As I sit here we are still in Brexit uncertainty.
By the time this is published maybe, just maybe, there might be some clarity.
However, whatever the outcome, it seems that the way in which goods ultimately arrive with the end consumer is likely to change.
Costs to bring goods in may increase. Suppliers shipping direct from central European warehouses may face some new challenges – increased cost and increased lead times.
UK sporting goods retailers may find that bringing in goods from overseas could be more problematic -more paperwork, higher free shipping thresholds, longer lead times – and this is likely to have some supply chain impact issues.
In my view, this may well play into the hands of the wholesaler.
The wholesaler business model is close to the manufacturer in the supply chain. They can source inventory directly from a manufacturer and buy in bulk or from a distributor who deals with the manufacturer. Ultimately, the wholesaler is trying to source valued products in bulk and at a very low price. They warehouse these products and have a catalogue for retailers to purchase products and sell them to their customer base.
Why Retailers Use Wholesalers
Retailers use wholesalers to easily source products at a low price. They can set margins and markups for the end consumer and quickly access inventory to stock stores. Working directly with manufacturers adds a time consuming element to the retail process and wholesalers ultimately handle this while storing inventory so it can reach the market quickly.
Retailers using wholesale services are typically selling other brand products.
Go back 25 years or more and the wholesaler was a different animal than we see today. The UK and Irish customer base was much greater, wth a higher number of doors to sell to. Typically brands had a field sales force covering the territories, with multi calls per day and with the smaller customers being serviced by the wholesalers – at the time Cartasport, Reydon Sports and William Lindop.
The wholesalers represented a huge spread of brands and could service the customer base efficiently with next day (or in some instances same day) delivery. Brands were keen to embrace this model as it allowed them to concentrate on the larger customers whilst the wholesaler serviced the smaller customers and smaller top ups.
Declining customer base
However, as the sports multiples grew and the overall customer base began to decline so these smaller customers became more and more important to the brands. On the one hand they could no longer justify the additional margin demands on the wholesaler, and on the other hand their sales force now had time to call on these customers as there were fewer.
The result was that brands began to withdraw some product offer and deal direct with as many customers (big or small) in an attempt to maintain business and improve margins.
The wholesalers were left with a smaller product selection and fewer customers to sell to. The market could no longer justify three wholesalers and, in 2014, William Lindop Limted closed their doors after nearly 100 years of trading.
But what of the wholesaler today? Roll forward to 2019 and, as the market has evolved, wholesalers are beginning to play an interesting and more important role in the marketplace again. The wholesaler business model is evolving to meet the demands of eCommerce, nimble online startups and Fulfillment by Amazon. The fast-paced world of eCommerce has driven the wholesale model to accept dropshippers with potential fulfillment services.
The customer base has changed and, whilst many brands are reluctant to open with small or start up companies, the criteria of the wholesaler is often a little looser and, as such, their business has begun to pick up.
Uncertainty for sports retailers has forced many to purchase hand to mouth and reject the forward order model. Sourcing via wholesale across multiple lines and multiple brands ensures cash flow management is easier.
Marketplaces such as eBay and amazon have opened up some new channel opportunities and the wholesalers have embraced these either indirectly through a new customer base, or directly.
Reydon Sports have taken the model a step further and created a series of “house brands” that allow the retailer to hit certain price points, market requirements and sit alongside their branded offer.
So, what if we sit these trends alongside any potential Brexit issues? The conclusion would be that distribution models will swing back towards local market stock holding with wholesalers being the best placed to take full advantage.
If the choice for a retailer is to spend time, effort and cost completing complicated paperwork to bring in a small order from a European based supplier versus the relative ease of ordering multiple brands and products from one source then the latter model clearly holds more appeal.
Brands, frustrated in the delays in shipping small orders from centralised warehouses (and the additional costs involved) are also likely to look for wholesale (and distribution) parters where they can bulk ship larger orders more efficiently.
If these trends continue then I see the wholesaler proposition being more compelling for both brand and retailer alike and a growth, over time, in the depth and breadth of product range they offer.
They are best placed to service marketplaces directly due to their large stock holding and can cleverly match their business servicing retail partners alongside a direct approach.
The implementation of online ordering, tracking and invoicing will also ensure that the businesses remain relevant and efficient and the volumes being driven through this route to market will encourage additional brands to embrace the wholesaler.
I, for one, will be watching with interest.