For UK Wholesale Distributors, a £16 Billion Opportunity in Direct Sales

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. 

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