The cash and carry is facing tough times. Recent years have seen the competition hot up thanks to the rise of the discount retailers, especially German supermarket giants Aldi and Lidl. But this doesn’t mean the death of wholesale retail. There are new challenges to be met, and if they are addressed effectively, the whole industry can benefit.
The major advantage wholesale businesses have is their focus on quality, and particularly freshness, assortment and variety. Many focus on speciality products, such as the Asian foods offered by the megastore East End Foods here in Birmingham. These specialisms have gone some way to protect cash and carry stores from the price wars affecting consumer-facing retail operations.
There is a strategic opportunity here for cash and carry and wholesale stores to fill the void left by the Big Four supermarkets (Tesco, Sainsbury’s, Asda and Morrisons) waging a losing battle in the price wars. Consumer shopping habits have changed dramatically. We now take a ‘grab and go’ approach to our shopping, making frequent but quick dashes to the express store or convenience shop on our way home from work or the school run, purchasing what we need, when we need it. As a result, the big names are reducing the number of out-of-town megastores, with their huge floor space and wide assortments. There is no doubt that some consumers still do their big weekly shop and still use these hypermarkets, but their numbers are decreasing.
As a result, if consumers want ‘special’ products, from ethnic and fresh food to seasonal and more unusual items, they might only be able to find them at a wholesale store. Cash and carry stores can take on the major supermarkets by offering a wide variety of these specialist products. As an example, East End Foods offers 1250 lines in its Indian cooking range alone. Even a very large and well-stocked supermarket would be hard-pressed to offer more than 100.
It’s clear that cash and carry stores can beat supermarkets in their depth of assortment, not across all ranges, but at least for the ranges they offer, whether that be Indian foods or beer and wine. But to do this, wholesale stores must overcome the factors that hinder ‘normal’ consumers – namely, the legal restrictions that mean only businesses can shop in cash and carry stores. This will require a change in the law, but also a much bigger change in mind-set. Wholesale business managers will need to ensure their staff are fully trained, offering the kind of customer service they have become accustomed to from the Big Four. But the emphasis on quality, freshness and specialism must remain.
By giving consumers what they want, wholesale businesses have the opportunity to put even more pressure on the traditional supermarkets. Identify what it is that makes your store stand out from the crowd, do what you can to encourage greater consumer footfall, and you can reap the rewards in terms of profit and longevity.
Professor Heiner Evanschitzky is Professor and Chair of Marketing at Aston Business School.
Dr Heiner Evanschitzky
Professor of Marketing