Is DTC Killing Wholesale?

What categorizes as wholesale? There’s much confusion here.

First, let’s define the terms, then we’ll tackle the question. 

Wholesale is when you sell your product to another business and they resell it to the end consumer (at a higher price). Ex: You sell your hot sauce to a specialty grocer for $4. They put a 40% markup on and sell it for $10. In other words, you sell to an account, they increase the price and sell it to a consumer. 

Here’s another example. In foodservice, when you sell to an account and they use your product on their menu, it’s wholesale. They may or may not call out your name on their menu, but it’s still wholesale. It’s also wholesale when you sell your product to another producer who uses it as an ingredient in their product. (Ex: maple syrup and sell it to local bbq sauce brand.) 

What about E-commerce? With the exception of DTC sales on your own website and certain platforms (e.g., Amazon) most e-commerce grocery is still wholesale. It’s wholesale because that’s how consumers are buying groceries online. It mimics the single shopping cart experience. You’re still convincing a buyer (who’s a real person on the other side) to buy your product and put it on their digital shelves. You’re selling at wholesale to them and they’re reselling to the end consumer.

Is wholesale dying as we continue to turn more online? Should you just be selling DTC?

Early stage brands think they should sell on their website. First question, where does your target customer look for and buy products similar to yours? Ex: Ice cream sales DTC. Think it through. Is your audience buying ice cream online or at the grocery store? It takes a lot of time, money, and strategy to change customer behavior. 

The easiest way for you to get your target audience to try or buy your product is to find where they are and put it directly in front of them. Where is your audience currently experiencing the problem you solve for them and how can you put your product in that channel? (Most often, an Omni-channel strategy is most effective.)It’d be advisable to pursue wholesale accounts that already have retail shoppers coming through their door. They’re doing the marketing for you whether that’s clothing stores, arenas, restaurants, clubs, etc. Then, sprinkle in some DTC to supplement sales. 

With your DTC strategy, you want to think through things like how you’re going to get in front of them so they can buy direct from you. What marketing skills do you need to get them there? Where is your audience getting their information? Which online channels are they scrolling? Who do they follow/trust/open emails from? How do they engage with brands directly via DTC already, and how can you do that? Why would consumers go out of their way to buy ice cream from you rather than at the grocery? What makes your product so different from what they can get already? Do you have the bandwidth to do farmer’s market, demo’s, etc. You need answers to all of this before you start a website and put your products up for sale because the orders ARE NOT just going to roll in. 

Is it easier, faster, cheaper to sell DTC? No. Is it easier, faster, cheaper to sell wholesale? That’s also challenging. After all, the food industry is tough. Is DTC killing wholesale? Every channel requires a different strategy and an understanding of how you’re going to get your product in front of that consumer and why they’re going to select your product instead of another brand on a physical or digital shelf?

Is DTC killing wholesale? Sure, it’s great for some brands, an Omni-channel is the best way to grow a brand. 

Crafted Kitchen has tons of free resources to help your business go from side hustle to success story. Want to talk about your business? We do! Schedule a call today.

Crafted Kitchen is a shared use commercial kitchen in the Arts District of Los Angeles. We offer flexible kitchen rentals to small food businesses. Rent a kitchen today!

Leave a Reply

Your email address will not be published. Required fields are marked *