What Is Wholesale vs. Direct-to-Consumer?

Nike's turnaround story is largely about one strategic shift: moving back towards wholesale after years of prioritising DTC. But what do those terms actually mean — and why does the distinction matter so much?

Wholesale: Selling Through Retailers

Wholesale means selling your products to retailers — Foot Locker, JD Sports, Sports Direct, Zalando — who then sell them to consumers.

The retailer buys the products at a wholesale price (lower than the retail price), marks them up, and takes the margin in between.

Advantages for brands:

• Massive distribution — your products appear in thousands of stores globally
• The retailer handles logistics, staffing, and customer service
• Brand discovery — shoppers browse and find your products without actively searching for you

Disadvantages:

• Lower margin per unit (you're sharing the profit with the retailer)
• Less control over how products are presented
• Dependent on retailer relationships

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Direct-to-Consumer (DTC): Selling Directly

DTC (direct-to-consumer) means selling directly to customers through your own channels — your own website, your own stores, your own app.

Nike.com, Nike flagship stores, the Nike app — all DTC.

Advantages for brands:

• Higher margin per unit (no retailer taking a cut)
• Complete control over pricing, presentation, and the customer experience
• Direct relationship with the customer — data, loyalty, personalisation

Disadvantages:

• You bear all the costs of logistics, returns, customer service, and store operations
• Discovery is harder — customers have to actively seek you out
• Very expensive to build and maintain at scale

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What Went Wrong with Nike's DTC Push

In the early 2020s, Nike made a strategic decision to significantly reduce its presence in wholesale retailers and double down on DTC. The logic was sound: higher margins, more control, more customer data.

But the execution had unintended consequences. Nike lost shelf space in key retailers. Those retailers filled the space with competitors — On Running, Hoka, New Balance. Nike's products became less visible to casual shoppers who might have discovered them in a Foot Locker but wouldn't specifically seek out nike.com.

The brand also became more dependent on heavy discounting through its digital channels to drive traffic — which eroded the premium positioning it had spent decades building.

Elliott Hill's turnaround is largely about reversing this: rebuilding wholesale relationships and restoring Nike's presence in the retail ecosystem that built the brand.

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Why Both Matter for Margins

Here's the trade-off in numbers:

When Nike sells a £100 pair of trainers through a retailer, it might receive £50 (the wholesale price). The retailer takes the other £50.

When Nike sells those same trainers through Nike.com, it receives the full £100 — but has to pay for the website, the warehouse, the delivery, and the returns. Net margin might be similar, or even lower, once all costs are included.

The theory that DTC is always higher margin is an oversimplification. At scale, wholesale can be extremely efficient precisely because someone else is handling the expensive retail operations.

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See It in Action

The wholesale vs DTC debate is central to several Ask AYO earnings stories:

• Nike Q3 FY2026: Wholesale revenue up 5% to $6.5 billion. Direct sales down 4% to $4.5 billion. This is the deliberate trade-off Hill is making — rebuild wholesale first, optimise DTC later.
• Lululemon Q4 FY2025: Lululemon remains primarily DTC — it built its brand through its own stores and website. Digital revenue now accounts for more than half of quarterly sales. The question is whether the premium DTC model can sustain itself as US consumer sentiment weakens.
• H&M Q1 FY2026: Digital revenue growing strongly, but H&M's model is fundamentally wholesale-adjacent — it operates its own stores but relies on a physical retail network rather than a pure DTC approach.

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The Bottom Line

Wholesale and DTC aren't opposites — most successful brands use both. The question is the right balance. Wholesale gives you reach and discovery. DTC gives you margin and relationships. Getting that balance wrong — as Nike did — can damage both the business and the brand. Getting it right is one of the defining strategic questions in modern retail.

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Related Reading

• What Is Gross Margin?
• What Is a Turnaround?
• What Is Revenue?