DTC to wholesale, and beyond – learn how your brand can do it all

There’s one retail trend we keep seeing across brands, across categories - direct-to-consumer brands are expanding to wholesale in 2023.

Economic headwinds, rising costs of customer acquisition, and challenges in the supply chain have made it so that DTC brands need to expand their distribution channels to remain competitive and continue to grow this year. Insider Intelligence said that the “next phase of [D2C] retail won’t be defined by a singular distribution strategy, but rather by the need for brands to make a real connection with customers.” The four ways they’re predicting brands will enter this new phase – emphasizing physical retail, partnering with mature brands, shifting digital ad spend, and leveraging customer data.

We couldn’t agree more. Wholesale is a channel where all those strategies come together.

When we asked CEOs in the Disco Network about their 2023 agenda, Ali Kaminetsky, Founder of Modern Picnic said, “We are really excited to start testing wholesale in 2023. We started as a DTC brand in an effort to prove the concept, build brand equity, and tighten up our supply chain. However, we are now ready and able to open up into wholesalers and really leverage their distribution, manpower, and reach.”

Fast Company found that “in the long run, experts believe bootstrapping and retail partnerships may lead to higher quality products and more enduring businesses.” For example, as Insider Intelligence mentioned, “Peloton and Rent the Runway announced partnerships with Amazon in 2022, and Allbirds developed wholesale relationships with retailers such as Dick’s Sporting Goods-owned Public Lands and REI.”

To help DTC marketers and operators better understand how to navigate the world of wholesale, a new arena for many consumer brands, we tapped one of Disco’s in-network experts, Marilyn Yang, Co-Founder and CEO of Fun/Gal Snacks & Popadelics. She hosted our first-ever DTC Lessons “Ask Me Anything” session in our Slack community and the insights she shared were just too good to keep to ourselves!

Read on for Marilyn’s take on how Popadelics approached this new retail channel and how you can leverage digital marketing and shopper insights to inform your wholesale strategy.

Question: What's the first touchpoint to get into a retailer/wholesaler

Marilyn Yang: There are a few categories of this depending on the size of retailer/wholesaler you’re targeting. For small, independent retailers - the traditional cold email still works charms! Almost all of our independent retailers were signed up via us reaching out cold, via email. For many reasons, I’d suggest starting out with independent retailers first before branching out into the larger chains.

Many larger chains require your product to be carried by distributors, too, so in some ways, it’s a bit of a chicken or egg situation regarding locking down a retailer or a distributor first. There are some larger chains that can work directly if they really want your product, though, so it depends. Larger chains are a more complex selling process, though. That’s where attending some of the major industry trade shows is valuable - such as Specialty Food Association Winter and Summer Fancy Food Show and Expo West/East.

Question: How important is sales velocity in the first store? For example, is a certain number of units sold important? Will future/potential retail places look at how well we did in that first location?

MY: For independent stores - it doesn't matter as much, to be honest, at least as part of the selling process. We've found that independent stores are able to make buying decisions very quickly, in fact! If they like your product (i.e. the taste/feel of it), and they think it's a good fit for their customers, they'll bring it on. It does become important when you think about ongoing business, though. Obviously, they won't re-order unless you're selling through.

For the large chains - it matters much more since some of them may only test your product out in a few stores before expanding. They also care more about perhaps your sell-through in some of the stores you're already in!

Question: Have you tested different prices at different retailers vs. your website? Or do you use a consistent price across all channels? Especially with online ads promoting sales vs. some different prices at different retailers.

MY: We have the same manufacturer's suggested retail price (MSRP) whether online or in-stores, which is important to prevent channel conflict, but we do run different promos online than we do with our retailers, and at different times. However, although we have the same MSRP for a “single” pack across all channels since we only sell multi-packs online, we essentially offer “volume discounts” for purchasing in bulk on our website. It makes sense to both the retailer and the end customer, though, that it should be cheaper on a per-unit basis to buy 6 packs vs. 1, so this usually isn’t an issue with most retailers/wholesale customers. We do, however, also keep the multipack pricing consistent anywhere we sell multipacks.

Question: How do you discuss wholesalers marking down products and balance how that may affect your DTC sales?

MY: Funny enough the concern is usually the other way around - where because of the margins retailers may be looking for and distributor markups etc, your product is more likely to end up higher priced on the shelf than you originally may plan! In general, though: we have promo calendars for our website that are independent of what may be going on in stores.

Independent stores typically don't have a price reduction program, so there's more flexibility here to collaborate directly with the retailer.

Larger retail chains do have formal calendars and programs and may sometimes mandate some sort of introductory discount. It’s important to go into these types of relationships with eyes wide open to these sorts of requirements!

Question: Do you work with advisors or lawyers to draw up agreements, etc? How do you handle the contractual stuff?

MY: It varies between dealing with independent stores vs. chains!

Independent stores: typically there won't be a formal contract here, they place an order or they don't, pretty much. I'd definitely recommend brands draft their own agreements though - really more for risk mitigation should anything go wrong.

Chains: Many chains have their own requirements for working together and their own supplier portals etc. through which to manage the relationship. I wouldn't say there's typically a contract, per se, but they have their set of terms, and clearly, the power dynamic is that they're the ones with the power. The distributor also comes into play in some of these cases, where when you sign up with a distributor, you have to agree to the distributor's payment terms, terms of collaboration, etc. So definitely some stuff to review here!

For major contracts - it's never a bad idea to review with a lawyer! We typically will do so for major contracts, but it helps too that although I'm not a lawyer, I've reviewed a fair amount of legal documents as part of my PE/investing background!

Question: What is the feedback loop like between the brand and the wholesaler? How often do you have strategic conversations about how to drive growth for your brand within their ecosystem?

MY: It really varies! Independent stores are more likely to have an active dialogue with you.

For bigger chains, your brand is probably 1 of hundreds if not thousands, so it's harder to get any sort of one-on-one attention aside from perhaps some sort of quarterly sales review/update. And sometimes you may be even further removed if there's a distributor at play. As such, it's important to be proactive in terms of making sure to take advantage of the relevant retailer marketing programs (again, the onus is on the brand to participate and pay for these) and staff in-store demos, drive traffic, etc.

Question: How do you handle asset creation for wholesale if they have specific requirements for their PDP/in-store marketing? Does the wholesaler pay for that or the brand?

MY: It's really up to the brand to provide this for the most part! Larger chains may have formal programs in terms of printing special displays that follow their guidelines etc. but it still gets charged to the brands.

For independent stores, the onus is really on the brand! We typically will send shelf talkers to our wholesale partners to display in-store!

Question: How can we use wholesale partners to gain customer contact info without jeopardizing the relationship / “stealing” customers?

MY: In our experience, retailers/wholesale partners aren’t typically concerned about brands “stealing” customers, since they understand too that it’s a synergistic relationship. Customers don’t always want to buy certain things online, even the same things, just like they don’t always want to buy certain things in stores. Even for me - sometimes I’ll buy my laundry detergent at the corner store, but other times I’m ordering online.

The easiest way to do this is to do in-store demos! When you or your brand reps are in-store doing demos, it’s the perfect opportunity to set up some sort of contact capture program, for example in exchange for an in-store discount. There are some interesting ways to integrate digital and in-person couponing, too, such as with Aisle - we’re actually currently running a campaign now.

Question: Do you worry about the brand values being diluted in a wholesale environment?

MY: I wouldn’t say we “worry” about it, but we are conscious about what kind of stores carry our product. And I think this is another reason why having good packaging is key - that your product can reflect and/or convey its brand values in a standalone environment. This is also another reason why being omnichannel is important - when a customer picks up a new product in store, it’s not uncommon for them to then visit your website, too - so having a strong website and social media presence can all help with conveying those brand values at varying points of the customer journey.

Question: What marketing support have you seen the best ROI on to support new retail launches?

MY: Anything that gets the product into the customer's hands! Especially for a food product, at the end of the day, the customer needs to be able to try it and decide if they like eating it (or not).

Especially for a super unique, new product in a new category like ours, that in many ways is a pleasant surprise vs. people’s preconceptions. In the early days, most of your capital is probably tied up in inventory, so take advantage of that through product seeding / in-kind sponsorship opportunities with events that align with your brand.

Question: Have you invested in the paid advertising opportunities that wholesalers offer for more visibility?

MY: Trade spending is probably the main place in terms of B2B spending for us - so that includes attending trade shows, etc.

Once you get into a distributor, distributors also host their own internal trade shows for their retail customers which also cost money, so another thing is to be aware of all of the various investments/costs that are needed to pursue wholesale!

Question: Can you speak a bit about retail minefields…how can brands protect themselves from retail bad practices?

MY: I think the main thing is when dealing with distributors and large retail chains to not get caught flat-footed with chargebacks, fees, etc. and to go in with your eyes wide open! For example, distributors will charge a whole slew of fees related to ensuring your product isn't damaged upon arrival, doesn't have a near-term expiration date, etc. And large retail chains may also have their own requirements in terms of pre-labeling products for sale. So long story short - read the fine print (or hire a lawyer to help)!

Question: What’s one mistake you made at the start of your wholesale experience that could have been avoided?

MY: I think we could have done more earlier to understand what "matters" to retailers! For example - we kind of had a soft launch of our product, but then made a number of tweaks to optimize it for retail:

Updated to a smaller pouch size (for more efficient shipping but also to be at a lower price point to appeal to more customers in the store).
Retailers care more in general about getting your products certified. So we spent time getting Non-GMO Project Certified and OU Kosher certified.

I think in some ways you wouldn't be able to find these things out until you try it, but we could've saved a lot more time if we had perhaps approached things first with that retail lens!

Question: What do you think is the most helpful strategy to amplify wholesale success

MY: It all goes hand-in-hand; having a strong DTC presence will help amplify wholesale success and vice versa, too! Particularly when launching into a new retailer - there are ways to help ensure success such as doing in-store demos, sampling, and targeted regional events, big and small (i.e. sponsoring local events, donating products to relevant audiences). We’ve found too that whenever we do live sampling events such as vegan festivals, customers always ask us “where they can find us in stores”. It seems to be a lower barrier to entry at times for customers to know they can find your product at the grocery store down the street vs. online, so having that retail presence really helps amplify both online and in-person sales!

About Marilyn Yang and Popadelics:

Marilyn Yang is the Co-Founder and CEO of Fun-Gal Snacks, the parent company of Popadelics Crunchy Mushroom Chips, shiitake mushrooms reimagined for the modern superfood snacker! They launched in April 2022 and are NYC-based. In addition to Amazon and their own website, their snacks are currently carried in 200+ stores nationwide, notably Urban Outfitters and Foxtrot. Popadelics snacks are vegan, gluten-free, kosher, and non-GMO, and a portion of all sales support the Fun-Gal Snacks Foundation, which supports health and wellness causes.

Learn more about Marilyn and her journey with Popadelics here:

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