With social media giants Facebook and Pinterest moving to retail products through gift feeds and online shops, this opens other sales channels for social designers and makers. This must, surely, be good news for small fashion and creative businesses? After all, as much as you love making and designing, you want (and need) people and stockists to buy them. Where and how you will sell is basically your distribution strategy, and that’s what we will look at in this blog post…
Sales, sales, sales
Often, small creative and fashion businesses are understandably desperate to recoup costs, or (wrongly) feel surprised and grateful that somewhere would want to stock or present their offer! Retailer or stockist opportunities are grabbed and rejoiced – perhaps they are local to you, perhaps online, or perhaps overseas. Negotiations begin, price points and margins are squeezed, and deals are (sometimes reluctantly) struck. And then on to find the next stockist… However, many times a scatter-gun approach can start to appear. Your range might be sold cheaper in a tourist stockist, part in a small, unfrequented gallery, some (marked down) at sales events. I think it is fantastic to get sales – and any sales! – it is a sign that your product is working. But this can negatively impact on your ‘brand’.
You do need sales to survive as a business, but your brand positioning – how your consumers perceive you in relation to other brands – needs to remain intact. Too many sales and discounts online or in-store and it dilutes a higher-priced, high-end brand, as does selling in the wrong place. You need an approach to follow and stick to so that you ensure consistency in your brand positioning and customers’ eyes.
Some distribution questions
In my last post, The Right Strategy For Your Business, we explored your strategic approach and I explained that most small, creative and fashion brands I work with are differentiated – they offer something additional of value that customers will pay extra for. Sometimes, the product offer is niche – exploiting a new and narrow gap in the market, bringing an innovation to customers. David Jobber, in Principles and Practices of Marketing]i[, proposes that there are two types of distribution strategy – direct and indirect, and three main types of distribution approach – intensive, selective and exclusive distribution. But before we explore this, Jobber poses the following questions which I suggest you answer:
- Who is the consumer? Where are they? How much will they pay? Do they want delivery or to browse and buy?
- How will costs/time/brand position be affected? Does brand want volume sales or exclusive positioning?
- Will channels be mixed? How can these be integrated and managed…?
What is distribution?
Now you can answer the above questions, let’s review distribution. Direct distribution is where you sell directly, through one or more channels, to reach your consumer. So, you sell from your own website, own store, or market stall or a mixture of these, There are no middlemen and associated costs, and you are fully in charge of how your products – and brand – are portrayed and retailed to the customer, including your price points and how and when you mark down. This is, perhaps, more work, more monitoring and pushing of sales, dealing with returns etc. But here you also have the benefit of knowing and having a direct relationship with your customer – you can gather data for newsletters and social media to encourage repeat custom. Your control is greater.
Alternately, you can sell indirectly, through retailers, or through a wholesaler who then sells to retailers. Either way, if this is a wholesale arrangement, you get paid for the entire order – this clears your inventory and secures you payment earlier rather than waiting for the individual sales to come in. However, the more links in the chain between you and your customer, the less control you have over how your brand is priced, perceived and even displayed. Also, you don’t know or work with the end customer to exploit opportunities.
In the end, you may have a mixture of direct, and indirect – many of the small fashion and creative businesses and start ups I work with do this. Invariably, they build up varying distribution channels and after two or three years need to review how and where they sell as there are some channels less cost effective and time consuming. But that is really common, almost a rite of passage for a new business. And it’s actually positive, it shows business has been good…
Intensive, selective and exclusive distribution
Upon deciding whether you will go direct or indirect, let’s consider the approach. First of all, intensive distribution is where your pieces are, literally, everywhere – you produce a higher volume of cheaper priced products that is retailed in a wide number and variety of stockists and this risks over-exposure. This is also known as saturation coverage. For this, you need a high production capacity to churn through these and meet orders. This means you are more mass-market in your offer, and often your product is more standardised and quick to produce. One example of this might be stationary or interiors products or small gift items where you outsource the production, perhaps overseas, and secure deals with several high street retailers, plus online (your own website and others’), and you may also sell to trade e.g. interior designers and through events.
In a selective approach, you are more choosy with where you sell (yes, you can be choosy!). The considerations here are how many different outlets, what type of outlet, and how much of your range you sell. This way, you are not over-exposed, running the risk of customers losing interest in you, and you retain a more exclusive brand positioning AND price point. You are producing less, and charging more so this needs to be suited to, and reflected in, your product design and brand. Here, you might be a jeweller or menswear designer and you stock your range in a selection of mid-high end galleries, concessions in upmarket department stores, or independent boutiques. In addition, you will retail on your own website (without visible mark-downs – instead think ‘VIP sales events’) and carefully selected platforms alongside similar level of brands where you will be visible.
Lastly, you might secure an exclusive deal with one stockist. This one stockist is your only stockist and they love your work and want to sell it – perfect! Here, despite the fact that they should be trying to win your sole custom, as a new brand you can often be squeezed on your margin so you need negotiation skills par excellence! This common occurrence is well described in Porter’s ‘power of the buyer’. So, if it isn’t working out – the sales aren’t good from a smallish order, the margin is too low, the relationship is bad, etc – then you are tied to them alone for the duration which is risky. For guidance and information on navigating this, I recommend Toby Meadow’s How to Set Up and Run a Fashion Label[ii] –not just for fashion brands, but all higher end designer-makers.
Within these considerations are further issues. As I mentioned previously, you need to be realistic about your production capacity and also your desired cashflow and sales – The Design Trust have done a great blog on how to forecast this for the first time, so do read their pointers. You need to think about where you want to be seen, and who else is stocked alongside you; if you are selling on different online host platforms you need to ensure visibility from searches and also consider the commissions you will be charged.
Another consideration is the type of sales arrangement – perhaps wholesale, where your products are bought and paid for upfront – what, you might think, could be better than this! However, the risk here is that you have less control over what end price the products are retailing at and when products are marked down – both of these can affect brand positioning.
Or perhaps it will be a sale-or-return arrangement where you end up with stock that isn’t selling and is returned to you after a period of time when, by this point, you might also struggle to sell it. Both of these have pluses and minuses… So, in summary, the key word here is strategy – think strategically about how and where you want to sell. Think beyond the need for short term sales and covering costs. Expect to learn the hard way, to have disappointments and unexpected triumphs, for relationships to become less desirable. And remember, you have great products that will be in demand so you can be choosy!
Next time, in Creative Planning – Next Steps 5: Easy Marketing Strategy we will be exploring your marketing and I will suggest some simple tips for you to follow. If you have any questions after reading this, or would like me to work with you on your creative business, then feel free to email me on firstname.lastname@example.org, or drop a comment on the blog