transactions.
Imagine having your collection at Barney’s or Neiman’s. You’ve made it! That is great for your brand’s overall public image – not to mention the possibility of a celebrity purchasing your merchandise!
Being in stores allows you to be seen by people who would have never even heard about your brand. This gives you the advantage of reaching more people, which expands your brand’s market reach. More eyeballs means more potential customers, which means more potential for sales!
Those are the truths about selling to department stores and boutiques. Now you may be thinking, what do I do now? Now, is where you take action. Use this knowledge to decide whether or not this route is right for your fashion company. If it is, then begin taking steps towards building your wholesale business. Yes, it can look challenging and overwhelming but you don’t have to do it alone! Enrico and I built FAB Counsel so that fashion entrepreneurs like you, don’t have to take this long, hard, and worthwhile journey all by yourselves.
You’ll walk away knowing: