September 07 2020

How are changes to retail affecting the wholesale Industry?

For decades, the way Wholesale distributors operate has stayed largely the same. They have been the go-to in terms of middlemen between supplies and retailers. However, as larger retailers and supplies are always looking for ways to increase profits and the emergence of more competent digital systems, this is changing.

Direct-to-consumer models and Wholesale Bypass

Nike announced changes to their global operations, looking to expand their e-commerce influence and increase the minimum number of products retailers can purchase from them in wholesale.
This not only puts a strain on smaller retailers who struggle to stay competitive while balancing smaller budgets but also on the wholesale industry as more direct routes to market are available for suppliers.
This is far from unique to Nike, with the convenience and ease of shopping on e-stores leaving the middlemen out of the picture. It also begs the question as to how the Industry will manage to maintain steady growth while these conflicting processes emerge further and further.
Limiting the number of retailers stocking Nike products means “sales can be funnelled through its own website and network of stores.”

This process makes a lot of sense for Nike; they can reach customers just as easily while removing additional costs which are no longer necessary.
Furthermore, the internet has meant it is easier than ever to find new manufacturers, supplies and cheaper ways to get products from a retail perspective.
This drives competition and means smaller wholesalers who can’t compete with increasingly lowering prices while maintaining profit margins.
Although digital technologies and the IoTs have numerous advantages, they are streamlining the methods used to source and ship products, putting a strain on businesses in the supply chain who have had their processes duplicated and improved by emerging technologies.
The most recent example of wholesale bypass has emerged during lockdown. Larger supermarkets have had to improve and increase sales through home deliveries, and most have said they will continue to use this process long after lockdown is over.
However, it’s not all doom and gloom for the wholesale industry. As the world adapts to new technologies, the Industry has done similarly - Direct-to-consumer methods have seen an increase amongst wholesalers during lockdown, and some wholesalers have reported higher profits this year than the same time last year.
To read our article on the need for digital innovation in the supply chain, you can click here.

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