The future of retail is the end of wholesale

online,e-commerce,shoppingIn July 2015, Peter Dresing, from Danish company, AsiaCorp, said that e-commerce will rapidly reshape the entire economic model of retail, spelling the end of wholesale.

And in March last year, Euclid Analytics wrote that the war between online and offline is over. “Online delivers convenience; stores offer an experience. Physical retail is not going away, no matter how many extol its demise. Rather, the nature of physical retail will change from transactional to experiential. Physical retail spaces will be optimised to support the mobile consumer across every step of the buying journey.  Online will continue to play its valuable role by delivering speed, efficiency and convenience”.

Why is it that almost everyone is an expert on retail and an expert on marketing?

The reason is that it is virtually impossible to argue with comments such as those detailed above without being judgemental and/or rude but I will try.

There are a number of writers who intentionally use shock headlines to attract readers and I am as guilty as others but there needs to be some substance even if the headline is tongue in cheek.

Firstly, the war between online and offline is not over. It has only just begun. Look at any statistics and you will see the growth. There are even those who are bold (stupid) enough to put a percentage on online sales versus offline. I have read figures of 30 per cent of retail sales will be online by 2020. And then there are other experts who predict ‘more accurately’ that the correct number is 49 per cent! I wonder how long it took one of their graduates to come up with that number. In any case, who can define what online retail sales really are?

The reason that wholesale will never die is simple.  Smaller retailers especially, often live hand to mouth. They don’t have the capital to import goods and pay up front and then wait while the goods are shipped and then sell the merchandise before getting any return (a rough rule of thumb is say three months for the cycle). They do not have the ability to deal with minimum quantities. They don’t have the desire or ability to deal with tariffs and duty and shipping costs and agent fees and insurance et al. They probably don’t even know how to cost the goods when they have landed.

They will continue to buy from wholesalers until they are big enough to make the giant step of going offshore.

And so the two prophecies above are clearly nonsense.  Online is growing and wholesale is here to stay. Period.

Stuart Bennie is a retail consultant at Impact Retailing www.impactretailing.com.au and can be contacted at stuart@impactretailing.com.au or 0414 631 702

Comments

2 comments

  1. Dave posted on February 3, 2017

    More 'experts' with crystal balls and little yardsticks.

  2. Max posted on February 13, 2017

    To be honest Stuart, am not sure how wholesale is even part of the equation in your article. Smaller retailers will of course still buy from wholesalers but are very likely to make that inventory (of 1 or 100 or 1000) available for sale online as much as in store or other distribution means (e.g. local markets, department stores). Looking at the data available and the major trends that are taking shape, there is simply no denying that the future of retail is "Online delivers convenience; stores offer an experience. Physical retail is not going away, no matter how many extol its demise. Rather, the nature of physical retail will change from transactional to experiential. Physical retail spaces will be optimised to support the mobile consumer across every step of the buying journey. Online will continue to play its valuable role by delivering speed, efficiency and convenience". As a result wholesale isn't part of this debate. Wholesale will continue to exist but the way retailers cater to their customers (shoppers) will be to meet their demand for experience and convenience, and clearly ecommerce technology (and the entire order fulfilment process, including delivery) will play an important role in meeting this demand, going hand in hand with the physical experience where demanded. If you speak to the likes of Steve Lowy he can tell you that they are witnessing speciality retailers doing 30-40% of their sales online. If you look at the William Sonoma group figures they already do 50% of their sales online. The % of online retail sales to total retail sales is skewed by the fresh food/groceries category. If you were to take this out you would likely find that non-fresh food related retail is doing a considerable amount of their sales online. What this means is that retailers don't need as many stores and that stores will morph to cater to a) the experiential and convenience factors sought by shoppers and b) fulfilment of the growing demand for local delivery of online orders. At the end of the day shoppers are driving change through their demand for experience when they want it (more likely for specific categories than others) and convenience when they need it or when it makes more sense. Amazon has built an entire model on this. Why waste time going to a store to pick up paper towels or other commoditised items? Shoppers have better things to do with their time. Again, I fail to see how this would ever predict the demise of wholesale and if so, could you elaborate, as your article hasn't made this point clear.

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