What has been happening in the wholesale sector?
Although the fortunes of individual sectors have varied in recent years, in general terms the wholesaling sector has seen the following developments:
- the expansion of large multiples in many retailing and service sectors. Because these companies purchase centrally direct from the manufacturer or distributor, they quite often bypass the traditional wholesaler
- the introduction of cash and carry facilities by many wholesalers in an effort to keep prices as low as possible
- huge growth in ecommerce, with both wholesalers and many retailers selling online. The rise of the small online seller, including many eBay traders, has expanded the potential customer base for the wholesale sector. The last few years have also seen an increase in the number of independent retailers as many new businesses have been set up on the High Street to fill the gaps left by the multiple chains migrating to out-of-town locations. Although many of these businesses close quite quickly after opening, others are ready to take their place and it seems that, for the moment, the general trend in numbers is upward
- the emergence of wholesaler/retailer partnerships and alliances (including partnerships between wholesalers and buying groups), to help the independent retailer to survive
- a trend towards larger depots and away from single depot operation
- increased regulation of many sectors, for example packaging waste regulations and food safety regulations
- the introduction of tobacco display bans, requiring many wholesalers to make adjustments to their premises
- very competitive trading conditions - particularly during the economic downturn of the late 2000s and early 2010s, made worse by very high fuel and overhead costs. Although the economy started to recover in the second half of 2013 and fuel costs fell quite significantly, very low prices across the whole of the retail sector - and in particular grocery retailing - put pressure on wholesalers. The economic recovery continued through 2014 and into the first half of 2015 but then stalled in the second half of 2015 and the first half of 2016. Since the Brexit vote in June 2016 there has been little growth in the economy. Increased inflation and restricted real term wage increases have put pressure on disposable incomes, resulting in subdued consumer spending. Little change, if any, is forecast for 2019 and into the foreseeable future. The fall in the value of sterling following the Brexit vote pushed up costs for the wholesaling sector and the slowdown in consumer spending made it difficult to increase prices to retail and other business customers
- an increased focus on price, with customers able to choose from a wide range of wholesalers and demanding best value for their business
- wholesale grocery and foodservice sales to independent and convenience retailers faltering due to falling prices, problems with customer retention and declining tobacco sales
- the introduction from the start of 2016 of the Alcohol Wholesaler Registration Scheme which means that all wholesalers of alcohol must be registered with HMRC and, from 2017, retailers of alcohol can only buy from registered wholesalers. This has had a beneficial effect on wholesaling, increasing sales of beer wine and spirits
- the introduction of minimum alcohol pricing in Scotland in May 2018, reviving the possibility of its introduction in England
You will have to decide:
- whether there are enough customers in your area to support your business
- whether the customers you are planning to supply have a realistic chance of long-term survival - in a few sectors, because of the dominance of online specialists and large premises-based businesses, and in some cases because of technological advances, small independents have only a slim chance of succeeding
- whether you will be able to compete against any other similar businesses in your area
Keeping up to date with developments
Joining a trade association is an excellent way of keeping up with developments in your industry. The wholesaling sector is represented by various different trade associations, some of which produce specialist journals of interest to those operating in a particular market sector. The industry as a whole is represented by the Federation of Wholesale Distributors (FWD) - you can find out more on their website.
Subscribing to a trade journal is another good way of staying up to date. Wholesale News, for example, is aimed mainly at grocery and food-service wholesalers and is published by the FWD. You can find out more and subscribe online on the FWD website.
Trade shows
You can get a lot of useful information by visiting a trade show or exhibition for your type of business. The Exhibitions website contains details of trade shows that may be of interest to you.
More content for wholesalers from across the Donuts
- Wholesaler legal issues
- Six tips for suppliers dealing with wholesalers