Costco Wholesale

If you want to get a sharp reaction from a wholesaler, pick one of the following three conversation topics: pricemarked packs (particularly recommended selling points and margins); illicit trading (and the unfair competitive advantage it delivers); and allowing the general public to shop in cash & carries. All three never fail to stir the blood.

I have had a long-standing ‘relationship’ with the third topic, ever since we opened up the registration base to business users at the now departed Nurdin & Peacock in the mid-1990s. We were convinced that this was a sensible broadening of business reach, but despite our best efforts, we were hit with a storm of rage from retail customers. They did not want us to be selling at wholesale prices to what they specifically referred to as their customers.

We rode out the storm and retail business continued to grow, but ultimately, the damage to our reputation had been done.

Twenty years later and the issue is very much back on the table. Times have changed and the UK working age population (16 to 64 years old) is riding high at 31m, of which 4.6m (15%) are classed as self-employed. Set this against the 33,000 independent retailers and 263,000 caterers in the UK, and the size of the opportunity soon becomes apparent.

The food and drink landscape has changed fundamentally, with ‘convenience’ as the trigger. That is not just because of convenience stores, either – it is the result of the greater number and diversity of outlets available, the convenience of ordering online or with an app, and the option of having goods delivered to the door.

Independent retailers and caterers are also taking advantage of online purchasing from sources other than wholesalers, including supermarket home-shopping services, Amazon, Ebay and specialist niche retailing businesses.

There was a time when the trading demarcation lines were clearly drawn. But now, all bets are off. Selling to small businesses is a natural and now increasingly necessary extension for cash & carries.

I firmly believe that independent retailers cannot realistically expect their cash & carries to be immune from having small businesses (in other words, consumers) as their customers.

Costco leads the way

In the UK, we tend to be precious about this. For example, there has been a lot of noise recently about Rogers Wholesale Foods and JJ Food Service opening to the public, and Blakemore trialling a widening of its customer base.

But it is normal practice in many countries around the world. Bulk consumer shopping or ‘hybrid’ warehouses are well accepted in companies such as Atacadão in Brazil, Massmart in South Africa and Eurocash in Poland. They are all commercially successful. 

Even in the UK, Costco Wholesale has been successfully selling to all types of business customers across the spectrum for many years. Independent retailers shop there very happily alongside ordinary Joes like me.

Nevertheless, while I am all in favour of it, it has to be done well. In this respect, Costco sets the benchmark. It does a great job across the store, while sprinkling it with glamour and theatre. It is always fresh and exciting.

This is where we have to get real. Small business users have plenty of choice, so to entice them into a cash & carry and retain their loyalty, the offer has to be compelling. Bulk purchase prices must be competitive, the range must be relevant, the fresh food must be high quality, operational standards must be excellent (no forklifts on the floor), and service at all the touchpoints must be first-class.

I am a proponent of the hybrid bulk purchase model. It is the way forward for cash & carries. But it has to be done well for all types of customer. 

Wholesale expert David Gilroy is the managing director of consultancy Store Excel

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David Gilroy is the founder and managing director of Store Excel. He was previously the convenience retail lead at W2 Commercial and held operations director roles at Bestway Wholesale and Nurdin & Peacock.

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