This week, a look at the current state of the brand-retailer relationship, according to new research, Tapestry’s new earnings report, the founder of growing luxury brand Brochu Walker and executives from Net-a-Porter. Scroll down to use Glossy+ Comments, giving the Glossy+ community the opportunity to join discussions around industry topics.
The current value of retail partners
According to a new NuOrder report based on a January 2024 survey of around 260 fashion brand workers, wholesale is the most profitable investment channel for brands. It accounts for 60% of total sales, on average — driving up this percentage are companies making at least $50 million in annual revenue. These sales are fairly equally split between specialty retailers, at 45%, and big-box retailers.
Forty-nine percent of respondents said they plan to prioritize investments in wholesale channels in the next year, with the goal being to expand their business. Only 4% of respondents said they plan to move away from wholesale toward DTC.
More specifically, 51% of brand executives said securing new retailers is a priority, while 45% of respondents said selling more through existing retail partners is a goal. Reported reasons for these focuses were that one-time retail partners have closed and existing retailers are buying more conservatively. In addition, brands aim to lessen their reliance on major retailers, reach new target demos and market their brand.
For existing retail partners, brands are seeking more details around sales and sell-through, with three out of four respondents reporting the use of ERP integrations to gain more visibility to this data.
Quote of the week
“Five or 10 years ago, the [brand] conversation was, ‘Drive to e-comm. That’s our lower-cost channel. It’ll be cheaper.’ But now, the cost of shipping is expensive, there’s the environmental consequence of it, there’s the cost of media, there’s all the technology you need to run your digital ecosystem, all the partners are expensive, talent and staff [are expensive], … So, e-commerce has become one of the most expensive channels to operate, especially compared to retail, not to mention wholesale.” –Scott Lux, global evp of e-commerce, technology and innovation at Esprit
Even so, only 12% of NuOrder’s survey respondents said they’re upping their wholesale focus in response to DTC marketing becoming more costly and competitive.
The brands worth betting on, according to Net-a-Porter
Among NuOrder’s survey respondents, optimism around the growth of their wholesale channels is up 6% year-over-year, but for e-commerce-only retail partners, it’s down 4%. Online-only wholesale retailers have seen a decline in market share in the last year, according to NuOrder.
Based on conversations with e-tailer executives, differentiating through unique curations is a priority as the landscape becomes more turbulent and competitive. For its part, as stated this week by buying director Kate Benson during the company’s virtual presentation about fall trends, Net-a-Porter’s curation is based on its focuses of refined luxury, exclusive access and sustainability.
But, based on information shared during the presentation, it’s also driven by what’s selling and what’s new, as novelty has worked to drive sales among Net-a-Porter in the past. As such, the onus is on brands to bring it, so to speak, if Net-a-Porter is among their target sales channels.
“Trends are large, sweeping shifts in our approach to the every day — a result of cultural movements, new creative directors and the macro environment. Or they are item driven — must-haves that all consumers flock to,” said Net-a-Prter market director Libby Page.
Among the brands and products that have proven popular and are, therefore, being rewarded with more Net-a-Porter love are The Row, Khaite and Alaia, where, “in some cases,” Net-a-Porter has seen triple-digit sales growth, Benson said. She attributed that growth to “increased customer demand, as well as higher average selling prices driven by a global rise in production and fabrication costs.”
Included in the “Like a Lady” trend that Net-a-Porter defined for fall were ballet flats. According to Page, Net-a-Porter customer searches for “mesh ballet flats” surged by over 200% in the past three months, and the retailer has sold 8,500 pairs of the style since January. Likewise, Net-a-Porter is buying into styles in burgundy for fall, after the color popped up across fall runways in February driving an immediate boost in sales: The retailer’s sales of spring-summer burgundy styles are up 18% year-over-year. Finally, “Hard-Working Workwear” was called a fall trend, aligning with the popularity of Net-a-Porter’s “Wardrobe Staples” — it’s the retailer’s top-visited “Shop By” menu option.
Providing customers with newness, and before other retailers, is also a Net-a-Porter priority. As Page stated, “We ensure we maintain a unique point of view by introducing new refined luxury brands that will excite and delight them.”
She added that the company’s top-spending “EIP customers,” standing for “extremely important persons,” are “drawn to new and unique brands that command a higher price point.”
Of course, in-demand brands often have their pick of retailers. Per Net-a-Porter, it wins them over with its global reach — its site sees 16 million monthly visitors — as well as its standout editorial content and EIP community. It often introduces first-access products to its top customers with community events, as it did in March with a Versace cocktail party, co-hosted by Donatella Versace.
For fall 2024, Net-a-Porter will offer first access to products by Khaite, Bottega Veneta and Chloé — alongside Chloé stores, it will be the first retailer to launch Chemena Kamali’s debut collection, which “fills a much-needed feminine void” in its luxury assortment, Page said. Net-a-Porter has invested in 22 of the runway looks, with dresses being the top investment. In addition, the retailer will also host a pre-sale of The Row’s anticipated Margaux clutch.
Other fresh fall styles Net-a-Porter is buying into include Altuzarra’s ruffle sweaters, cashmere pants and “all of the accessories,” Page said, noting that the brand was “a really unexpected highlight [offering] complete sensory overload for styling.”
Net-a-Porter is also betting big on hats, which made a splash on the fall runways. The retailer has purchased 70 styles.
Finally, in support of its Infinity sustainability initiative, Net-a-Porter is leaning into brands leveraging lower-impact materials and responsible craftsmanship, and those which are designed for circularity.
Specialty stores are fueling Brochu Walker’s growth
Ten-year-old luxury brand Brochu Walker has hit its stride. Its sales this year are up by more than 50% year-over-year, and since 2016, it’s experienced average e-commerce sales growth of 220%.
Karine Dubner, Brochu Walker’s creative director who also owns the business, owes the brand’s success to her 40-person team’s resilience and belief in its offerings, which she described as “timeless and quality, but also feminine.” At the same time, the brand has entered an array of new categories, which have expanded its customer demo and newly allowed for head-to-toe styling. And finally, customer loyalty has been a differentiator. Many of Brochu Walker’s retail partners have been customers since the brand’s inception, and 54% of its online shoppers return each year,
Since 2021, Brochu Walker has opened three stores, with a fourth, in Atlanta, set to open this summer. By the end of the first quarter of 2025, it will open two additional stores, in Greenwich and Houston. All of its stores are “very profitable,” Dubner said. In addition, the brand sells in more than 230 specialty stores, and it counts Neiman Marcus and online retailers among its wholesale partners. (“I want to protect our wholesale business,” Dubner said.) In 2023, direct e-commerce drove 64% of total sales. Currently, 72% of its sales are direct to consumer, while 28% are through wholesale partners. Its customers’ average order value is over $600.
“Ten years ago, the blueprint was: You start [selling at] department stores for brand awareness, and then you grow the brand,” Dubner said. “But at the beginning, most department stores weren’t interested. So our growth really came from specialty stores.”
She added, “We handpicked our department store partners — they’re relevant and we trust they’ll work with us [as partners]. But unfortunately, department stores are very promotional. And for branding, people need to feel that if they buy something, the value is not going to go down.”
Along with its presence at retail, Brochu Walker’s marketing mix includes digital ads, print mailers, customer events and ads in local magazines.
Soon, the brand will release a collaborative product collection and a sunglasses line. In the long term, Dubner hopes to have 10-15 stores and reach $200 million in annual sales.
“Luxury is about the quality, the detail. It’s also a bit exclusive,” she said. ”If it’s everywhere, it’s not as luxurious.”
Inside Tapestry, Inc.’s Q3 2024 earnings
During a Thursday morning presentation, Tapestry, Inc. broke down its third-quarter 2024 earnings, revealing a revenue decline of 1.8%, to $1.48 billion. The company also cut its sales forecast for the year to $6.6 billion — in February, it projected $6.7 billion.
Following the call, Glossy spoke to Brian Yarbrough, consumer discretionary analyst for Edward Jones, about the call’s key takeaways, as well as Tapestry’s strengths and weaknesses and its decision to scoop up Capri Holdings.
Behind the numbers
“It was an OK quarter. They are doing a great job not discounting and driving higher margins, but that’s balanced by the fact that there’s just very little revenue growth. Outside of the U.S., their Coach brand did decent, but in the U.S., their largest market, sales [declined]. And their other two brands, Kate Spade and Stuart Weitzman continue to struggle and post negative sales. [Tapestry] always talks about all the new customers they’re gaining — 1.2 million customers [this quarter] — but yet revenue is still negative. So where are you losing sales? You’re losing customers somewhere, or people are spending less. The demand side continues to be my biggest concern, because earnings will be OK this year, but if you have another year where revenues are kind of flattish or there’s very little growth, it’s going to be hard. You’re not going to have the big tailwind of lower freight expenses and it’s going to be much more difficult to drive earnings. At the end of the day, in the longer term, you really need revenue growth.”
The DTC-wholesale balance
“[Tapestry brands] are about 90% DTC. … With that model, you control your own destiny — you don’t have to go on sale if you don’t want to go on sale. Plus, if you’re selling to wholesale, you’re probably selling a bag to a retailer for $150 and then they’re selling it for $300. If you sell it [DTC], you’re getting that whole $300 revenue. So, I think they have the right [DTC-wholesale] balance. I like that they have less wholesale exposure, especially over the last year-and-a-half or two years. Inventories were so high, and retailers — especially in the U.S. and also in Europe — have been extremely cautious [when it comes to] ordering.”
The merchandise mix
“Several years ago, Tapestry took the playbook and said, ‘OK, we’re gonna cut SKUs by 30-40%, and we’re gonna have a couple of core styles, like [Coach’s] Tabby bag, and then we’re gonna put in a lot of newness.’ And that creates excitement around the brand and drives customers back. They’ve done a really good job there with the Coach brand. But Kate Spade sales just continue to decline. I think the hardest thing for Kate Spade is that they used to be extremely promotional. A lot of people bought the bags because they felt like they were getting a great deal. Whether they can grow without being promotional is the million-dollar question. That’s why they’re trying to infuse a lot of newness into the product lineup — to try and create excitement around the brand again.”
The Capri Holdings acquisition
“Right now, Coach is doing pretty well, but obviously, Stuart Weitzman and Kate Spade are struggling. And then you’re gonna buy a company that has Michael Kors that’s struggling, Versace that’s struggling and Jimmy Choo that’s struggling? I think this management team has done a great job, and I give them a lot of credit. But you’ve already got two brands that have some issues and you’re not growing them, so why buy three more brands and have a bunch of problems? You haven’t proven you can replicate Coach’s [success] with these other brands.”
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