Happy New Year and Our Predictions for 2016!

Who can believe that the year 2015 has gone past so quickly, and here we are in 2016! Hope everyone has had a great start to the year and looking forward to keeping their New Years resolutions.

2015 has been an eventful year for the wholesale industry with Booker making another solid acquisition, Bestway nearing the 40 year mark and the likes of Lidl and Aldi continuing to create havoc in the grocery sector with the Big Four continuing to suffer.

So what are our predictions for 2016? Here we go bold and make some predictions for 2016 and so lets see if they come true by the end of the year!

Amazon Finally Arrives

We all know that Amazon has been testing the market in the grocery delivery market and has been stealthily growing its business. But we believe 2016 will see a shift in gear for the retailing behemoth and they will begin to make decent in-roads into the retail grocery market, affecting the big boys and shackling the status quo. They may also start their expansion into the wholesale sector but we see a few years yet until this will happen.

Lidl and Aldi move into Convenience Market

Lidl and Aldi have tested their pilot stores in North London in the convenience store market and we see this taking on a much larger momentum in 2016 with the opening of multiple stores. This will have a knock-on affect on the wholesale market with demand peaking and the more convenience stores being affected too.

Oil Stays Cheap

Cheap oil and hence cheap petrol will mean that deliveries become cheaper and product prices will decrease. This has already happened in 2015 and we see this trend of deflation continuing into 2016.

Consolidation

We see further consolidation in the wholesale market and the food delivered market too. It makes perfect sense – all those delivery vans running around central London – a merger would reduce the vans, traffic congestion and make more efficient deliveries too – Hey presto!

On-Line Ordering

On-line ordering which already has been growing will see explosive growth in 2016, reaching the tipping point as customers see just how much time and energy they can save from ordering online. We expect to see the increase in online sales doubling in 2016.

So there we have it – lets check back at the end of the year to see how close our predictions came!

Wholesalers – How to Get the Price of your Products Right

Over the last month, we’ve been having a look at how to help wholesalers to get the selling price of their products right. Typically the selling price has always been a fixed mark-up on the price of a product.

So if a wholesaler bought a product for 80p, then he would be adding a 25% mark-up and selling the product for £1 which should have enough margin to cover the overheads of storing the product, handling and delivery etc.

However, today using this pricing strategy has its limitations, and why is that? Firstly, there are competitors in the marketplace and each competitor is setting their own price of the product based on their own specific cost structures e.g. storage, distribution and how much they bought the product for in the first place. The larger the purchasing power of the wholesaler the better discounts the wholesaler can get from the manufacturer.

Hence, to be able to set your own price, you’ll need to see how much the competition is selling in the marketplace for. If you’re price is too high, then the customers will go to the competition. If you’re too low then you’re throwing away good margin. Hence, getting the price right is essential and the first step to doing this is to know what your competitors sell at.

Secondly, there will be products which are bring customers in e.g. Coca Cola cans, Red Bull etc. which are very popular products and can be promoted at a special price to lure customers into buying. These products will be on promotion and typically loss leaders.

However, you will also want to see what the competitors have on promotion and whether you can beat or compete with that price. It may be the case that a competitor has such a low price on a promotional product, that you cannot compete with the price and so best to promote a different product or wait until the competitors promotional period is over.

This is what our ‘Improve That Price’ analytic’s product does.

A wholesaler can see the competitor pricing for all products, and then decide how to price their own products. They can also download variance reports which will show which products are 5%, 10%, 20% etc higher priced than a competitor and make changes accordingly. The can do this instantly for all of their product range, and even against the closest match of a competitor.

This is a great piece of software and now used by some of the largest wholesalers in the UK. So if you want to see how this works, then email faisal@improvethatprice.com and he would be very happy to give you a demo!

Our Forecast for 2015

It’s been an interesting year for wholesale and foodservice sector in 2014 with a strong performance and little of the drama that has forsaken the supermarket industry this year.

The year has been one of transition from the traditional cash and carry model to one being dominated by internet and click and collect sales. We see this trend continuing into the next 5 years with steady growth year-on-year.

With internet sales having reached over £1bn this year with big contributions from both Booker and Bestway, the convenience of ordering online is becoming a stable feature for customers. This still only represents 4% of the overall market, and so there is still room for much further growth to be seen in internet sales sector. We forecast the market grow to 10% within the next 10 years.

Mobile apps have also started to emerge with a new app created by Bestway as one of the first apps in this sector. Time will tell as to how popular mobile ordering will become, but we forecast that it will continue to grow as smart phones become a mainstay of the ordering market.

With all this online presence continuing to grow, data will become increasing more important with savvy wholesalers making decisions based on the data that they have in real-time to target new and existing customers with special offers etc. We see the emergence of data as the next big change in wholesale and the wholesalers who can adapt the quickest in the next 5 years, will enjoy the biggest growth.

We also see the market becoming more and more competitive as the discounters enter the convenience store market. With lower prices and a different range of brands, market share will be lost to the discounters which will have an added affect on wholesalers too.

Overall, we see opportunity in 2015 for wholesalers to adapt further to technology through online websites, mobile ordering and employing big data techniques to engage customers and refine their price strategies going forward. Those that can adapt the quickest to changes in the market will have a competitive advantage in the coming years.

We wish you all a Happy New Year and prosperous 2015!

Supermarket Price Wars Affect on Food Producers and Wholesalers

It’s been no secret that there’s a price war going on at the moment between the major supermarkets due to the attack from the discounters. This may be good news for consumers, with lower prices in store and deflation of food and drink prices, but not so good news for the food producers.

Research from Moore Stephens has shown that 146 food producers went into administration this year, compared to 114 last year, which is a worrying sign.

With the supermarkets putting added pressure on supplier costs, this has meant that the margins made by the supplies are far less than before, and can tip the supplier into administration. This coupled with the long payment terms of the supermarkets means that the suppliers have a cashflow problem, and end up running out of cash.

Are we due to see the effects of this in the wholesale market? At the moment, there may not be a price war waging between the wholesalers, but the food suppliers also supply to wholesalers and food service companies too. Thus, with fewer suppliers in the market and less competition, this may lead to higher prices in the future too.

It will be interesting to see how prices will be affected in 2015 with fewer food suppliers, and the impact of the discounters moving into the convenience store sector too. 2015 will certainly be an interesting year in the wholesale market!

Poundland Sees 12% Rise in Profits – Should you be stocking Value Brands?

Poundland this week reported a 12% rise in profits for the half year to £9.3m, and like-for-like sales were also up 4.7%.  This clearly suggests that shoppers are going for the discount brands, and looking to get their shop as cheap as possible. What impact does this have on the convenience stores in local areas?

Well, for a start, consumers are becoming more price sensitive and so are trying to save money at any suitable opportunity. This puts pressures on the price competition between convenience stores, Sainsbury Local, Tesco Metro etc.  and the discount stores too.

So should the local convenience store be selling more of the low value branded goods, then the branded goods themselves E.g. should a local convenience store sell own label tomato ketchup rather than Heinz ketchup? Or are these customers still going for the branded goods, and are only after the convenience? And with limited shelf space, then the shop owner has to be very picky about the products that they sell too, so the choice is even more important.

It’s very difficult for the local convenience store to compete just on price – any Sainsbury’s Local or Tesco Metro can blow them away on the price, with their enhanced buying power. The main reason why a customer is coming into the convenience store is literally for convenience – if they went to a Tesco Metro then they would have to walk there, try and find the product, walk around the large store, queue up to pay etc, which takes time. To buy something simple like a bottle of tomato ketchup, then it is easier to go to the local convenience store and be in and out in a few minutes.

Hence, as speed is the key, seeing the product the customer wants to buy very quickly is important. Hence, the brand is very important in this regard as the customer can identify with the brand quickly and easily, and make a choice easily.

Thus, for this reason we recommend that the convenience stores continue to stock the popular brands and stock own label products for non-key items e.g. custard cream biscuits.  A focus on the gross margins of the products and the convenience aspect will ensure that convenience stores will continue to flourish and be a central point for the local community for the foreseeable future.

Lidl and Aldi Enter Convenience Store Market – a New Threat for Retailers?

Both Aldi and Lidl have announced that they will be opening up convenience stores to compete with  Tesco Metro and Sainsbury Local which is big news in the convenience store market.

Aldi trialled their first store in Kilburn which has proved to be a great success, and Lidl is to follow with a store in Kentish town. The convenience store market has been one of the few growth areas for the supermarkets, with all keen to continue expansion too.

However, this could come to a pre-mature end with the emergence of the discounters into this market space. How will this affect the current crop of independents and retail outlets already there, and in turn affect the larger wholesalers too?

With the emergence of cheaper goods from Aldi and Lidl in a convenient format, this will have an impact on the current crop of Sainsbury and Tesco convenience stores, as well as all other independents. Customers are going for convenience and a cheaper price, and hence the new Lidl and Aldi stores will experience more customers which will be taken at the expense of the existing independents and supermarket chains.

As the independents buy their goods at the large wholesalers e.g. Bestway and Booker then the sales of these wholesalers could drop too, as they are dependent on the convenience store trade. Those wholesalers who have a large food service offering will see less of an impact than those who rely on convenience stores.

It’s interesting times for the retail and wholesale market and there could be some major changes happening over the next ten years in this market place.

Scotland Voted ‘No’ to Independence, what is the Impact on Wholesale Prices?

It was a big day for the UK on Friday morning, with the results of the Scottish Referendum. With Scotland voting ‘No’ on leaving the UK, it was one of the biggest days in the last 300 years in the history of the United Kingdom, and not to be repeated for a long time too!

So how does this affect wholesales prices of your food and drink items, I hear you ask? Well, we can look at it both in terms of a ‘Yes’ and ‘No’ to Scottish Independence and see what the affect’s on the wholesale prices would have been.

Today, all trade freely moves between England and Scotland in the UK. The big wholesalers have their headquarters in England, and run their Scottish stores usually as a subsidiary of their UK branch and so the stores are just treated exactly the same as the English stores with the same products, similar prices and the same distribution network.

However, if Scotland had decided to go independent, there would be a new border created between England and Scotland, with a new currency too, as the pound most likely would not have been allowed to continue as a currency in Scotland. This would have had a large implication on the prices charged to customers and the transfer of goods between the two countries.

Prices would be open to a foreign exchange rate, and we forecast that prices would have increased in relation to those in the UK, with the exchange rate fluctuating with the new independent status of the country. Additionally, transferring stocks to the ‘new Scotland’ would have incurred further charges with import duties going up, especially for Tobacco and Alcohol as the ‘new Scotland’ tries to raise funds to support their new independent country.

Additionally, the cost of distribution may be affected too. As Scotland is a separate country, they would be able to choose which taxes to apply to petrol prices in the country, making distribution to stores more expensive if petrol prices were to rise with the higher taxes.

All in all, it was a beneficial result for all wholesale businesses up and down the country that Scotland did not vote ‘Yes’ to independence and with this uncertainty removed, small businesses can now get back to working on improving their own sales, profitability and growth – the real issues that they face today, rather an issues brought about through decisions outside of their control.