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-Distribu
tor

• 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 volumeact 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 retailersCO-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
Manufacturers Representatives vs.
Wholesaler-Distributors

• MRs (manufacturers 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