August 09 2021

What are the challenges for the Wholesale Industry in 2021?

Photo by Kelly Sikkema on Unsplash

Over the last 16 months, Industries globally have been hit with unprecedented challenges that swept over how the economy was structured and functioning.
We are, of course, referring to the Coronavirus breakout and the subsequent lockdown measures that followed. The Wholesale Industry, and wide supply chains have experienced trade restrictions, worker shortages, widespread closures, rising food costs, logistical implications and insufficiencies on both supply and demand levels. COVID-19 created a boat load of disruptive forces, while exacerbating a number of existing challenges that became unavoidable.
The underlying indicator was a need for resilience throughout supply chains, and the task of how to protect both businesses and supply chains was, and remains, a global feat. The coronavirus placed a huge burden specifically on the food and drink industry, but along with these challenges came opportunities for growth, innovation and progress for an Industry that had worked in essentially the same manner for decades before the pandemic.
This article will explore various challenges that the Wholesale Industry face as we move forward, along with outlining 3 opportunities that have been brought to the surface which could allow Wholesale food and beverage distributors to future-proof their operations as we push through this year.

Challenges for the food and drink Industry

Wholesale bypass, rising competition and shrinking margins

The important note to make is that the customer experience is driven by a convenient experience, and personalised service. This has been in the forefront of consumer behaviours for the past decade and is likely to increase as technologies enable more flexibility for the consumer and retailer customer.

E-commerce and rising competition for the wholesale industry

These adaptations have already been raised as a huge threat for Wholesalers. The industry has been faced with the growing threat posed by the process of Wholesale bypass in recent years. Traditional customers are (understandably) looking for cheaper and more convenient ways to source their goods, with wholesale bypass playing a crucial role.
Technologies are enabling the traditional wholesale customer to come face-to-face with suppliers and manufacturers, often offering the same products at more competitive prices. This has placed a burden on Wholesalers, who are having to juggle increasingly tight profit margins while maintaining demand and customer relationships.
The bottom line is the “growth of direct-from-manufacturer-to-retailer disintermediation” (1) has resulted in a shrinking market for the Wholesale Industry, who are unable to keep up with the convenience and price competitiveness offered as the role of the middle man.
During the coronavirus outbreak, the implications of this bypass became more apparent and the impact of a shrinking market was compounded by an almost complete closure of existing Wholesale customers.
For various Wholesalers, the damage of these closures was mitigated by an introduction of B2C sales. Through the introduction of E-Commerce systems, foodservice distributors were able to reach the individual consumer directly and curve issues of stock pillage and customer closures.
This highlighted the importance of a digital presence, as well as indicating potential opportunity for the Wholesale Industry who may have to adapt and expand routes-to-market as existing channels continue to weaken.
Shrinking margins place additional stress on wholesalers who then have to increase sales in a diminishing marketplace to keep profits maintained.
The implications of improved convenience and competition for retailers and existing wholesale customers has resulted in an increasingly critical need for innovation and development to drive sales. Wholesalers “must collaborate very closely with their suppliers to differentiate themselves through high-value services or by increasing operational efficiencies that allow them to win customers at competitive, wholesale prices.” (2)

With challenge comes opportunity for the Wholesale Industry

Amongst uncertainty and anxiety comes opportunity for those Wholesale distributors who are willing to adapt their business models, and look for new technologies and routes-to-market to develop and grow their operations.
During the first wave of lockdown, we saw a number of UK Wholesalers rapidly adopt E-Commerce platforms, utilising social media and the internet to reach new customers, offering exclusive discounts and promotions and reducing impacts by rising to the challenge and thinking on their feet.
JJ Foodservice, for example, recorded an annual growth of 1.6%, reporting £225 million sales this past year, which shows higher sales than the previous year. (3) They did this through the mentality mentioned above; a willingness to adapt to changes and explore new opportunities.
Where challenges arise, opportunities are often not far away; the ever-increasing presence of E-Commerce platforms, a move away from solely serving traditional customers and the use of threat of competition from retailers all pose both threats and opportunities. Increasing competition leads to innovation to raise the bar, e-commerce reveals new channels and routes-to-market, and the emergence of big data and analytics poses the opportunity to provide a more convenient and personalised customer experience.
References
  1. https://insidefmcg.com.au/2018/08/09/what-is-driving-wholesale-bypass/
  2. https://www.the-future-of-commerce.com/2021/04/30/challenges-in-wholesale-distribution/
  3. https://www.fwd.co.uk/wholesale-news/2021/02/16/jj-foodservice-record-growth-despite-covid-crisis/
Additional reading

https://noblue.co.uk/news-updates/challenges-in-wholesale-distribution/ https://www.inspirage.com/2021/05/wholesale-distribution-in-2021-and-beyond/ https://www.inspirage.com/2021/05/wholesale-distribution-in-2021-and-beyond/ https://nig.com/trading-support/news/challenges-and-opportunities-for-wholesale-distributors-in-2020/

Photo Credits

(1) Photo by Kelly Sikkema on Unsplash

(2) Photo by Samantha Borges on Unsplash

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