High Street footfall continues to decline thanks to the damp squib of an English summer and the Olympics did little to console retailers. It seems that business leaders in the UK wholesale market were right to think conservatively about their sales growth, with recent research by the Centre for Economics and Business Research (Cebr) showing that over a third of wholesale distribution (WD) companies expect growth to remain static or shrink over the next year.
However, there is light on the horizon as the Cebr research predicts that the wholesale distribution industry can add £16 billion to its turnover over the next year through direct sales—a strong growth opportunity for those willing to think outside of the box.
As WD companies inhabit a very different world from that of retailers, business models and internal operations should be analysed before thinking about adding a direct sales channel. Margins need to be re-evaluated and price points set for direct-to-consumer offerings that compensate for the additional administrative burden of managing direct sales. The business model that allows a company to sell 1,000 units at £1 each doesn’t allow it to profit from selling the same product for £1 each individually.
It’s also important to consider the effects of an additional channel on operational efficiency. Nearly one-third (30%) of WD companies admit they still place orders with suppliers manually or by telephone ordering, and it seems many of these suppliers feel that ordering and information-sharing could be done more efficiently.
A wholesale distribution company NetSuite worked with, Justoffbase, previously maintained stock, order information and accounting information in multiple systems (an inventory spreadsheet, separate accounting system, paper files) while managing orders from customers and to suppliers via email and phone/fax. By placing all of this into a single system and building dynamic integration into its suppliers, Justoffbase enjoyed five-fold growth in their business without the manual integration pains its staff experienced in the past with legacy systems.
The goal should be to take a holistic, ‘one system’ view of all aspects of your wholesale and ecommerce operations—integrating automated order processing, inventory management, demand planning, shipping, financial management and sales force automation capabilities.
Once you’ve got all of your internal ducks lined up, it’s time to develop a professional online presence. The average WD company spends just over £100,000 on its ecommerce site, whilst the average retailer spends double this amount. Amazingly, over a third (36%) of wholesalers don’t even have a website! If you want to compete in a world dominated by Amazon and eBay, then it’s vital to get this right.
There’s no need to spend a fortune implementing a world-class website. The advent of pre-built ‘Commerce as a Service’ systems make developing an ecommerce site that integrates into your existing systems much more cost effective, preserving your margins for your direct sales channel, while protecting your wholesale revenues as well.
The figures suggest that savvy WD business leaders should be exploring multi-channel sales strategies in pursuit of growth. The challenge will be to do this in a way that evolves their business model, streamlines and automates their workflow and delivers profits alongside that growth.
Whilst their retail counterparts have been leading the way in ecommerce and m-commerce, the WD industry is starting to wake up to the potential of those channels. With the potential boost of direct-to-consumer sales worth up to £16 billion, it’s urgent that the wholesale distribution industry evolves its approach.