Commentary by Bill Bittner, President, BWH Consulting
Is it time to merge the roles of wholesaler and broker into one?
Wholesalers provide the efficiency necessary to distribute products of small manufacturers who are unable to own their own distribution facilities.
Brokers support the information channel necessary to carry the manufacturer's product message to local retailers and markets. They also provide the local presence necessary to confirm marketing plans, such as shelf space or point of purchase displays. This "free labor" is often important to retailers for maintaining proper store displays.
The Internet has made the information channel much more porous. Marketing messages can be carried down through targeted marketing addressed to individual consumers or associations.
Wholesalers are becoming much more sophisticated in monitoring the distribution channel and providing IT services to their retail customers. They can provide information on which stores are ordering and selling individual products. They can also support the manufacturer and retailer through online services, such as product catalogs and merchandising plans. Promotional messages and discounts can be announced through the catalogs.
The wholesaler is in a perfect win/win situation as the more product a manufacturer and retailer are able to sell, the more the wholesaler ships. The wholesaler benefits by making sure the two other parties are successful.
By providing an online information channel down to the point of sale system in the store, the wholesaler can provide the manufacturer much of the information traditionally obtained through brokers. Online inventories give them the information they need to understand how much product is in the pipeline and better control their production plans. By providing catalogs geared to retailers that promote and explain various category offerings from manufacturers, the retailer is kept informed of market offerings and can pick the best products for their store.
The big question is whether the in-store presence provided by the broker for shelf sets, sampling programs, etc. is so compelling that it makes it impossible to merge the roles of wholesaler and broker. I believe it is important and that the role of the broker cannot be replaced by only electronic messages, but requires the "hands-on support" that comes through physical presence.
Moderator's Comment: The author raises the question of melding wholesalers and sales and marketing companies (AKA brokers) into a hybrid organization to improve the process of distribution and supply. Do the grocery and CPG industries need a new distribution model? What changes would you encourage to address the shortcomings of the current model? - George Anderson - Moderator