While big brands like Nike and Prada have been clear that DTC will dominate in 2021 and beyond, these companies understand that innovative partnerships with their most important retail accounts are still crucial.
One growing trend: the emergence of drop-ship initiatives, which allow retailers another way to access product without assuming the costs that come with carrying inventory. Brands own and control the goods, meaning they ship directly to consumers. In these arrangements, stores don’t benefit from the retail markup — often at least two times the wholesale price — but instead draw a commission or share revenue.
In its fourth-quarter earnings call this morning, Foot Locker Inc. said it launched a pilot drop ship program with Nike to activate additional inventory that is not held in its stores or warehouses. “While it’s early on, the program aims to provide more of the right product at the right time, to better satisfy customer demand and shorten lead times,” said Dick Johnson, Foot Locker chairman and CEO.
Johnson said the program will evolve once the companies determine “what appeals to the customer and what doesn’t.” But the biggest advantage? If inventory is sold out, there’s a chance to get more. Additional details weren’t disclosed.
Also this week, Prada, which has been reducing its wholesale exposure dramatically, inked a drop-ship deal with Net-a-Porter, as first reported by Business of Fashion.
Meanwhile, Nordstrom said in its investor day this month it would reduce its traditional wholesale offering to about 50%, while ramping up concessions and drop ship.
But while they mesh with the digital evolution necessary to sustain retail, these deals can be complicated, since the merchant no longer oversees the delivery of goods.
“These people we do business with are retailers as well. We lose some control, but the confidence that we have with the trusted brand partners … enables us to work [together],” Pete Nordstrom, president and chief brand officer told investors.