What will the effects of Asda entering the wholesale channel be?

Asda has now launched its membership-free cash-and-carry operation at its store in Patchway, Bristol, with the concept set to be rolled out across the UK, if successful.

The 20,000sq ft operation, under a new fascia called The Deal Depot, has its own dedicated management team, uniforms and a separate entrance, with no Asda branding to be seen anywhere inside. It offers bulk packs, everyday essentials and own-label ranges from the Walmart-owned Sam’s Club.

Speaking about the news, industry expert David Gilroy says: “The current wholesale market is over-supplied. Many operators are working on scarily skinny margins. Should they be worried about the incursion threat increasing from ‘serious’ to ‘urgent’? Yes and no.

Read more: Asda to launch wholesale operation in Bristol

“Customer value is a delicate flower – that fine balance across price, reliability, quality and service. Perception of value needs to be constantly checked and validated.

“Wholesalers close to their customers that offer great value have little to fear. Those who don’t have their game together will suffer.”

Meanwhile, Confex managing director Tom Gittins believes that more competition is healthy for the sector and is “sure Asda will plough in enough resource to make it a success”.

“As a retailer, Asda is sure to bring a different slant to the traditional cash-and-carry depot format and it will be interesting to see how this develops,” Gittins adds. “I see this expansion as upselling to the consumer rather than trying to capture B2B sales, but time will tell as to how the customer base evolves.”

What do wholesalers need to do in order to fight off threats such as this? “Even with all their buying power and retail experience, we must remember that Asda has not operated a cash and carry in the UK before,” says Gittins, adding that this puts it at a disadvantage versus existing operators.

He points out that the wholesale channel still needs to up its game. “I am sure we can deal with this new threat, providing we keep listening to our customers and respond to their needs,” he says.

“Confex and our wholesalers would see more of a threat from expansion into delivered wholesale. If Asda wants to enter the declining market of cash and carry, then maybe it knows something we don’t?”

This move from Asda fits into two themes that have been a constant talking point within the industry over the past couple of years: the threat of incursion and the need for wholesalers to broaden their appeal.

Asda has realised that business customers look for value from every possible avenue with many no longer interested in the old-fashioned lines between retail and wholesale.

Suppliers will also welcome the chance to shift more volume and greater distribution.

In the November issue of Better Wholesaling (p8), a wholesale customer explained that he shops at Lidl and Aldi for some of his product. This is regular occurrence across the channel and is nothing new to the industry.

However, if successful, it could enlighten other major retailers and lead to a domino effect that threatens the industry in the long term. It is now more important than ever for wholesalers to have a well-defined proposition.

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Paul Hill
Paul Hill is the Editor of Better Wholesaling. Paul can be found on Twitter on @BW_PaulHill, or can be contacted via paul.hill@newtrade.co.uk and 020 7689 3376.

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