3 Biggest Pain Points for DTC Brands Moving to Wholesale

For many direct-to-consumer (DTC) brands, getting into wholesale seems like a logical growth lever. Wholesale offers the promise of scale, expanded reach, and additional revenue streams.

But the transition isn’t always simple. The business has its fair share of differences, and without some sort of guidance, brands might find themselves setting themselves up for failure. 

So let us be your guide today and let’s explore the three biggest pain points DTC brands typically run into when shifting into wholesale, based on our experiences with brands on our platform and our more than 17 years of experience optimizing brands’ wholesale operations. 

Pain Point #1: Margin Compression and Financial Risk

In the DTC space, brands often enjoy higher gross margins by selling directly to consumers without middlemen. In wholesale, you have to sell at a discounted price (to retailers), which reduces per-unit margins.

Payment terms are looser. Retailers often expect net-30, net-60, or more. That means longer cash conversion cycles.

There’s also a risk of overproducing inventory. If orders from retailers don’t move, you can be stuck with inventory that wasn’t forecasted properly.

And returns, markdowns, or unsold inventory often land back on the brand (or eat into profits) especially in fashion or seasonal categories.

In fact, many DTC brands delay entering wholesale because they fear loss of margin control and over-exposure to retailer demands (pricing, display, promotions).

Mitigation Strategies:

• Negotiate favorable payment terms (e.g. deposit or partial up-front payments, shorter net terms).
• Do smaller test orders / pilot programs before full rollouts to wholesalers.
• Maintain a strong DTC channel in parallel to cushion financial fluctuations.
• Build in a buffer for returns, markdowns, and unsold inventory in your financial modeling.

Pain Point #2: Operational Complexity and Supply Chain Strain

Logistics change and for brands entering wholesale, this often means larger, pallet-oriented shipments versus many small parcels. Inventory forecasting, warehousing, and fulfillment all need to adapt.

What sells in the DTC space may differ from what retailers want. You may need to create separate SKUs, packaging, or packaging formats (for retail display) which increases complexity and cost.

It’s also not uncommon for branding, labeling, and packaging requirements from retailers to differ. Compliance standards, packaging durability, point-of-sale displays etc. add layers of cost and process.

Returns and reverse logistics are different and often messier. This means that there are times when retailers have different return policies, and sometimes expect the brand to absorb the cost or take back unsold/discontinued stock.

Many DTC brands have e-commerce tooling built for small-parcel and direct orders. Wholesale requires order management systems, B2B portals, ERP integrations, forecasting tools, and more.

Mitigation Strategies:

• Audit your supply chain and fulfillment operations: where are the gaps in handling large, bulk orders vs small parcels?
• Invest in or partner with technology/tools that support B2B/wholesale ordering. 
• Build flexibility into packaging / SKU design so you can adapt for retail display and retailer requirements without reinventing products.
• Start with a small number of retail partners to pilot operations and refine processes before scaling broadly.

Pain Point #3: Channel Conflict and Brand Control

When you sell through wholesale, you often lose some control over how your brand is presented. Retailers may discount, bundle, or otherwise present products in ways that diverge from your direct brand messaging.

You might even run into situations where your own DTC channels conflict with your retail channels. For example, customers might see cheaper prices on your DTC site vs in-store, or see promotional activities that undermine what retailers are doing.

Retailer demands and competitive pressures may force you to discount more (or allow promotions) that hurt your overall brand positioning or margins.

But it’s not all downsides, retail channels expose your brand to a whole new segment of buyers and can scale up your orders significantly. You just need to be sure to take into account some of the limitations or idiosyncrasies that come with the retail channel as well when you’ve been used to DTC. 

Mitigation Strategies:

• Define clear channel rules/policies: e.g. minimum advertised price (MAP), geographic exclusivity or limits, control over discounting or promotional campaigns.
• Segment your product lines. Maybe have some SKUs exclusive to DTC, others exclusive to wholesale, to reduce direct overlap.
• Collaborate with wholesale partners on marketing and display standards. 
• Monitor and enforce policy violations (like retailers discounting too deeply) while ensuring retailer partners are incentivized to maintain alignment.

Moving from DTC into wholesale is often a necessary evolution for brands looking to scale, but brands need to be sure to do it strategically. 

It’s very possible to manage the transition in a way that preserves your brand’s identity, core margins, and customer relationships while opening up new growth channels.

At RepSpark we’ve been helping brands transition and expand their wholesale operations for more than 17 years, reach out and we can help guide you through what that could look like for your brand.