Can wholesalers also be great retailers? TAN PARSONS considers the pros and cons.
For many wholesalers, relationships with retailers go beyond the cash & carry depot or making deliveries to their stores. Through symbol fascias and retail clubs, wholesalers have got closer to their customers, understanding their needs and helping them to improve their offerings.
But when Costcutter and Palmer and Harvey announced last month they were joining forces, they clearly demarcated their responsibilities.
Costcutter will run the retail side, taking over Palmer and Harvey’s 800 Supershop, Mace and Your Store shops. Meanwhile, with Costcutter’s existing deal with supplier Nisa due to expire in June next year, Palmer and Harvey will take care of distribution, supplying all Costcutter’s stores as well as their customers.
Palmer and Harvey’s chief executive Chris Etherington says: “I firmly believe you can’t be a great wholesaler and a great retailer. Your drivers are different. For me, that’s why Costcutter is so good – they are a retail business. They’ve never been a wholesaler.”
The deal definitely marks a shift in the convenience industry, partly because it gives the groups a combined buying power of £5bn through the newly formed Buyco, which will be headed up by Palmer and Harvey’s commercial managing director Martyn Ward.
But it may also mark the beginning of a consolidation process in the sector – Costcutter chief executive Darcy Willson-Rymer thinks so, saying he expects his group to double in size to 5,000 stores as a result of acquisitions and unaffiliated shops joining Costcutter.
But will manufacturers prefer organisations that specialise in either wholesale or retail? Today’s Group MD Bill Laird says retail and wholesale are indelibly linked and should not be mutually exclusive – the closer you are to the end user, the better.
Understanding the supply chain
“It’s about identifying the customer at different stages of the life cycle in the business – from supplier, wholesaler and retailer down to the consumer. You can’t afford to break that chain at any stage.”
He says that wholesalers need to understand what their customers need to in turn help them with their customers. Having retail clubs or offering full symbol status, such as the Today’s Extra fascia, is also a good way of keeping close to retailers.
Landmark Wholesale, which runs its own retail operation under the Lifestyle Express fascia, says it is a huge advantage to have wholesale and retail operations under one roof. Business development director Chris Doyle says: “Suppliers are telling us that this is what they want. At the end of the day, if you’re a manufacturer, you want to get your product through to the consumer – you’ve got to get it right in the wholesalers’ depots and in the retailers’ stores.”
While it is not easy to marry the retail and wholesale arms of the business, he says, the key is to have specialists in the right areas. “We don’t try to do those things at the same time in the same room. We have only been running our retail operation for five years, but we know it’s the right strategy.”