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Brands’ ‘trust budgets’ are a leap of faith for stockists

German mainstream womenswear brand Gerry Weber has ruffled feathers at its UK stockists and in the wider industry with plans to overhaul its wholesale strategy and centralise distribution from Germany.

The brand, which has 400 UK stockists, confirmed to Drapers last week it would shift a number of its larger domestic and international accounts to ‘trust budget’ arrangements, under which independents and franchisees hand over their allocated buying budgets for the brand direct to Gerry Weber. Gerry Weber will then tap into those stockists’ EPoS systems, analyse their sales data for the brand and use the information to scientifically pull together packages of stock for some forward orders and all repeat buying. Participating retailers will be rewarded with an improved margin of two percentage points.

Raised eyebrows

The plan to shift buying control away from stockists has raised eyebrows among rivals and the brand’s accounts, many of whom were still waiting for confirmation of the plans from Gerry Weber at the time of writing.

Several retailers contacted by Drapers question how product for the UK could be selected in Germany. “I don’t really see how it will work,” says one influential retailer, who asked not to be named.

There is also concern that Gerry Weber’s decision to centralise its international business, including scrapping the role of UK and Republic of Ireland manager How­ard Ross, could create distance between the brand and UK market trends. At present Gerry Weber will retain its UK office and showroom.

Yvonne Garner, co-owner of womenswear indie House of Carillon near Weedon in Northamptonshire says she has already had issues with product lines not catering to UK trends: “Collections have had a very strong focus on the European market, which is not in line with UK styles, and product that has been a good seller for us in the UK has often been discontinued because it hasn’t sold well on the Continent.”

Other stockists complain there has been a lack of colour in recent years.

Gerry Weber vice-president of international sales Monique Fischer explains that the wholesale strategy, coupled with the restructuring of the brand’s international business, aims to do the reverse and bring it closer to the UK market. “We want to understand the market more by being closer to customers and having a more direct line to them,” she says. “Gerry Weber is moving from being just a wholesale company to become more vertical. It means opening more of our own stores and franchises. It is about having our finger on the pulse so we can act on market needs.”

Fischer is adamant that ‘trust budgets’ will not be imposed on stockists and can only be adopted by customers with which the brand has a “close partnership and co-operation”. She denies that the strategy is the start of a withdrawal from wholesale by Gerry Weber to focus on its own retail operation.

The trust budget practice is uncommon in the UK. It is understood premium menswear brand Ralph Lauren has trust budget arrangements with larger stockists, although the brand would not confirm this, and womenswear brand Donna Karan is thought to have worked this way in the past.

Gross margin guarantees

However, German womenswear brand Gardeur, which has four UK concessions and 160 UK stockists, encourages its larger German independents and department store stockists to take a wider range of product selected by the brand, by offering gross margin guarantees.

Gardeur’s Republic of Ireland distributor Dermot Kelly says the strategy can benefit stockists. “Buying that way will help to improve lead times for repeat orders,” he says. “It can’t work for every brand but Gerry Weber is long-established. If the customer has trust in the brand and spends a significant budget, there is an opportunity for something like this.”

Gardeur’s stockists return unsold stock and top-ups are cut off at an agreed date in the season. Gabi Schmidz, Gardeur’s administrative supervisor for international sales, says the brand can only implement these arrangements with stores that allocate at least 269 sq ft of trading space to Gardeur.

John Galvin, owner of womenswear indie Galvin For Ladies in Tullamore, Republic of Ireland, has this arrangement with Gardeur coming in for spring 11.

“It does mean I’ll take a wider range of product than I previously would have but I can return what doesn’t sell,” he says. He would not reveal the level of margin that has been agreed.

Galvin For Ladies also offers a Gerry Weber shop-in-shop, and although Galvin has yet to discuss plans directly with the brand, he is sceptical about the trust budget arrangements at this stage. “We buy a lot from Gerry Weber but I don’t always want a product repeated when it is sold,” he says.

He also points out that providing daily feedback to inform the buying decisions will be “a lot of extra work” for an average margin increase of two percentage points.

Standardised offer

Industry sources agree brands are seeking to get closer to consumer trends. But Geraldine Bennett, managing director of womenswear company Oui Group, warns that a reliance on EPoS data that aims to maximise sales per square foot could lead to a more standardised offer at a time when consumers are looking for innovation. She says: “It is about trends now, and being closer to the season.”

Nigel Hughes, director of fashion agent APT Collections, which represents Gecko and Passport, also believes independent stockists are seeking partnership and reassurance during the ongoing economic uncertainty. “I know I am going to have to work closely with retailers and we have to nurture each other in these times,” he says.

But in tough economic times there are often calls for businesses to take risks and be innovative. Bennett says Gerry Weber’s strategy has “an element of genius and an element of risk”.

She says: “It depends on how well [Gerry Weber] knows its customers, how well stockists know theirs and how well Gerry Weber tailors the offer for each.”

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