Robots, space stations, mobile video communicators and nuclear fission were all far in the future when I was a kid, but are now a reality.
Future gazing inspired me to write an article in 2017 for Better Wholesaling: ‘Wholesaling: A message from the future’. In it, we followed Marwan, a retailer in the reimagined world of wholesale in 2022 (see below). Originally from Syria, Marwan enjoys a partnership-style relationship with his wholesaler.
The emphasis being on information sharing, technology and retail solutions. All his ordering, payment and communication is electronic. His visits to the cash and carry are for top-ups only and as a destination for learning, discovery experiences and business events. The depot offers a frictionless checkout experience, electronic PoS methods, electric vehicle charging and an electronically secured car park. Time saved frees him up to focus on serving his customers.
Now we are here in 2022, what lies ahead?
Wholesale will always be relevant, provided that it continues to add value. The shape and form may change, but the six fundamentals done exceptionally in wholesale will always apply: right product, right price, right service, right solutions, right format and right time. Dynamics in certain key areas will determine the direction of travel.
Consumers will demand sustainable food production, more local sourcing, less plastic and a demonstrable commitment to renewables.
The government-initiated drive, combined with awareness to eat and drink more healthily, will precipitate a change in diet.
Wellness and health-enabling products will also grow in importance. We are already seeing a shift to lower fat, sugar, salt, dairy and alcohol products.
Suppliers will reformulate ranges, and design and launch new products. New suppliers will emerge with exciting ways to offer healthy indulgence.
The emphasis on fresh food will increase with fresh produce brought to the fore. Plant-based protein will pose a challenge to the meat industry and it is conceivable insect-based protein will enter the diet. Wholesalers will need to be agile to respond to these trends.
The future of wholesale depends on the resilience of its customers. Clearly illustrated during the height of the pandemic. Hospitality effectively closed down while, by and large, the local small retailers prospered.
This is why I have always argued that wholesalers should de-risk by diversifying and by widening their registration bases. Companies such as JJ Foodservice did a brilliant job in shifting its businesses towards consumers and has benefitted as a result.
Although the hospitality industry is still facing tough challenges, all the indications are that it will emerge strongly, with consumers showing a keenness to eat out and socialise.
The future for small retailers is more nuanced. Who would have thought in 2019 that small stores would enjoy fabulous growth, and many would be offering app ordering and delivery?
However, a year of restructuring activity is predicted due to high inflation. There are pressures all across the sector. The major multiples are stepping up their small-store acquisitions.
Every store that moves to multiple-owned is one less for the wholesalers to serve. The term ‘convenience’ is being redefined by the quick delivery operators such as Getir, Gopuff, Gorillas and so on. They are well financed and expanding rapidly.
Their experiments with click & collect sound a warning. This is true disruption, and it will affect small stores, particularly in urban areas. I predict the wholesaler accessible-retailer universe will shrink in size and quality.
Wholesalers that best harness technology to improve service, customer engagement and efficiency will win out. Customers seeking value through speed and simplicity will shop around for great service – this will be the competitive battleground. E-commerce hitherto relatively under-exploited in wholesale is primed for explosive growth.
The Sunday Times reports that Shopify, valued at $144bn, makes it easy to set up an online store. They are now targeting business users. Check out b2b.store as well, which delivers this service for wholesale. Convenient electronic trading will become dominant in the future.
The warehouse will work in tandem with e-commerce acting as a showroom, more of a destination and immersive experience. Till-free trading has to be the ultimate objective. Payment methods will widen to include cryptocurrencies, blockchain and non-fungible tokens (NFTs).
Another prediction has been the rise of this class of digital assets. Electronic shelf-edge labels (rolling out now in Carrefour stores and in Musgrave) will become the standard. The cost is reducing, and as well as dynamic pricing, they offer product attributes, picking efficiency, stock-taking facilitation and profit enhancement. Customer loyalty and retention will become increasingly important.
Wholesalers will find ways to turn customer data into income. Effective strategies to maintain a continual focus on loyal customers through personalised instantaneous offers, bespoke pricing, added value and tailored experiences will offer wholesalers a powerful competitive device diminishing the dependency on price-led promotions.
Another projection is that consumers will spend $5tn on electric vehicles and self-driving software in the next decade. Tesla already offers $200-per-month self-drive software packages. Long-haul trucking must be ripe for driver-assist software, and wholesale distribution must be the next frontier for robot picking and order assembly.
People are central to success in any business. Loyalty is a two-way street, and I hope the move to valuing colleagues and providing for their welfare continues in the long-term.
For progressive wholesalers this will include fair remuneration, training, development, job enrichment, diversity and decent working conditions. Despite our sector being a low-cost industry, investment in people pays back. Parfetts appears to be having great success with its move to employee-owned status.
Higher productivity and lower labour turnover flow through to brilliant customer service. The successful wholesalers of the future will put their people first.
Competition and disruption
Wholesalers of the future will be more profitable than currently. This is essential for investment in technology and facilities to see off competition from all sides: multiple grocers, Amazon – now hitting £1bn in grocery sales – and the plethora of direct to store operators.
Tesco-owned Booker will continue to exercise a vice-like grip on the industry as it leverages its scale. The successful introduction of its Jack’s brand being a case in point. Other such retailer/wholesaler combinations cannot be ruled out. If wholesalers remain true to the six fundamentals, they will be robust enough to deal with competitors.
Disruption is a more unpredictable matter. It comes down to this: can any-one out there do a better job than you in your field? Can they get their goods to your customers at a lower cost than you? I foresee two possible models. The first is a stripped-back, ultra-low-cost discount cash and carry offering a focused range at unbelievable value.
The second is a virtual ‘dark’ operation, using AI and machine learning, no legacy systems, no physical stock with a just-in-time aggregator model based on linked two-way communications with its customers.
Market conditions and political interventions
Just a few years ago we were sailing serenely along. Then came Brexit, followed by the pandemic, and now conflict in Europe. The price of food and fuel is escalating. This is where we need coherent long-term government policies across energy, transport and food security. Successful wholesalers can mitigate by planning ahead for stable workforces, energy savings, sustainable energy sources, transport efficiencies and by adopting renewables in all facets of their operations.
Asked to prioritise one key area for securing the future, I would choose technology. Technology realises imagination and protects the business.