Cut Your Wholesale Fees: A Brand's Guide to Profitable Direct Wholesale Growth
As the direct-to-consumer channel becomes more challenging to grow, more brands are turning to wholesale to open up additional revenue streams. And while third-party marketplaces (like Faire) are a valuable part of wholesale, it’s important to not be too reliant on these marketplaces. The lack of control that you have over your customers and the hefty fees associated with being in them can erode margins quickly.
This article explores the strategies brands can adopt to cut costs, regain customer control, and maximize profitability, highlighting why modern marketplaces like Faire often fall short for brands and how a direct-to-retailer platform like Vanik provides a superior, fee-friendly alternative.
The High Cost of Convenience: Why Faire is Bad for Brands
Marketplaces like Faire gained popularity by simplifying the connection between brands and retailers. However, this convenience comes at a steep cost, particularly for the brand (the seller). For a brand focused on maximizing profit and owning the customer relationship, Faire's model presents significant drawbacks:
Hefty Commission Fees: Faire charges a substantial commission on sales. While the rates can vary, it is often 25% on the first order from a new retailer and 15% on reorders (plus payment processing fees). These fees eat dramatically into the brand's profit margin, often making it difficult to maintain the typical keystone pricing structure (50% markup).
Loss of Retailer Relationship: The marketplace acts as a middleman, controlling the communication and data. Brands often lose the direct relationship with their retailers, making it harder to build loyalty, gather feedback, and encourage repeat business outside of the platform.
Pressure on Pricing: Faire often has policies requiring brands to keep their prices on the platform the same or lower than on other sites, limiting a brand's flexibility and potential to offer exclusive incentives to their direct customers.
Incentive Costs: The platform often incentivizes retailers with perks like free shipping or 60-day payment terms, costs which can be indirectly shifted back to the brand.
Ultimately, while Faire is excellent for retailers looking for easy ordering and net terms, its commission structure and control over the relationship can make it a less profitable and less sustainable growth channel for the brands themselves.
To see what these fees look like for a brand, let’s look at an example of a brands margins that is collecting reorders through Faire on a regular basis:
Keep in mind that when a brand transacts through a marketplace, like Faire, they don’t have a direct line of communication to their customers. All communication has to go through Faire and all customer data is kept by Faire, so not only are they giving up more margin, they are also losing control of the customer.
Now let’s take a look at the same example, but this time, we will show what the cost breakdown looks like for brands selling wholesale directly:
When you manage a customer directly, not only are you getting back significant margin (13%+), you are also able to develop a relationship with your retailers, which will only help strengthen your loyalty.
Strategies for Retailers to Reduce Wholesale Fees
The most effective way for a brand to slash wholesale fees is to shift focus to their direct wholesale channel. By bypassing expensive third-party platforms, brands can maintain the same wholesale price while retaining the entire profit margin. Here are the key strategies:
Own Your Digital Wholesale Channel
Instead of relying on a third-party marketplace, brands should create a direct-to-retailer portal using their existing e-commerce site (like Shopify). This ensures you pay only standard credit card processing fees, eliminating marketplace commissions entirely.
Implement a Smart Ordering System
The biggest challenge in direct wholesale is retailer retention and making reordering easy. Traditional methods involve manual emails, sales reps, or clunky login portals. A better solution is a technology that automates this process, like Vanik.
Vanik makes it super easy for retailers to order, saving you time and making you more money. Onesto Foods has seen a 2x increase in reorder speed, while saving 20+ hours a month, as detailed here.
Leverage Tiered Pricing and MOQs
To encourage larger, more profitable orders, implement a clear pricing structure:
Tiered Pricing: Offer deeper discounts for higher volume purchases (e.g., 40% off for 1-5 units, 50% off for 6+ units).
Minimum Order Quantities (MOQs): Setting an MOQ ensures that each order covers your operational costs, reducing the frequency of small, less-profitable transactions.
Vanik: The Superior, Fee-Reducing Alternative
For brands running their Direct-to-Consumer (DTC) site on Shopify and looking to transition retailers off high-fee marketplaces, Vanik is a far more profitable and brand-centric solution than Faire.
Vanik is designed to grow your direct wholesale business by focusing on making it simple for brands to onboard new retailers and engage with existing retailers, without needing to pay those hefty marketplace fees.
Virtually Zero Commission, Maximum Profit
The most significant advantage of Vanik is the elimination of the marketplace commission.
Faire: Charges up to 25% commission on new orders.
Vanik: You pay a flat monthly subscription fee, keeping 100% of the profit margin outside of standard payment processing fees.
This fee reduction instantly improves profitability by a minimum of 15% per reorder compared to Faire.
The Power of Direct Relationship Ownership
Vanik is built to strengthen your direct relationships with retailers by allowing you a direct line of communication with them.
Seamless Integration: It connects directly to your Shopify store and customer list in minutes.
Automated, Smart Reordering: Vanik acts as a retention engine, automatically sending personalized order reminders to your retailers based on their past purchase history and inventory cycles. This is often more effective than generic email blasts or relying on a retailer to remember to log into a portal.
Two-Click Checkout: Retailers do not need to log into a complicated portal. They receive a personalized email that takes them to a streamlined checkout, making reordering as easy as two clicks. If the retailer has any questions, they can reply directly to the email from the brand, allowing them a seamless connection to them.
Full Brand Control and Data
By using Vanik, all retailer data, communication, and order history remain under your control within your own Shopify environment. This allows you to better understand your retail partners and build long-term, loyal relationships without a platform intermediary.
The Takeaway
Brands committed to maximizing their profit and owning their customer relationships must pivot away from high-commission marketplaces like Faire.
By embracing a direct wholesale strategy and leveraging modern, retention-focused tools like Vanik, brands can drastically reduce wholesale fees, automate reorders, and drive profitable, sustainable growth in their independent retail channel. The key to reducing wholesale fees isn't asking the marketplace to lower them, it's taking back control of the transaction.
If you are looking to learn more about how Vanik can help you grow your direct wholesale business, set-up time to chat with us.
