History repeats itself but innovation changes the future, says Jason Finch.
A leaked report to government warns that the future of the UK’s grocery wholesalers looks rocky – it predicts the demise of the independent corner shop within 10 years. It goes on to say that even large wholesalers, the middle section of the supply chain, could be wiped out entirely.
That was back in 2006, after pressure mounted for a Competition Commission investigation into the growing power of the big four supermarkets. Three years later, the picture darkened further when Tesco announced it was going full steam ahead into the convenience retail market: if you weren’t supplying to the big four, you were doomed.
The prophecies proved false: the symbol and independent convenience retail sector is booming and grocery wholesale is very healthy.
However, the story reminds me of a friend who often grumbles that nothing happened at midnight on January 1, 2000 with the fabled ‘Y2K problem’. He claims the doom-mongers were wrong.
Computers were all meant to go haywire, the dates would all mess up and everything from aeroplanes to fireballs would begin falling from the sky. Of course, the world didn’t end and apparently nothing happened.
The fact is nothing happened because the problem was anticipated and a lot of money was invested to ensure the survival of the old computer systems that hadn’t been programmed to think beyond ’99 (the apostrophe there is the key to understanding why it was a problem in the first place). Many forget why things didn’t die that day.
The true story in wholesale is that independents – and the buying groups and wholesalers that supply them – were forced to get smarter with convenience retailing. The whole sector could well have died had it not become more professional and modernised stores, making them brighter and cleaner with better products – innovation forced on it largely because of the rise of the aggressively competitive supermarkets and their well-known names coming into convenience.
Innovate with suppliers: Make it easier for your customers to buy products
You may have seen the ‘Buy It Now!’ buttons on eBay, the popular consumer auction website. Unilever Food Solutions is trying out the same thing to make purchasing easier for the foodservice market. It has teamed up with 3663 so that instead of reading about products on the supplier’s website and having to remember the details for a future order, chefs and purchasing teams can order ingredients direct from the Unilever Food Solutions website by clicking through to the product’s page on 3663’s website.
I suspect suppliers are going to be the ones to drive online innovation in the grocery wholesale market. Big brands have to do consumer marketing, which tends to be more advanced, cunning and clever than business-to-business marketing. Small suppliers have to aggressively innovate to get through to buyers and to make sure their products get prime placement on the shelves of retailers. Innovation and persistence is in their blood.
Together, they have a 20-year head start on consumer-focused use of connected technology, in terms of websites and innovative mobile hardware such as the smartphone. Business-to-business is playing catch-up.
The wholesale channel needs to persuade brands and manufacturers to give it access to the same people who create consumer-focused marketing and online initiatives. It needs to hire the so-called ‘multichannel’ executives from the world of High Street retail. It is those people who have the experience to drive the next stage of technology-focused innovation into your business model. Sit your marketing director next to your IT director – both probably need to talk to each other more.
Radical change around the corner: Retailers are ready to experiment with new technology
I was recently talking at an international retail conference about the accelerating pace of change in technology. After me, the group president for Europe of Statoil Fuel & Retail spoke and said fixed checkout points in c‑stores and forecourts would vanish soon. ‘No way,’ many thought – for a start, how on earth would people pay?
But being closed-minded to fast and radical shifts in the way things are done is dangerous in today’s business world. New technology start-ups are born from entrepreneurial innovation and will find retailers who will experiment with their developments. The sector must not be playing catch-up again because faster moving firms innovated earlier and faster.
I’ve harped on about Amazon before. It is already trialling direct food delivery in the US and taking grocery items direct to consumers, eliminating wholesalers in the supply chain. Interestingly the eyes of high street non-food retailers are also on this and some are already wondering when Amazon will make a play for Ocado and change the face of grocery-buying in the UK. Famously they all had to learn how to compete with technology companies when e-commerce went mainstream.
Hunt out your ‘intrapreneurs’: Are there any programmers working for your company already?
Anx Patel started programming Commodore home computers when he was seven years old. He’s now 35 and recently launched the first smartphone app that convenience retailers can use to order from a range of suppliers all at once. He combined his experience of retail business management with his passion for technology innovation so suppliers can sell direct more easily. It may well not be long before such innovations make a significant impact.
Focusing on traditional ordering methods or giving priority to just one, rather than a more modern connected and blended approach, is becoming a seriously shortsighted decision.
New apps such as Patel’s GoKart are proving there’s an appetite for ordering in new ways. By that, I also mean direct, not necessarily just online. Suppliers are finding it easier to deliver direct, too. Wholesalers can win from this but their business models may need to change to accommodate such shifts.
You may have unknown programmers within your company already. Give internal entrepreneurs a chance to create small software products for the business. Some will be useless and fail, but other developments may gain traction and become winners.
Innovating in the new era of connected technology is all about repeatedly trying and failing quickly, because at some point success will come and it will be large. It’s worth starting before the experiments of others, such as Amazon, become successful.
