There are many different business models that a shoe brand can work with, where everyone has their different advantages and disadvantages. Here I go through these, and also make up with some old myths that often are spread around some of them (not selldom by brands that use a specific business model and want to promote this).
Difference between wholesaler, agent and selling directly to retailers
Sometimes a shoe brand for some markets has a wholesaler/distributor (the terminology varies a bit) or agent, which helps in the work of retailers in that market. The difference between these is that the wholesaler buys stock themself from the factory and, in turn, sells it to the dealers, the agent is an intermediary who might have smaller stock themself but who otherwise handles the contact between the dealer and factory and takes a certain percentage on each pair of shoes. And to add to it’s of course also common that the factory with its brand sells directly to retailers, and often one can have a mixture of the above solutions around the world, in some larger countries one has a wholesaler, medium-sized markets an agent, and in smaller ones sell directly to the stores.
The advantage of the wholesaler is that the retailers can buy smaller stock themselves and don’t have to spend money on keeping sizes, and can in principle receive the entire brand’s range in just a few days to their customers. The disadvantage is that the wholesaler, after all, takes a slightly larger margin since as mentioned they chip in the money for stock and takes the risk in another way.
The advantage of the agent is that the dealer has an easier time meeting a representative of the brand and can get a good service, and the agent can design supply and synchronise purchases so the market gets good prices and delivery at the right time, and so on. The disadvantage for the retailer is that he needs his own stock to a greater extent, and that a certain amount for all shoes goes to the agent.
The advantage of buying directly from the factory is that the dealer has all the power to adapt the purchase completely, and that there is no need to pay any costs to an intermediary. The disadvantage is that the dealer must build up the warehouse entirely on its own, and if you are a small retailer, it can be harder to always get the deliveries on time, get quick restock of sizes and have a good contact with the factory, which may be far away.
Loake is a brand that has agents in many markets.
Own factory selling via retailer
Here we have an actor who owns and operates its own factory, and has its own brand that one sells through retailers. Sometimes they in some markets has a wholesaler or agent as intermediary to the retailers, or they sell directly to the stores.
Of course, there are many advantages to owning your own factory. You have all the power to develop production and products as you wish. Selling through retailers means that you can reach out wide and that you can get money even before the shoes reach the stage that they are at the end customer, but one disadvantage, however, is that you have a retailer who also needs to make money so the price ends higher. Most brands with their own factories and who use retailers also sell in their own channels, and then earn more per sold pair on those shoes sold there than those sold through retailers. One disadvantage for the retailers is that they are controlled with pricing and other things from the brand.
There are many examples of brands with this business model, some are Cheaney, Gaziano & Girling, Carmina, TLB Mallorca, Alden, Santoni and so on.
Gaziano & Girling has its own factory in Northampton, and sells shoes at retailers around the world, as well as on their own site and in their flagship store on Savile Row in London.
Own factory and sell in own channels
The most pure business model is when you run your own factory and sell directly to the end customer, maybe only online or in combination with your own physical stores. In addition to the large control of production and product that applies above, you have even greater control of how the shoes are delivered to the customers, and you have no other player who also needs to make money and add to the final price. The disadvantage, however, is obviously that you have much more difficulty reaching out than if you can take help from retailers, and you do not get any money until the end customer has made their purchase (and chose to keep the shoes).
A few examples of brands working like this are Meermin, Attila and Riccardo Bestetti (nowadays). Even in principle, all bespoke shoemakers work according to this business model, even though it of course is a slightly different thing.
Meermin has its own main factory in China, and only sells in its own stores and on its site. Picture: Milad Abedi
From another’s factory and sell through retailers
Here we have brands that are started by someone who does not own a factory, and who still wants the possibility of spreading their brand with the use of external retailers. The advantage is that it is obviously easier to start a shoe brand if you use someone else’s already established factory, you may at least in theory choose freely among all the world’s shoe factories and find one that suits what you want to do, and you can then get good spread on the brand through other stores. Disadvantages are that here you have many who need to get paid along the way before the shoes reach the customer, and it also means that there are more players that have opinions about things and that can cause problems along the way.
Examples of brands using this model are George Cleverley (their RTW), J. FitzPatrick, Finsbury, Emling, Norman Vilalta, Corno Blu and Project TWLV.
Project TWLV uses an Italian factory for its shoes, and sells at various retailers in Europe and the US.
From someone else’s factory and sell in their own channels
The last category is the brands that use another factory, but only sell in their own channels. A very common model, ranging from large brands sold in many parts of the world, down to what is usually referred to as Private Label, where perhaps only an individual store has its own shoe collection. Benefits is similar to the above that you can choose quite freely with which factory and type of shoe you want to work with, and you can determine the pricing of your brand without the involvement of anyone else. Disadvantages is that you are dependent on someone else’s factory and their whims, if you are large it can be demanding if the cooperation no longer works and you need to find a new factory, or as small brand because you may not necessarily have so much to say against a large factory with other major customers.
Interestingly, it is this category that is most like to promote that they “sell directly to the customer and therefore can keep such low prices”. More or less imaginative graphics are happily displayed where you add a ridiculously lhuge part of costs for “retailers and marketing”. Sure, there will be a price premium with retailers, but not gigantic, and the marketing budgets shown here are for the big luxury fashion brands which are quite few in number, and when it comes to classic men’s shoes, they are not really such a big competitor. It is quite a few brands in this area that add huge costs to marketing, at least relatively, although obviously LVMH-owned Berluti has higher marketing costs than Cobbler Union. But those who really should promote the fact of skipping middlemen should be the category that has their own factories and sells directly to the customer.
Examples of slightly larger brands that use this business model are Shoepassion, Septieme Largeur and Bexley, examples of smaller brands are Caulaincourt, Löf & Tung, Skolyx and Myrqvist.
Löf & Tung is Skoaktiebolaget’s own Private Label.
