Department Stores Make a Comeback

After a pandemic pivot to e-commerce, many brands are back to working with third-party retailers, this time, with better terms.   Background:   The wholesale model, while offering exposure and some upfront revenue, did not always have the best terms for vendors. Department store bankruptcies, pandemic-induced store closures and the boom in online shopping pushed brands further towards their direct-to-consumer and e-commerce businesses to drive revenue.    But that’s beginning to change. As shoppers return to stores, brands are seeing value in ramping up their partnerships with multi-brand retailers — this time on better terms. “What I'm hearing across the board from both brands and retailers is that this vendor-retailer relationship is more collaborative than ever,” said BoF retail correspondent Cathaleen Chen.    Key Insights:   There are multiple factors pushing brands back to wholesale. Among them, the growth of e-commerce, which has slowed after spiking in 2020, and the growing consumer appetite for curated, in-person shopping experiences that allow them to stumble upon new designers. “That discovery is still so important, and now [shoppers are] relying on a cool third-party retailer to sort of facilitate that discovery,” said Chen.Both parties are also increasingly open to exploring other models like concession, consignment — more typical to European department stores — and drop-shipping, where the brands themselves are responsible for fulfilling orders made through retailer’s websites.  Brands are returning to wholesale, but not at the expense of their direct-to-consumer and retail offerings. “I think we're at a point where everybody has a more well-rounded business so that if things do go bad again in whichever channel, they can be agile and adapt very quickly,” said Chen.  

Additional resources:   How to Take a Brand From Local to Global | BoF  Searching for the Next Barneys  Inside Neiman Marcus' Post-Bankruptcy Playbook 

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