As the market fluctuates, fashion brands are weighing the pros and cons of DTC vs. wholesale
Fashion brands’ decision about whether to focus on direct-to-consumer sales or wholesale has gotten a lot more complicated. In the early days of the DTC revolution of the 2010s, the common thought was that, by eliminating the middlemen of retail partners and selling directly, brands would benefit from wider margins and customers would get lower prices.
That hope animated not just the rise of brands like Warby Parker and Allbirds, but also the strategies of massive companies like Nike, which enacted a plan to cut down on wholesale partnerships and increase direct sales in 2020. But in 2023, the reality is a lot more complicated.
The rising costs of running a DTC business have increasingly made wholesale more appealing, even with all of its attendant drawbacks. In 2021, BMO Capital Markets conducted a study to see if the DTC model had actually resulted in more profits for the brands that adopted it. The study found that, while margins were higher, other costs of DTC — particularly customer acquisition — often meant that the two models resulted in similar net profits.
“We’ve done a lot of research, and what we saw was that pivoting to DTC does not result in better margins,” said BMO’s Simeon Siegel in March. “DTC is just a channel and the product is always going to be more important than where you sell it.”
