Whispering Death Threatens Wholesalers

The latest travails of the English cricket team in the Caribbean brings back memories of the great West Indian teams of the 1970’s & 80’s when they bestrode the sport like a colossus. They had a great many batsmen like Clive Lloyd and Vivian Richards but it was their bowlers that struck terror into the hearts of the opposition. Tall, powerful, aggressive and accurate bowlers such as Curtly Ambrose, Joel Garner and Courtney Walsh. It was Michael Holding who was the most feared. He was deadly and known as “whispering death” because he was so light on his feet through the delivery stride. Holding was so feared and accurate that he could devastate any batting line-up in one session.

After two years of profound consolidation in our industry years, wholesale is better prepared for the challenges and stresses ahead than ever before.  Yet the industry faces its own “whispering death.” Two silent & deadly killers are lurking and they could seriously damage the sector:  incursion by the multiples and customer defection. 

Just like many of you, I like to visit independent retailers and caterers. I always find them courteous, open and there’s a fund of learning points to be garnered. We know that wholesale customers now buy from a range of sources and that online offerings have increased purchase options and transparency across previous “demarcation” lines. However, in recent months I have noticed that this trend is becoming more pronounced. Alongside buying spirits & drinks from multiples on home delivery I am now seeing supermarket own label and fresh products being stocked. One retailer told me that he buys the quantities he needs from the supermarket every day and that the keeping quality on fresh produce is superior to that from his wholesaler. His customers are more than happy to purchase supermarket brands from him. He is also buying new & different ranges online – not available from the wholesalers. 

The latest festive season trading results confirm that consumers have achieved dominance over the retailers. Consumers are very savvy and will buy from any outlet that serves their needs. The multiples are being squeezed by falling market share, loyalty erosion, higher cost to serve (deliveries) and profit constriction. Where do they go to find new profitable markets? The wholesale sector looks like a juicy plum ripe for exploitation.  Morrison’s for example grew their core business by 0.6% over Christmas and added a further 3% growth through its wholesale activities.

The most deadly incursion threat to wholesalers resides in the heart of their customer base. The multiples and franchise operators are steadily taking the best retail sites across the country, hollowing out this category. For example the Co-op has just announced a rapid roll-out of their convenience store franchise model.  This threat is twinned with multiples actively looking to wholesale to small businesses. Meanwhile defecting customers are finding their own routes to new and exciting product sourcing through a range of channels from multiples, discounters to online traders. 

What makes incursion and defection so dangerous is that you don’t know that it’s happening until the business starts to go south and a blip becomes a trend. Then it’s too late – “whispering death.” When customers start disappearing it is exceptionally difficult to respond effectively.  Critically analyzing the business metrics is vital: customer numbers, purchasing frequencies, sales mix and transaction values provide an early warning of the dangers.

Prevention is the only way to neutralize the danger.  Giving great service, brilliant value, relevant range choice, top-level business expertise and bonding tightly with customers is now more important than ever. I see incursion and defection as a primary trend in 2019 and the most serious threat facing our industry. The good news is that wholesalers are now leaner, fitter and in a good place to combat that threat.

A version of this article was published in February 2019 edition of Better Wholesaling.