Kayla Marci

March 3, 2021

The rules of wholesale retail have changed. Are you with them?

The data behind successful third-party marketplace selling, with a look into the performance metrics comparing ASOS vs. Zalando.

For many years now, it's been reported retail is amid a direct-to-consumer (DTC) takeover. However, as we navigate trading in the COVID-19 era, it's the third-party titans reigning supreme.

Just take a look at some of the heavy hitters covered in this report. Farfetch's revenue in 2020 increased 64% to $1.7 billion with plans to expand into China and beauty. Zalando's latest financial report in Q3 reported a revenue increase of 21.6% to €1.8 billion with plans to triple the size of connected stores in 2021. ASOS achieved 10% growth per quarter over 2020 and added Arcadia brands to its ever-expanding portfolio. 

These are some pretty impressive figures to boast, especially when operating in the most challenging period retail has ever faced. So while wholesale channels may look more attractive to brands now than a few years ago, it's not without its risks. 

This makes data critical to provide visibility on how brands' retail partners are stocking, pricing and discounting competitors, as well as empowering negotiation and giving insight into new platforms.

Whatever your strategy, we are here to empower it with real-time data and analytics. Get in touch to speak to one of our Retail Specialists today. 

The great debate: Wholesale vs. DTC

An age old question. The short answer is both strategies work differently for each business and brands will often have to balance distribution to get the best of both worlds. 

The DTC model is characterized by having no intermediary to get goods to the end consumer, with businesses keeping their costs lower than traditional brands and generating higher margins. According to The Business of Fashion, if feasible, brands should aim for 50% to 80% of their sales to be DTC. This channel does have limitations to exposure, making it more challenging for brands to grow and tap into new markets.

Here lies the beauty of wholesale; however, brands will need to relinquish some control e.g., how a product is displayed on the site, the competing labels it's merchandised with and discounting. This is why many luxury brands favor DTC channels though there has been a recent pivot to sell on an e-concession model such as Alibaba and Tmall's Luxury Pavilion. This gives them more power over pricing, marketing and offerings compared to a traditional wholesale partnership. 

Online wholesale remains essential for mass market brands, especially as the retail landscape becomes digitized, with the H&M Group considering digital expansion into new international marketplaces. Major players are also starting to dabble in stocking third-party brands to gain greater market share, test the water in new categories or spotlight emerging talent. Mango is currently courting third-party brands and will soon stock Intimissimi lingerie. John Lewis plans to add 50 new fashion and beauty brands to its mix throughout 2021 and Marks & Spencer is adding Jaeger, Seasalt and more to its portfolio.

Retailers selling other brands need to ensure they comply with today's environmental expectations. Zalando is making sustainability a requirement for all brands and those stocked on the site will be ranked by the Higg Brand and Retail Module by 2023. Last year, ASOS set out new requirements for brands to follow ethical manufacturing and supply chain sustainability standards to be stocked on the site.

The third-party giants: Zalando vs. ASOS

While both retailers are basking in the success of the COVID-fuelled e-comm boom, they have nuanced strategies when breaking down the brands available.

ASOS's private label makes up 32% of items available on the site. The brands with the highest number of products available are River Island, New Look, Topshop, Nike and Puma - the top three evidence of ASOS' absorption of the British high street. Zalando's portfolio indicates more of a street and sportswear focus. The top brands stocked are Superdry, adidas Performance, Puma, Tommy Hilfiger and Only. Buckle up, we’ll be diving in deeper to examine the different metrics of a fast fashion and a sportswear brand on each of these sites.

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Case study: The fast fashion brand

River Island's home site spans menswear, womenswear and childrenswear, while the third-party sites primarily stock products for adults. Tops are 33%-39% of the total assortment at River Island and ASOS. However, there is a more even weighting at Zalando given to the top three categories.

Accessories make up 14% at the home site and Zalando yet is less than 5% of ASOS' offering. Swimwear makes up 8% at ASOS compared to less than 2% on the home site and Zalando. However, the majority of these styles are over two years old and 93% are on sale.

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Products command the lowest and highest advertised full price on River Island's home site, with consumers paying £3 for a pair of socks upwards to £165.00 for a leather biker jacket. On average, River Island products at Zalando are £9.00 more expensive than on its home site as it holds more products landing in the £40-50 bucket.

Discounting differs across all three retailers, with River Island currently advertising the most profound reductions on its own site at 54%. At its wholesale partners, Zalando is discounting a greater proportion of the brand than ASOS at 80%. However, it offers the shallowest reduction across the three at 30%. It also protects footwear, its second most invested category, from heavy markdowns, while ASOS and River Island avoid discounting bottoms too deeply. Despite ASOS stocking a high amount of River Island swimwear compared to the other sites, all in ones is the category warranting the deepest discount.

Analyzing products selling out of majority SKUs at full price over the past six weeks reveals the different types of River Island products consumers favor on each site. ASOS credits its quick pivot into loungewear as a factor in its successful sales, making it an ideal platform for brands to sell comfort-led products. At Zalando, the products selling out are dressier, indicating Brits are preparing for June 21st’s end of lockdown celebrations. Here’s a comparison of River Island’s Top Movers at ASOS compared to Zalando:

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Case study: The sportswear brand

On Puma's UK site, tops are given a similar weighting to footwear. This is mirrored at Zalando; however, ASOS prioritizes bottoms, driven by investment in sweatpants - harking back to its dedication to comfort. 

Breaking down the tops category further also backs this up. T-sShirts and hoodies are the most stocked product across all sites, yet 14% of tops available at ASOS are sweatshirts vs. 8% at Zalando. The third-party sites hold on to more underwear stock, where there is a greater emphasis on outerwear and accessories on the home site.

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Similar to River Island's analysis, the advertised entry-level is the lowest on the home site. Puma achieves this by offering football sock stoppers and then exits at £272.00 with a technical puffer jacket. ASOS commands the highest exit price, stocking a waterproof jacket from Puma's 2020 collaboration with Helly Hansen, which appeared on the latter brand's site, but not the former.

ASOS is currently promoting the most aggressive discounting strategy of Puma products, with the greatest proportion of products reduced and the deepest markdown. Zalando has a similar reduction rate to the home site; however, it's discounting slightly more items. All retailers are dedicating the deepest discounts to fringe categories that aren't heavily stocked and have the lowest sell out - dresses, all in ones, product sets and swimwear.

The tops category experienced the highest number of full price majority SKU sell outs over the past six weeks. Digging deeper reveals various T-sShirt options drove this. Top moving products at ASOS were categorized by trend-led products leaning towards athleisure silhouettes and lifestyle sneakers instead of performancewear, which saw success at Zalando. Here’s a comparison of Puma’s Top Movers at ASOS compared to Zalando:

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The state of luxury

Over the past few years, luxury brands have been trimming back their wholesale partnerships, concentrating on DTC strategies to achieve higher margins and gain back control of their pricing. For example, 90% of Prada’s sales were direct and it also had a notable shrinking presence on third-party sites. Its freshly-struck deal with Net-a-Porter provides a glimpse into the future of luxury wholesaling, allowing the brand to own and control Prada and Miu Miu inventory available on the third-party site. Net-a-Porter will then earn a commission for any products sold instead of marking the products up to turn a profit. This alternative model is an attractive solution as designer brands can be present on third-party sites, while generating sales and maintaining exclusivity.

With Prada tightening its distribution channels, the number of options stocked in the UK has fallen YoY by 84% at Farfetch, 47% at Net-a-Porter, 25% at Mr. Porter and 26% at Selfridges. Only Mytheresa has seen an incline at 17%.

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Prada's highest priced goods are also housed on its own site instead of through its wholesale partners. This way, it can invest in ecommerce innovation and tailor its services to its high-income consumers now shopping for luxury goods online with the role of bricks-and-mortar stores forever changed.

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Having this kind of information at your fingertips is golden if you’re experiencing pushback from a wholesale partner suggesting your product is priced too high or too low for their site. Arm yourself with knowledge of the market and have the data to back it up!

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