A strong day on your website should be good news for the whole business. But when wholesale and DTC (direct to consumer) draw from the same inventory, a surge in online orders can leave your retailers in a bind and without access to products that are selling through.
The problem may only become obvious a few days later. A buyer calls to replenish a product that is selling well, and the rep has to explain that the brand’s own website sold through what was left. The online orders were legit, but so was the retailer’s need for that inventory.
Matador Equipment accounts for that inevitable tension in its inventory planning. On the Between the Drops podcast, Nellie Stephenson, COO, and Chris Vonderhaar, Sales Director, explained that the brand maintains separate inventory allocations for wholesale and ecommerce. Forecasts and preorders inform the split, and moving stock between channels requires a deliberate decision.
For brands working through the same issue, it pays to plan ahead and determine how much inventory each channel will need before replenishment, and what evidence would justify changing that allocation. Working through those numbers gives the team something concrete to use when the website sells faster than expected.
Matador’s small team supports both wholesale and DTC, and has worked out how to plan across both channels. In the conversation, the team points out that DTC sales are visible every day. Wholesale can be quieter, taking effort to notice despite relationships with retailers that have been buying for five or ten years, sometimes longer. Which means Matador has to earmark inventory for wholesale by predicting retailer demand.
Nellie described the risk of a shared inventory pool: “One big day on the website or one big order from a customer could wipe us out channel wide, like all channels wide.”
Matador reduces that risk by setting aside inventory for each channel, using forecasts and preorders to determine how much each receives. That means a strong day on the website can sell through the DTC allocation without automatically consuming the stock reserved for retailers.
That wholesale allocation covers accepted orders and anticipated demand, including retailers coming back to replenish later in the season. Matador can move stock between channels if it needs, but it won’t ever happen automatically, and the team first has to determine whether the channel giving it up will still have enough to meet its needs.
Let’s work through an example of our own. The numbers and decisions below are hypothetical, rather than a description of Matador’s inventory or internal policies.
Suppose a travel gear brand has 1,000 sellable units of one backpack SKU on hand. Its next delivery is expected to be received and ready to ship in eight weeks. The team needs to decide how to use those 1,000 units across that period.
Wholesale already has 300 units committed to accepted preorders. The team reserves those first, checking the shipping dates against the stock on hand. For this example, there are no existing DTC orders waiting to be fulfilled; those would also need to be accounted for before dividing the remaining units.
Next, sales reviews retailer replenishment from comparable periods and checks expected needs with reps. That work supports a forecast of another 250 wholesale units over the eight weeks, beyond the preorders already counted.
The DTC team forecasts 350 units for the same period, using recent sales and the expected effect of a planned campaign. Because the campaign is included in that forecast, operations does not add it again as a separate demand estimate.
That leaves 100 units after commitments and forecast demand. The team chooses to hold 50 as a buffer within each channel’s allocation. These are planning assumptions for this example: another brand might need a larger reserve because deliveries are less reliable, or a different split because demand is more variable in one channel.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Now there is a reason for the 600/400 split. Wholesale needs more stock because it has an existing order book to fulfill as well as expected replenishment demand. The website receives enough to cover its forecast with a small reserve.
This review also exposes shortages early. If commitments and forecast demand had totaled 1,200 units, the team would have a 200-unit gap before setting aside any buffer. Changing percentages would only move that shortage between channels. The team would need to revisit what it could support, including whether to reduce planned promotional demand or pursue an earlier delivery.
Run this exercise at the individual SKU level. Having enough inventory of a product overall will not help if retailers ordered a color that the website has already sold through.
Four weeks later, the website has sold all 400 units in its allocation. The campaign performed better than expected, and the DTC team asks for another 150 units to keep it running.
Wholesale has shipped its 300 preorder units and sold 80 units in reorders. It has 220 units remaining from its original allocation of 600.
That warehouse balance alone cannot answer the transfer request. Operations needs to know how much of those 220 units wholesale still needs during the four weeks before replenishment.
Sales checks with reps and reviews current reorder activity. Demand is running below the original forecast, and that review supports an updated estimate of 100 additional wholesale units before the next receipt. There are no other accepted orders awaiting shipment in this example. The team keeps the 50-unit wholesale buffer because demand and the inbound date still carry uncertainty.
The calculation is straightforward: 220 units remaining, minus 100 in expected wholesale demand, minus a 50-unit buffer, leaves 70 units the team could consider releasing.
That gives operations a defensible answer. Transferring 70 units would leave wholesale with 150, enough for its updated forecast and agreed buffer. Transferring the full 150 requested would leave only 70, which is 30 below expected wholesale demand even before allowing for uncertainty.
The DTC opportunity is still worth pursuing. But it does not make the other 80 units available without a consequence. The team can approve a smaller transfer and reduce the campaign’s pace while it works on replenishment.
At Matador, selling out in one channel starts a conversation about what the other can afford to give up.“We can move inventory between those allocations,” said Nellie, “But we have to say, okay, are we willing to make this borrow to support this channel from this other channel?” There needs to be a solid, defensible reason to risk potentially shorting one channel over the other.
In our example, the team could release 70 units while keeping enough stock for expected wholesale demand and its agreed buffer. That calculation needs another look if any of the following changes:
The first step is to update the calculation when the facts change. If the team wants to release more than that calculation supports, it needs to be clear about the retailer demand it may be unable to fulfill.
The practical value of an allocation policy is that it helps people reach an answer while there is still time to act. “Be thoughtful about borrowing” leaves too much open when a campaign is already selling. Without clear rules, inventory can end up going to whichever team is pushing hardest for it that day.
For your brand, a workable rule could be that operations has to approve transfers after sales confirms the remaining wholesale requirement and the inbound date has been checked. Accepted orders stay reserved. Reducing a channel’s agreed buffer requires a separate approval because it changes how much uncertainty the business is willing to absorb.
For each request, the team should be able to answer:
Record the answer in terms people can use. For our example: approve 70 units for DTC, retain 150 for wholesale, and review the balance next week or sooner if the inbound date changes. That is much easier to act on than a general instruction to support both channels.
The inventory and ordering systems then need to reflect the transfer before those units are offered for sale. Reps should see the revised wholesale availability, while the website should only gain the quantity that was approved. Otherwise, a sound decision can still result in both channels selling the same stock.
Bring one frequently contested SKU to the next inventory meeting. Put its open orders next to each channel’s forecast through the next usable receipt, then work out what stock remains after the reserve your team agrees it needs.
If someone asks for more inventory, test the request against that same calculation. Ask what has changed since the allocation was set and which obligation or assumption would be affected by releasing more.
Matador’s experience offers a useful discipline here. Separate allocations make the team stop and choose how to support each channel, even when one is getting more attention that day. The forecasts and preorders give that choice a basis.
The goal is to be able to explain the decision: how much can move, what the remaining stock needs to cover, and what would trigger another review. Then a strong day on the website can lead to an informed conversation about growth, with the retailer’s next order still part of the plan.
Listen to the entire episode of Between The Drops here, or on your preferred place for podcasts:
Spotify Apple Podcasts Youtube