Wholesale, retail titan’s Waterloo

An unknown territory, multiple fighters and scattered flanks to battle against a solid army. Used to deal in their own battles for the conquest of streets, some fashion retail titans can now encounter adaptation problems due to wholesale upheavals, an arena in which the majority of the sector’s players are fighting each other and which continues to shrink its size.

The Swedish giant of fashion distribution H&M, the second one in volume of business, announced yesterday Cheap Monday’s closure, the brand it sold through a wholesale channel. The company has explained that this trade model has faced severe changes due to the shift of the industry and they have chosen to develop their brands in online and monobrand channels instead.

Notwithstanding, for other retail titans, wholesale is still a valid potion even if the importance they exert in base to income for companies is actually quite scarce. Fast Retailing, for instance, has J Brand, a United States brand with headquarters in Los Angeles and specialised in denim which is commercialised through department stores. The firm has a strong presence in the United States and it also exports to about twenty countries.

Fast Retailing operates in wholesale with its J Brand firm, whilst Gap is the owner of a chain of wholesale stores, Intermix

On the other hand, Uniqlo’s owner, who has also acquired the French lingerie firm Princess Tam Tam, concentrates its distribution in department stores and wholesale stores around Europe. Nowadays, it is currently undergoing a global process of expansion. The United States Gap has one foot in the wholesale channel. In 2013, the retail behemoth acquired a chain of multibrand stores, Intermix, for a price of 130 million dollars.

Founded in the mid-90’s in New York, Intermix had an amount of 36 stores by the end of the third quarter of 2018 after closing five of them during 2017 and two more before the year ended.

Intermix worked with more than 200 brands, among which there are Stella McCartney, Rachel Zeo, Rag&Bone, Helmut Lang or Matthew Williamson. Since 2014, this business is piloted by Jyothi Rao, who assumed the position after working at Gilt’s online platform of sales.

L Brands, owner of Victoria’s Secret, generates part of the business from the Body&Bath Works firm through a wholesale channel. In fact, the group focuses in this channel the international expansion of the ensign, whereas it focuses the monobrand business in the United States and Canada.

Other groups that have wholesale in their DNA are facing now for some years an obvious change of course towards retail with the purpose of connecting directly to consumers. For PVH, for instance, most of its business comes from wholesale (in which it also integrates franchises). Calvin Klein and Tommy Hilfiger are historically supported by wholesale and department stores in order to underpin their business in the United States and the rest of the world.

Nevertheless, for these two brands, the company is also valuing retail in order to support distribution. Other firms from the group such as Arrow, Izod or Van Heusen still concentrate all of their business in wholesale.

In Spain, the wholesale channel has gone from occupying 60% of fashion sales in 1993 to represent only 19% in 2017

VF Corporation, for its part, is another specialist in the wholesale channel and department stores. However, during the last decade, it has reinforced the business through the opening of flagship stores. It already amounts up to 1,518 points of sales counting all its different brands, Lee and Wrangler included, which split into another independent society last summer.

Despite its strength in traditional channel, VF Corporation started a reordering of business some years ago so as to promote its operations targeted directly to consumers and, concretely, in three of its brands: Vans, The North Face and Timberland.

The Dutch Bestseller, for its part, has built up a business valued in 6.3 billion euros over the wholesale pillar. Owner of brands such as Jack&Jones, Only or Vero Moda, the company has also opened stores of its own, sometimes even in collaboration with former wholesale clients and its current strategy is laid on advancing in retail in order to stop being a wholesale company which also opens stores to become a retail business that is also in wholesale.

Wholesale is Urban Outfitters’ backbone. The United States titan ended 2017 with a volume of business valued in 3.61 billion dollars and it ended last fiscal year with 613 stores in total, 84% of them in the United States. Besides focusing all its business in this channel, the group also has own brands which are also sold in its wholesale stores.

Lastly, the European Esprit has released a new restructuration plan for its business in order to get back to the path of profitability and it is based in two pillars: China and wholesale. In that sense, even if the group still leans on retail for the Chinese market, it will reorder its fleet of stores in Europe to focus on wholesale instead.