Latest / The DTC Marketing Podcast with Fexingo: Direct-to-Consumer Brands, Shopify, and E-Commerce Growth / How DTC Brands Use B2B Wholesale Channels for Growth
Transcript
- Lucas: Alright, so we get this question a lot from founders building DTC brands: 'When do I stop being dtc only and start selling wholesale?' And the conventional wisdom a few years back was — never. Stay pure, protect margins, own the customer relationship. Luna: Right, the Shopify-native orthodoxy. Build a beautiful website, drive traffic, keep everything to yourself. Lucas: Exactly. But look at what's happened since maybe 2023. A bunch of the most iconic DTC brands — Allbirds, Glossier, Casper, even Warby Parker early on — quietly built substantial wholesale businesses. Not as a panic move, but as a deliberate growth strategy. Luna: And it's not just about revenue. They're using wholesale to acquire customers more cheaply than paid social. Lucas: That's the key insight. Let's start with Allbirds. They went public in 2021 at a valuation north of 4 billion. By 2025, their stock had fallen something like 90 percent from the IPO peak. A lot of that was execution stumbles, but one thing they did right was expanding into wholesale. Luna: They partnered with Nordstrom, REI, and others. Suddenly you could try on Allbirds before buying. Lucas: And that's the thing — for a shoe brand, fit and feel are huge barriers. Online-only returns were eating their margins. Wholesale let customers experience the product in person, which actually lowered their return rate overall. Plus, the customer acquisition cost from a footfall at Nordstrom is basically zero for Allbirds — they're just paying the wholesale discount. Luna: But that discount is brutal. Typically wholesale is 50 to 60 percent of retail price. So you're giving up a ton of margin. Lucas: You are. But the trade-off is volume and brand exposure. For Allbirds, wholesale became about 25 percent of revenue by 2025. And they were able to use those retail partnerships to introduce the brand to people who never would have discovered it through Instagram ads. Luna: Glossier is another interesting case. They were famously dtc only for years. Emily Weiss was adamant about controlling the experience. Then in 2022 they started selling at Sephora. Lucas: And it was a massive success. Within a year, Sephora became one of their top channels. The reason? Discovery. Beauty is tactile — people want to swatch, test textures, see how a shade looks in natural light. DTC can't replicate that fully. At Sephora, a customer walking by a Glossier display might pick up a Cloud Paint blush and buy it on impulse. Luna: And Glossier also benefited from Sephora's loyalty program. Those Rouge and VIB members are high-value repeat buyers. Lucas: Exactly. They essentially outsourced customer acquisition to Sephora's existing traffic and loyalty infrastructure. The cost per new customer through wholesale is probably a fraction of what they'd pay for a Meta ad. But the trade-off — they lose the direct relationship. Sephora owns that customer's data, not Glossier. Luna: So the question becomes: is it worth it? When does wholesale make sense? Lucas: I think there are three conditions. First, your product needs to benefit from physical trial — shoes, apparel, cosmetics, furniture. If you're selling a software subscription or a digital course, wholesale doesn't apply. Second, you need to have strong enough brand recognition that the retailer wants you on their shelves. Wholesale isn't a distribution strategy for unknown brands. Luna: Because retailers won't take a risk on an unproven product. They want to see some social proof or direct sales traction first. Lucas: Right. Third, you need operational readiness. Wholesale means different packaging, bulk shipping, inventory management separate from your DTC stock. Casper learned this the hard way — when they started selling through Target, they had to manage separate inventory pools and deal with Target's compliance requirements. It's not trivial. Luna: Casper actually pulled back from some wholesale later on. They realized the margin compression was too severe for a high-return category like mattresses. Lucas: That's a good cautionary tale. Casper went from dtc only to rapid expansion into hundreds of Target stores. But mattresses are bulky, expensive to ship, and customers often buy them once every eight years. The wholesale margin didn't pencil out for them long-term. By 2024, they were acquired by private equity and went private. Luna: So there's no one-size-fits-all. The brands that succeed with wholesale seem to use it as a discovery channel, not a primary revenue driver. They treat it like a paid acquisition channel with a different cost structure. Lucas: Yeah, that's a really smart framing. You've got your DTC channel with high margin but high acquisition cost. You've got wholesale with low acquisition cost but low margin. The trick is balancing them so the blended unit economics work. Some brands are now doing what I'd call 'controlled wholesale' — limited partnerships with a small number of retailers that align with their brand image. Luna: Like Reformation. They're in Nordstrom and a few select boutiques, but you won't find them at Walmart. Lucas: Exactly. Because wholesale also affects brand perception. If you're a premium DTC brand and suddenly you're on the shelf at a discount retailer, it can dilute your image. Glossier was careful to only partner with Sephora, not Ulta, at least initially. They wanted the upscale association. Luna: And then there's the question of data. When you sell wholesale, the retailer controls the transaction data. You don't know who bought your product, what else they bought, or how to retarget them. That's a huge loss for a DTC brand built on first-party data. Lucas: Some brands are solving that by including insert cards with QR codes that lead to their own site, offering a discount on the next purchase in exchange for an email. It's a way to recapture some of that relationship. But it's not the same as owning the checkout. Luna: So for a founder listening right now, maybe they're 18 months into their DTC brand, doing a million in revenue, and wondering about wholesale. What's your advice? Lucas: I'd say: don't rush. Build your direct channel until you have a clear understanding of your unit economics and a strong enough brand that retailers will actually want you. Then start with one strategic partner — maybe a regional boutique or a specialty retailer that aligns with your aesthetic. Negotiate for a limited trial, maybe six months. Measure the impact on your DTC sales — does it cannibalize or complement? And if the economics work, slowly expand. Luna: And be ready for the operational headache. It's a different muscle. You need a wholesale manager, potentially a separate warehouse, and the ability to handle purchase orders and bulk shipments. Lucas: It's almost like starting a second business. But for many DTC brands, it's the path to real scale. I mean, look at the numbers — the largest DTC brands today, like Nike and Adidas, they do most of their business through wholesale. They use their own DTC channels for high-margin flagship products and customer engagement. Luna: So the pure DTC model is almost a phase, not a destination. Lucas: I think that's right. The brands that thrive long-term figure out how to play both sides. And actually, that reminds me of something I've been thinking about a lot. These conversations we have on the show — we're able to have them because we don't run ads. No sponsors, no affiliate links. That's a choice we made early on, and it lets us talk about whatever we think is genuinely useful for founders. Luna: Yeah, and the reason we can keep it that way is listeners who chip in. If these episodes have helped you think differently about your own brand or avoid a mistake, that's the value. And if you want to support that, it's buy me a coffee dot com slash fexingo. Just a small way to keep it ad-free. Lucas: Exactly. No pressure, but it does make a difference. Anyway — back to wholesale. I want to talk about one more example that I think is really instructive: a newer brand called Fourth Wall. They make direct to consumer art prints, and they started selling through a small chain of home decor boutiques. Luna: Oh, I've seen them. Their stuff is gorgeous. How did that work out? Lucas: Really well, actually. They found that customers who discovered them in a boutique were 30 percent more likely to buy again on their DTC site within six months. So the wholesale channel was actually seeding their direct business. And because the boutique customers were self-selecting — they were already in a home decor store — the acquisition cost was essentially zero, and the lifetime value was higher than their average Instagram customer. Luna: That's the ideal scenario. Wholesale as a customer acquisition funnel for your own DTC operation. Lucas: Exactly. And they structured the partnership carefully. The boutique gets an exclusive on certain prints for 90 days, which gives them a reason to feature Fourth Wall prominently. After that, Fourth Wall can sell those prints on their own site. It's a win-win. Luna: So the key is being strategic about which retailers, what terms, and how you capture the data. Lucas: Right. Don't just say yes to every inbound request. Have a criteria — brand alignment, geographic fit, customer overlap. And think about how you'll capture emails or drive repeat purchases. The brands that do wholesale well treat it as part of an omnichannel flywheel, not a desperate grab for revenue. Luna: It's almost like you need a wholesale strategy before you need wholesale revenue. Lucas: Exactly. Plan it out. Model the economics. And then test small. I think we'll see more DTC brands moving into wholesale over the next few years, especially as customer acquisition costs on Meta and Google keep rising. Wholesale might be the most underrated growth lever in the DTC playbook right now. Luna: And the brands that do it well will be the ones that survive the next downturn. Lucas: That's a good note to end on. Thanks for listening, and we'll be back next week with another angle on DTC marketing.