With the multiples in difficulty, suppliers must learn to work with wholesalers, reports Tan Parsons.
Suppliers at the IGD conference in September were warned to treat the wholesale channel with the respect it deserves.
Today’s Group retail director John Kinney made an impassioned argument for suppliers to work with wholesalers and see the channel as an entity separate from the supermarkets and one with different needs.
[quote_box_right]
John Kinney’s challenges to suppliers on product development
- Don’t leave it too late: Engage with wholesalers early.
- Don’t keep quiet: Speak to retailers about your products.
- Don’t forget wholesalers: Speak to wholesalers, too.
- Don’t ignore customers: Get feedback and make sure your products are fit for purpose for the wholesale channel.
- l get it right: If it is the right product at the right pack size, retailers will support it.
[/quote_box_right]
“We deserve to have the right products for us – not just the overhang from the multiples,” he said.
He said it was vital that suppliers engage with wholesalers and their customers early when developing products for market.
He told them: “Get that feedback and make sure your products are fit for purpose in this channel. Did you speak to retailers? Did you speak to wholesalers? It’s about providing a fit-for-purpose solution and improving relationships beyond transactions.”
He also highlighted chilled and food-to-go as key areas for growth, and said a challenge was how to deliver fresh food and chilled properly (see the 10-step guide to growing fresh food sales on page 24).
Another speaker was IGD chief economist James Walton, who warned that the multiples would face stiffer competition from discounters such as Aldi and Lidl. He said that with Asda and Morrisons openly admitting that they benchmark prices against the discounters, and with Tesco and Sainsbury’s benchmarking against Asda and Morrisons, retail prices are set to drop.
His comments were made just as Aldi, which now has a 4.8% share of the grocery market, announced plans to double UK store numbers to 1,000 by 2021, backed by a £70m expansion budget.
The most recent IGD survey of 1,000 shoppers revealed the emergence of ‘savvy shoppers’ who are deliberately leaving certain items out of their baskets.
Walton added: “We are also seeing the emergence of the ‘super-savvy shopper’ – people registering several email addresses when online shopping to get lots of discounts. It’s ‘bang out of order’ if you do it to get housing benefits but people think it’s okay if you do it to Ocado.”
Earlier at the conference, Landmark Wholesale managing director Martin Williams had warned delegates they would face challenges as the multiples dropped their prices, but that on balance, the landscape favours the independent channel.
He said: “Tesco and Morrisons are in decline, Sainsbury’s is flattish and Waitrose is also in decline – it is a fantastic opportunity for wholesale.”
The apparent frailty of the multiples has since been underlined by the emergence of accounting mistakes at Tesco, with the company found to have overstated its profits by £250m. The biggest of the ‘big four’ UK supermarkets has seen the value of its shares plummet in response.
Federation of Wholesale Distributors (FWD) chief executive James Bielby says that although the era of supermarket dominance is coming to an end, we shouldn’t read too much into Tesco’s crisis.
“The multiples and discounters will always be the cheap option – what the wholesale channel has to do is concentrate on being better, more precisely targeted to consumers’ wishes, and easier to work with.
“One of our focuses at FWD is helping suppliers exploit the full potential of wholesale. Those that are doing best in the channel appreciate that they have to approach it differently from the multiples, and that means being flexible on ranges, pack sizes and promotions, and understanding the needs of independents.”
