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Wholesaling - PowerPoint PPT Presentation

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Wholesaling. Chapter 15 with Duane Weaver. Sector Overview. Wholesaler-Distributor (W-D) W-D role in supply chain Growth and Influence of W-Ds. Essential tasks of Independent Wholesaler-Distributor.

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Chapter 15 with Duane Weaver

Sector overview
Sector Overview

  • Wholesaler-Distributor (W-D)

  • W-D role in supply chain

  • Growth and Influence of W-Ds

Essential tasks of independent wholesaler distributor
Essential tasks of Independent Wholesaler-Distributor

  • Tend to manage all 8 generic flows passing information and such, both downstream and upstream

  • Three great challenges of wholesaling:

    • Doing the job correctly (without errors)

    • Doing the job effectively (maximum service)

    • Doing the job efficiently (low costs)

Innovative value in wholesaling
Innovative Value in Wholesaling

  • Stock the right items in the right volume…act as an inventory extension of the retailer

  • Organize Federations of business – process designed in advance

    • Wholesale-led – growth in consortium relationships (alliances, holding companies, or divisions)

    • Integrated Supply – Exclusive wholesaler (or wholesale group) in exchange for high stock levels, and product mix and service levels.

    • Manufacturer-led – Create their own wholesale-distributor solutions (e.g.: Volvo bulk warehouse in U.S. near FedEx, Memphis, Tennessee)

Voluntary and cooperative groups
Voluntary and Cooperative Groups

  • Wholesaler Voluntary Group – wholesaler bands together retailers voluntarily to be able to provide more economical service (via economies of scale and/or similar of market characteristics). E.g.: IGA. See values on p. 488, table 15.2.

    • Standardized operating procedures

    • Common logos

    • Structured marketing agreements

  • Alternative Federations Downstream – same idea as above but initiated by retailers…CO-OP.

    • Members (retailers) buy shares and become owners of the Cooperative Wholesaler.

    • Results in strong congruencies that lead to economies of scale in wholesaling.

    • Have a more formalized structure and are better able to influence the marketing efforts of the retailers (owner-members) than in the wholesaler voluntary group.

Consolidation trend

  • Increase in retailer size pressures wholesalers to consolidate to obtain related efficiencies

  • Huge Wholesalers with much growth via acquisition

  • Drives manufacturer consolidation

  • Wholesale winners of consolidation:

    • Catalyst firms (rapid acquisitions)

    • Late entrants with defensible niches (after consolidations)

    • Extreme specialists

    • Extreme generalists, large and versatile

Future of wholesaler distributors
Future of Wholesaler-Distributors

  • International Expansion

    • Reduced cross border shipping costs

    • Lower trade barriers (NAFTA, EEC)

    • Fundamentals of wholesaling precludes most from becoming international (wholesaling tends to maintain economies of scale by “meeting the needs of a local market”)

  • E-Commerce – four wholesaler challenges:

    • Broader aggregated geography of markets

    • Pricing widely available

    • Distribution segregated from other service outputs such as customer service (now wholesaler can specialize in a function and outsource more?)

    • Information functions can be 3rd party internet-based institutions

  • E-business models

    • Independent Exchanges (consolidate buying with online catalogue)

    • Supply Chain Networks (internet based integrated supply..EDI software driven expertise)

  • On-line retailers impact

    • driving growth of larger wholesalers due to “drop ship model”, e.g.: Amazon.com

Vertical integration in wholesaling
Vertical Integration in Wholesaling

  • Trend of HUGE “Power Retailers” to bypass independent wholesaler-distributors. Two types:

    • General-merchandise power retailers (Wal-mart, Kmart, Costco…)

    • Category-dominant power retailers (category killers) (Staples, Petco, Home Depot, Toys “R” Us…)

Manufacturer s representatives vs wholesaler distributors
Manufacturer’s Representatives vs. Wholesaler-Distributors

  • MRs (manufacturer’s representatives) enable manufacturers to have much greater control over the market and prices than through wholesale distributors.

  • Function like sales force for manufacturers finding distribution opportunities. Never possess product, rather negotiate and service the transfer and sale of goods.

  • May still use wholesaler warehouse for inventory management and shipping.