incursion and defection
Defecting customers are finding new routes to sourcing products

David Gilroy on the silent and deadly killers of incursion and defection threatening wholesalers


This is the time of year when the industry looks to the trends and forces likely to shape wholesale in the months ahead.

Of course, Brexit is right up there – enough said. Other contenders might include sustainable packaging, reducing sugar content, plant-based foods and digital engagement.

We’ve witnessed profound consolidation in our industry over the past two years and it’s fair to say that wholesale is better prepared for the challenges and stresses ahead than ever before. However, two silent and deadly killers are lurking that could seriously hurt 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 and 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 this trend is becoming more pronounced. Alongside buying spirits and 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 and 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. Morrisons, for example, grew its core business by 0.6% over Christmas and added a further 3% growth through its wholesale activities.

The deadliest incursion threat to wholesalers resides in the heart of their customer base. Multiples and franchise operators are steadily taking the best retail sites across the country, hollowing out this category. This 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 and 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. When customers start disappearing it is exceptionally difficult to respond effectively. 

Critically analysing 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 neutralise 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.

Incursion and defection are the most serious threats facing our industry. The good news is that wholesalers are now in a great place to combat them. l

David Gilroy is co-founder and MD of Store Excel

More opinion: The impact push notifications could have on your business

SHARE
David Gilroy
David Gilroy is the convenience retail lead at W2 Commercial. He was formerly the operations director at Bestway Wholesale and Nurdin & Peacock.

LEAVE A REPLY

This site uses Akismet to reduce spam. Learn how your comment data is processed.