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A concerted push into wholesale is paying dividends for Solo Brands, even as it takes a chunk out of its direct-to-consumer business. The maker of the Solo Stove and Oru Kayak increased its wholesale business 114.3% in Q3, while its DTC sales declined 11.5% over the same period.
These numbers seem to indicate that there’s a trade-off between wholesale and DTC sales, but Solo Brands CEO John Merris told Retail Brew that this kind of “near-term cannibalization” was anticipated and could even create tailwinds for the direct business in the long term.
“We definitely do not believe that this is a zero-sum game between the two channels,” he said. “We actually think that there’s a lot more synergy.”
Getting serious about wholesale: Merris said the wholesale growth is due to Solo Brands’s changing relationship with retail partners. He explained that the company decided in late 2022 to embrace a more omnichannel business model and started reaching out to top retail partners to let them know that they were serious about developing their relationship, despite its reputation as a digital-first company.
The overtures were well-received, according to Merris, and Solo Brands started working more closely with partners to improve shelf real estate and enhance its product displays. The process also revealed that retailers were interested in getting more visibility around Solo Brands’s promotional calendar, so they could help drive customer engagement.
This demand has helped Solo Brands ease up on discounts at a time when many retailers were laying them on thick to help clear out excess inventory. “We had retail partners saying, ‘Hey, we don’t think that you guys need to be as promotional as you’ve been, especially as you lean into this. Let’s be more disciplined,’” Merris said. “We’ve seen that this year we’ve been less promotional on a year over year basis, even in this tough environment.”
‘Free’ advertising: Merris said wholesale is also organically raising brand awareness. He noted that there’s been a 23% jump in first-time customers shopping online for fire pit accessories, which implies they were either gifted a fire pit or purchased one through a wholesaler.
The dynamic is allowing the company to lower its digital advertising costs while still driving customers to its website, according to Merris.
“We have spent 26% less on digital marketing than we did last year for the same period through Q3,” he said. “So the traffic that the wholesalers are bringing us is cheaper if you think about it in terms of traffic, because we have grown 8% overall as a business.”
He added that Solo Brands’s profit margins for wholesale and DTC are similar, which makes any potential trade-off even less painful. “So it’s a near-term pressure, but a long-term tailwind, maybe even a medium-term tailwind,” he said of the wholesale expansion.
Solo Brands plans to continue expanding its wholesale channel with more retailers. The brand will start selling at Target in the fourth quarter.