More retail brand owners are favoring direct distribution — that is, selling their products solely through their own stores or websites.
These companies have few, if any, third-party distributors or indirect sales.
They rarely have markdowns or outlet stores, and their products won’t be found at online retailers like Amazon.
The advantage of this business model it that it allows businesses to better control inventory, pricing, promotion, and brand presentation. It also leads to a better, more comprehensive relationship with end customers. As a result, direct sales typically yield higher margins than wholesale, with higher conversion rates.
Lululemon Athletica (LULU)
In our research, one key question we ask is how companies sell and distribute their products and services. Athletic clothing retailer Lululemon employs a direct distribution model and plans to double its digital sales over the next five years.
- The company is rolling out an “Omni Guest Experiences” membership program and experiential stores, which will allow customers to take in-store fitness classes.
- The Omni program offerings should enhance customer engagement and draw new customers to the brand.
- During a test phase, 15% of membership sign-ups were from customers new to the brand.