Bob Mill's Direct-to-Consumer Operations to be Suspended
Bob's Red Mill, a renowned producer of flours, mixes, and cereals, announced the termination of its direct-to-consumer (DTC) operations effective August 12. The company will continue to sell its products through wholesale partners, a decision attributed to an efficient distribution network and the widespread availability of its products in retail stores and online outlets.
In an email to Retail Dive, a company representative explained that while they had been selling Bob's Red Mill products directly to consumers via phone, mail order, and their website, the brand's wide availability in stores and online necessitated the shift away from DTC sales.
Founded in 1978, Bob's Red Mill has been selling its products through traditional retailers for more than four decades. In 1982, the brand added its products to Fred Meyer, a Northwest grocery chain. Today, their products are carried by major retailers such as Target, Walmart, CVS, Giant, and Wegmans. The company has also made improvements to its online store locator to facilitate easier identification of its products' distribution.
This move by Bob's Red Mill reflects a growing trend amongst DTC brands, as challenges surrounding online sales become increasingly apparent. Analysts at BMO Capital Markets have previously questioned whether selling directly to consumers is truly more profitable than selling through wholesale channels, suggesting that the loss of wholesale sales often outweighs the benefits of higher unit prices at DTC outlets. Coresight Research, on the other hand, predicts that retailers will adopt a hybrid wholesale-DTC strategy over the next three years.
This hybrid approach has already been employed by several DTC brands, such as mattress company Casper, footwear brand Allbirds, beauty brand Glossier, and intimates brand Parade, who have partnered with retailers like Nordstrom, Sam's Club, Costco, Target, Bed Bath & Beyond, Public Lands, Zalando, Sephora, and Urban Outfitters. These partnerships offer various advantages to both the digitally native brands and traditional retailers.
For DTC brands, wholesale partnerships provide a physical distribution point, expand market reach, increase sales volume, and help lower customer acquisition costs. They also offer a means to diversify revenue streams and reduce logistical complexities. On the other hand, traditional retailers benefit from the influx of popular DTC brands, which drive traffic, particularly amongst younger consumers.
Bob's Red Mill's transition to a hybrid model allows it to maintain a strong DTC presence while leveraging the benefits offered by national grocery distribution. This strategic decision mirrors the experiences of other successful DTC brands, which have expanded into wholesale to accelerate growth, increase brand awareness, and tap into new audiences.
- The recent decision by Bob's Red Mill to shift from direct-to-consumer (DTC) sales to a hybrid wholesale-DTC model aligns with research suggesting that this strategy could be more beneficial for DTC brands.
- Analysts at BMO Capital Markets have previously posited that wholesale sales might prove more profitable than DTC sales for brands, as the losses from wholesale sales often outweigh the benefits of higher unit prices at DTC outlets.
- In light of Bob's Red Mill's transition to a hybrid wholesale-DTC model, several DTC brands, such as Casper, Allbirds, Glossier, and Parade, have already partnered with retailers like Nordstrom, Sam's Club, and Target to reap the advantages offered by this strategy, including expanded market reach, increased sales volume, and lower customer acquisition costs.
