Wholesaling

1. Wholesaling Chapter 15 with Duane Weaver

2. Sector Overview • Wholesaler-Distributor (W-D) • W-D role in supply chain • Growth and Influence of W-Ds

3. Essential tasks of Independent Wholesaler-Distributor • Tend to manage all 8 generic flows passing information and such, both downstream and upstream • Three great challenges of wholesaling: • Doing the job correctly (without errors) • Doing the job effectively (maximum service) • Doing the job efficiently (low costs)

4. Innovative Value in Wholesaling • Stock the right items in the right volume…act as an inventory extension of the retailer • Organize Federations of business – process designed in advance • Wholesale-led – growth in consortium relationships (alliances, holding companies, or divisions) • Integrated Supply – Exclusive wholesaler (or wholesale group) in exchange for high stock levels, and product mix and service levels. • Manufacturer-led – Create their own wholesale-distributor solutions (e.g.: Volvo bulk warehouse in U.S. near FedEx, Memphis, Tennessee)

5. Voluntary and Cooperative Groups • Wholesaler Voluntary Group – wholesaler bands together retailers voluntarily to be able to provide more economical service (via economies of scale and/or similar of market characteristics). E.g.: IGA. See values on p. 488, table 15.2. • Standardized operating procedures • Common logos • Structured marketing agreements • Alternative Federations Downstream – same idea as above but initiated by retailers…CO-OP. • Members (retailers) buy shares and become owners of the Cooperative Wholesaler. • Results in strong congruencies that lead to economies of scale in wholesaling. • Have a more formalized structure and are better able to influence the marketing efforts of the retailers (owner-members) than in the wholesaler voluntary group.

6. CONSOLIDATION Trend • Increase in retailer size pressures wholesalers to consolidate to obtain related efficiencies • Huge Wholesalers with much growth via acquisition • Drives manufacturer consolidation • Wholesale winners of consolidation: • Catalyst firms (rapid acquisitions) • Late entrants with defensible niches (after consolidations) • Extreme specialists • Extreme generalists, large and versatile

7. Future of Wholesaler-Distributors • International Expansion • Reduced cross border shipping costs • Lower trade barriers (NAFTA, EEC) • Fundamentals of wholesaling precludes most from becoming international (wholesaling tends to maintain economies of scale by “meeting the needs of a local market”) • E-Commerce – four wholesaler challenges: • Broader aggregated geography of markets • Pricing widely available • Distribution segregated from other service outputs such as customer service (now wholesaler can specialize in a function and outsource more?) • Information functions can be 3rd party internet-based institutions • E-business models • Independent Exchanges (consolidate buying with online catalogue) • Supply Chain Networks (internet based integrated supply..EDI software driven expertise) • On-line retailers impact • driving growth of larger wholesalers due to “drop ship model”, e.g.: Amazon.com

8. Vertical Integration in Wholesaling • Trend of HUGE “Power Retailers” to bypass independent wholesaler-distributors. Two types: • General-merchandise power retailers (Wal-mart, Kmart, Costco…) • Category-dominant power retailers (category killers) (Staples, Petco, Home Depot, Toys “R” Us…)

9. Manufacturer’s Representatives vs. Wholesaler-Distributors • MRs (manufacturer’s representatives) enable manufacturers to have much greater control over the market and prices than through wholesale distributors. • Function like sales force for manufacturers finding distribution opportunities. Never possess product, rather negotiate and service the transfer and sale of goods. • May still use wholesaler warehouse for inventory management and shipping.

10. Thank You