Nick Shanagher considers the opportunity for wholesalers to sell directly to consumers
The IT revolution that helped Tesco and Walmart leap ahead of the independent channel may have a sting in its tail, the authors of a new book from Wiley, Reshaping Retail, suggest.
Stefan Niemeier, Andrea Zocchi and Marco Catena have collaborated on the book, which summarises the world-view of the giant US consulting firm, McKinsey & Company.
Technology has handed power to consumers at retailers’ expense, they write. Smartphones that let shoppers search for, research, purchase and pay for products, after connecting to social media for reviews, have destroyed “the monopoly retailers once enjoyed over information about products and prices”.
The book’s most provocative assertion is that many retailers simply do not have the mindset to adapt to the new situation.
“Too many of those who began their careers operating stores are still trying to squeeze more from their traditional business processes, rather than responding to the new world in entirely new ways,” they write.
Wholesalers could ask themselves where they sit on this question. As the importance of the physical store diminishes, does this present an opportunity for wholesalers to sell directly to consumers? Indeed, the book starts in the Middle Ages, when grocers and mercers operated as both retailers and wholesalers. Are we headed back to this model?
The strengths of physical stores lie in four areas: preselection of range; aggregation of consumer demand; sales advice to shoppers; and the fast and effective physical movement of stock. If Amazon can do it, what stops wholesalers?
McKinsey says there are six reasons to enter a store still, and the authors believe that grocery and household products will remain the preserve of bricks and mortar stores, particularly c-stores.
Reshaping Retail suggests there will be four basic retail archetypes that will survive into the future: the lowest-cost operator (Aldi and Lidl); the convenience shop that is located in the right place; the convenience operator that depends on pre-selection (formerly the domain of the hypermarket); and the platform operator (Amazon or a department store).
“Convenience stores save consumers from making much effort to buy what they need or desire, although the ease of purchase comes at a price,” the authors say.
C-stores save time on travel. They offer instant solutions, especially if you have forgotten a key ingredient for a meal.
The authors argue that c-stores’ success depends on location, size and layout. They need to be close to a good flow of potential customers and away from potential competitors. Ideal locations might be villages without other shops within five miles.
This argument shows the consultant focus of the authors, which might grate at times as the world just is not as perfect as they envisage.
However, their ideas are thought-provoking. A wholesaler could easily have a business supporting local shops while also offering a ‘dark store’, lowest-cost operation to which shoppers who pre-ordered goods could go to collect their groceries.
What drives this is technology. “Anyone who can convene traffic can use technology to act as a retailer.” The chapter on technology fizzes with ideas on how to better forecast demand and promotions. One unnamed grocer replaced 10% of low margin products with higher margin ones and increased sales by 2% and margins by 1%, the book notes.
This book is sub-titled ‘How to win in the new consumer-driven world’ and provides you with a road map. But the direction that you take is very much up to you and having some bright minds to help can only be a benefit.