Research shows that retailers are increasingly choosing delivered over cash & carries. Wholesalers argue that it’s all about the level of support offered.

Time is at a premium when you’re running a busy c-store. Cutting out multiple trips to cash & carries and dealing with a host of individual suppliers could save valuable management time and make the difference between a struggling store and a slick operation.

Industry figures confirm independents have been thinking this way in recent years. According to industry research body IGD, the delivered sector has been growing steadily since the mid-1990s as the trend for independents to join symbol groups has weakened demand for traditional cash & carries. Delivered grew 4.5% during 2003 while cash & carry grew only 1.5%, according to the IGD’s Grocery Wholesaling 2004 report. Competitive pressure has reshaped the sector. Aggressive entry into convenience retailing by the supermarkets has created a ‘survival of the fittest’ trading regime while, at the same time, consumers have become more demanding. However, local stores that are clean, bright and well-stocked, a haven for top-up shopping, can compete. More management time can help a store reach this level of professionalism.

As MBL sales director Paul Mildenstein puts it: “Not only does delivered wholesale offer deliveries to the store but also the expertise in buying, ranging and marketing. It’s impossible for retailers to service all the needs of their store if they’re spending vast amounts of time travelling to and from cash & carries.”

The HIM Cash & Carry Customer Tracking Programme 2004 found cash & carry customers purchased from five separate sources on average during a month, and that customers were typically visiting their main cash & carry three times a week.

Managing director of HIM Tom Fender says: “While shopping around in this way satisfies the store owners’ desire to get the lowest prices, they probably spend too long away from the business and may not be accounting for the fuel and driving time spent pursuing deals.”

Clearly, the buying power behind a major wholesaler puts even the smallest store in reach of good deals on the leading brands. Wholesalers have become excellent marketers in recent years and constantly facilitate multi-buy promotions to keep shoppers interested in local stores.

Credit terms are normally available, and some delivered wholesalers run loyalty reward schemes for their member retailers. For example, in the case of Palmer & Harvey McLane’s (P&H) symbol group, retailers are rewarded for stocking core ranges with two loyalty schemes: Retailer Reward and Holiday Incentive.

The perception of delivered wholesale, with warehouse overheads, upkeep of vehicles, depot staff and driver wages and fuel, is that the prices should be higher. Not so, says Bob Lees, national sales manager at P&H. “People think we’re more expensive than the cash & carry but this is not the case. We have an aggressive competitive pricing policy throughout our range and regularly compare our prices to those of the cash & carry.

“Our double discount promotions offer retailers some of the best deals in the trade,” says Lees. “However, price means nothing if you haven’t got the product. At P&H we stock more than 9,000 products, helping retailers avoid that scenario.”

Steve Parfett, managing director of Parfetts Cash & Carry, argues that pressurised c-store owners benefit from time out of their stores and enjoy visiting their cash & carry to get merchandising ideas, see the products on offer and make their own choices. “Also, if a store owner sells out of something but has to wait several days for a scheduled delivery, sales are being lost,” he says.

Parfett points out that many cash & carry operations also have field staff offering business advice to registered customers. “Our network of support staff are out on the road giving free advice on ranging, merchandising, and issues like Chip&Pin,” he says. “When Sudan 1 hit the headlines we were updating customers hourly.”

P&H’s Lees argues that symbol group membership gives retailers the best of both worlds.
He says: “Professional independent retailers, who realise they can’t beat the supermarkets on price and range, tend to join symbol groups. They know that becoming a Mace retail member, for example, will bring them all the benefits of scale and market knowledge while allowing them to keep a degree of independence.”

Delivered wholesalers such as P&H have vehicle fleets and distribution networks that can manage ambient, chilled and frozen products, often in a single drop. In addition, own label becomes an option - in P&H’s case, all customers can purchase goods from the ‘M’ brand range. Lees says: “Retailers agree that own label is often worth having because it gives the customer an alternative to the top brand.”

Delivered wholesale by its very nature requires a store to be run with systems for inventory control in place. So owners will have help setting up IT to allow greater visibility of their stockholding, be able to understand sales patterns, and tailor their ranges. Delivered wholesalers maintain that, as a result, retailers may well see shrinkage cut and time-consuming tasks like manual stock counting eliminated.

The country’s biggest wholesalers have the operational experience and IT infrastructures to ensure order-picking in their warehouses is done to a high degree of accuracy. Conversely, according to HIM, one in three cash & carry customers questioned said they had failed to buy an intended item - either products were unavailable or the customer could not locate them.

HYGIENE RULES
Bob Lees at P&H points out that when a specialist wholesaler stores, picks, packs and transports on a retailer’s behalf, the hygiene rules and regulations for storage and carriage of chilled and frozen goods are also observed. “Independents that want to focus on their store can relax in the knowledge that products have been stored safely. The vehicles are well run and reliable and are large enough to bring exactly what’s needed straight to the shop.”

However, industry observers note some wholesalers are offering delivery services without thinking through all the costs and administrative work involved. Steve Parfett comments: “Non-specialists getting into delivery is a recipe for disaster. There is so much legislation now concerning vehicle licencing, driver working hours and restricted delivery times, not to mention the problem of road congestion. There’s still a need for core cash & carry services but they risk being undermined by the complications of delivery.”

Delivered wholesale customers benefit greatly from the reduction in administration that more structured orders bring. For instance, P&H’s buying group ACE arranges for ambient suppliers of greetings cards, coal and a myriad of other categories to restock stores when necessary and then collates a bill on the store’s behalf, which is paid by direct debit a month later. ACE general manager Patrick Walkington suggests: “Wouldn’t a store owner be better running the shop rather than juggling a complex supply chain?”

Operations like ACE specialise in sourcing the best deals and consolidating payment but can also closely monitor the market. This puts member retailers in touch with potentially lucrative new trends. “Innovative suppliers with new ideas - for instance mobile phone top-up schemes - often struggle to get their product to market, so we introduce the new product to members, facilitate credit control and make it easy for customers to pay,” says Walkington.

HIM’s Fender says poor ranging, not price, is what puts shoppers off independents. “According to our Cash & Carry Customer Tracking Programme 2004, a third of local convenience stores don’t stock short-life or chilled products, which is crazy.” He says the mentality is to stick with classic CTN ranges - crisps, tobacco, drinks - because they are perceived as easy to stock.

“Small retailers are paranoid about wastage, so they ignore the categories that would drive the greatest growth,” says Fender. “They should be investing in chillers and stocking traffic-drivers like dairy and ready meals. Cash & carries have so far failed to communicate this message to their members. They see themselves as buyers for their customers rather than business developers.”

It seems the more inclined wholesalers are to offer business advice and support, the healthier the c-store sector will be. Delivered wholesalers offering membership of a buying group or symbol affiliation not only deliver goods and encourage stock management efficiency, they can help independents plan a prosperous future too.

Nevertheless, HIM’s latest cash & carry customer research found more than 80% of independents questioned said they had no plans to affiliate in the next 12 months, which Fender finds worrying. “Many of these independents will be well run but the vast majority will be the ones withering and dying,” he warns.

THE GROCERY WHOLESALE MARKET
Value of cash and carry wholesale in 2003: £9.4bn Value of delivered wholesale in 2003: £7bn

Total value of wholesale in 2003: £16.4bn Source: Grocery Wholesaling 2004, IGD

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