Will Grocers Use Third Party Logistics for Outsourcing their Transportation Needs in Future?

Transportation costs are a major reason for growth in price level of products from manufacturers to retail stores. While large nationwide stores like Walmart, Costco, Safeway, Seven Eleven and many more have their own transportation, distribution and warehousing facilities, small stores rely on local distributors for their merchandise. Food products required by grocery stores are also in great demand by restaurants, hospitals, schools and other finished food retailers. In the midst of food distribution the parties involved have to also be careful about selling their finished products within a certain period of time as they are perishable and cannot be stored for long.

To reduce distribution costs grocers and convenience stores have varying strategies for both warehousing and transportation to retain competitiveness. To keep a cap on transportation requirements grocery wholesale distributors are using both third party carriers and their own private fleet for distribution of merchandise to their list of retailers. This hybrid transportation methodology helps both transporters to improve their distribution techniques and minimize wastage. Increasingly even food hubs close to large farms which work as cooperatives to collect and distribute food from local farmers use their own distribution trucks for local areas and sometimes transportation facilities of convenience store brokers to send it to distant markets.

Why third party logistics are profitable for grocery chains and convenience stores chains

• A growing number of large transportation truck drivers are retiring or moving on to more lucrative job opportunities. New generation is not keen about taking long distance driving as a profession due to the hazards involved and easy availability of job opportunities. This is forcing stores to offload their low-profitable areas to third party distributors which are working for other stores in the area.

• Flexibility that third party trucking companies provide in food distribution is invaluable especially during harvest time and peak holiday season when grocer has to use their own trucks for large number of pickups from farms to manage local demand. Similarly when demand is low then grocer can reduce number of third party deliveries and also maintain customer demand without wastage.

• Retailer chains which have operations on a national level will be unable to maintain their deliveries on their own at all seasons and often use third party carriers to reduce cost of transportation from manufacturer to store to provide competitive prices to their customers.

• The use of third party logistics also helps reduce potential risk of labor conflict and total shutdown as with potential threat of these logistics providers the laborers are also worried about losing their contracts.

• With lesser trucks and merchandise to manage the grocery retailer is also safe from increased capital outlay and expenditure.       Though it can make them vulnerable to same delivery issues which the third party distributor is exposed to the amount saved from assets purchased can be used to expand store outlay and make it more appealing.

Though convenience stores and grocery store chains understand that using external transportation facilities may add to the overall cost of merchandise, the benefits accruing from this system far outweigh the expense as they can achieve better productivity from hybrid transportation system. The recent increase in labor costs followed by transportation costs due to high rates of fuel has reduced the grocers’ margin forcing them to relook at the supply chain network to reduce operational costs for having profits. To keep their business profitable retailers have to measure the costs of distributing their products by themselves or through third party logistics providers.

Types of third party transportation management providers to retailers – Depending on the type of product there are several types of transportation management providers that specialize in food distribution like wholesale food suppliers and those that deliver apparel, shoes, cosmetics, accessories, cleaning products, tobacco and several others. These distributors are small and large which distribute goods either within the state or on national level on the basis of their expertise and profitability. While some third party distributors focus on small parcel shipments which are carried over large distances through their network of trucks and warehouses large bulk carriers transport goods by rail or ships which are then loaded on trucks and moved to retailers and grocery store distributors.

Manufacturer distributors – In this setup the manufacturer or point to point wholesale distributor take the responsibility of distributing the finished product directly from production point to convenience store chain or grocer. This type of delivery is possible when the whole truckload is bought by the retailer store which saves the transportation cost of moving from one retailer to other making deliveries.

Central distribution center to retail stores – Instead of having their own transportation service to supply finished products to retailers, manufacturers have a finished goods warehouse or distribution center. This is then moved to other locations by wholesale grocery distributors and convenience store brokers through their own transportation facilities by breaking them into smaller individual orders for distribution to retailers.

National distribution channels- These are centers where small manufactures and producers bring their individual finished products which are packed and ready for delivery. These distribution centers are sometimes run by food distributors, wholesalers, manufacturers’ cooperatives, and also by retailer groups to have a uniform delivery system. These products are then distributed to retailers which are a part of this association in small quantities for sale in vehicles which are generally owned by the distribution agency itself.

Grocers know that minimizing logistics and transportation costs can help maintain operational costs. As distributors add their own markup to products handled and delivered by them it can affect overall price a retailer charges from end customers. If a large wholesale retailer can take delivery of products from manufacturers’ factory or distribution center then they can provide lower price depending on transportation costs. In the use of third party logistics retailers have to look for multi-client distribution services which travel nationwide to distribute food and other convenience products to large and small retailers in a profitable manner. Like manufacturers, retailers also set up cooperatives to setup their own distribution network or engage third party distributors to complement their operations.

Emerging Trends in Wholesale Distribution

In the supply chain network of distribution from manufacturer to retailers, wholesalers play a major role and occupy the middle position between manufacturers and convenience store brokers or retailers. This group was never emotionally attached to the products which it was distributing to retailers or distributors as its services were limited to caretaker duties. With growing trend of large format retailer stores with nationwide chains which are setting up their own warehousing and distribution networks it is increasingly becoming a challenge for wholesalers to retain their importance in the distribution chain.

With growing number of convenience stores turning into food and beverage distribution outlets the supply chain networks are becoming more complex to maintain this demand. While customers are seeking better products at lower prices, manufacturers’ cooperatives and farmers are demanding better prices for their products which are squeezing the wholesale distributor from both sides.

The wholesale distribution sector has annual sales figure of $5 trillion which has fallen by a trillion since 2011 and is expected to grow at a compounded rate of 6 percent in forthcoming years. During next five years the revenue of distributors will grow by 50 percent while retailers will grow by 40 percent as the national economy has grown by 30 percent irrespective of the tough economic conditions. Though a few key industries like tourism and automobile have slowed down due to increase in gas prices the retail industry has remained steady.

Challenges in today’s competitive markets for wholesalers

Manufactures are seeking profitable ways to get their products into c-stores and want to keep distributors to the minimum. In this endeavor they are taking the help of grocery wholesale distributors and other convenience store distributors which move the goods directly to the retailers. Customers are also demanding more customized delivery systems to have better products which reach them at home at a competitive price. Global competition from low cost products is making it difficult for retailers to store local made products at low prices if the cost of distribution is high.

How to get products into c stores in time

The biggest challenge before manufacturers and distributors is to get their products into their preferred stores in time before customers are given a better alternative at a lower price. Wholesalers play an important part in this exercise by being able to identify the right storage facilities and finding the right distributors for their products. To combat this issue there are convenience store brokers associations and distributor groups who take the responsibility of marketing and distribution of products from manufacturers to retailers. They get the latest products and display them before consumers at convenience stores and grocery stores directly which are a part of their member distribution chain and then maintain regular supply depending on demand.

Technological challenges

Managing inventory and storage along with regular replenishing of stocks and being able to have updated information about stocks available in the warehouse is a challenge most wholesale face in their business. While this can now be managed with information technology the wholesaler has to identify the right solution which will be appropriate for his current and future needs. The right software solution should be able to manage customer orders, track inventory and generate shipping assignments for trucks that move out to distributors. Wholesalers also have to invest in software for automating standard tasks like making packing lists for pallets moving out of the warehousing along with drawing up invoices and comparing them with customer order lists to avoid mistakes.

Challenge from large retailers

Now that fuel prices have stabilized distributors are safe from one challenge to now face large retailers like Walmart, Safeway, Costco and others who are bypassing them to directly take delivery of products from manufactures. They have set up centralized collection centers wherein manufacturers supply their truckloads of produce which is repacked and distributed to the retailers’ stores which are spread across the nation. The distribution of these products from collection centers can be done either by these retailers themselves or through third party distributors.

Challenges of export/import

The wholesalers take responsibility for export of goods across Japan, Canada, Mexico, China and locations across Europe which has suffered due to economic upheavals and natural disasters. The long trucking dispute between US/Mexico also led to loss of several million as traffic from both sides of the border came to a standstill during this period.

Emerging trends in wholesale distribution

In spite of these challenges the wholesale distribution sector has been able to manage industry requirements and adapted itself to requirements of business and industry. While technologically wholesale distributors are able to improve their efficiency external challenges are forcing them to adopt new trends to improve bottom-line and manage growth.

Distribution channels driven by demand

This refers to distribution which is driven by demand as goods move down quickly through the supply chain due to ready demand. In today’s customer driven markets the manufacturers do not push goods towards buyers and retailers manage their inventories based on consumer demand. This helps in allocation of products across a widespread geographical area as manufactures and wholesalers are now aware of pockets which have demand for their products. Channel partners comprising of wholesalers, distributors, brokers and retailers share data about consumer demand which helps maintain inventory supplies.

Direct interaction with customers

With the assistance of internet, wholesale distributors are able to improve their business activities as they are able to directly connect with retailers and customers. The innovative wholesalers are managing supply chains by using internet to interact with buyers to understand changing trends and using collaborative tools like virtual trade-shows. Online business environment requires wholesalers to use their website as promotional tool for lead generation and sharing information.

Now warehouse management systems are sophisticated tools which constantly help top wholesalers to stay ahead of competitors through effective strategy. The national association of wholesale distributors works with more than 100 wholesalers to access and analyze business information which can help managers to make business decisions which will meet unique challenges and provide long term solution.

Marketing for a Wholesale Grocery Business

Marketing is necessary for any business. The methods vary depending on the nature of the business but all businesses need it irrespective of their size and the sector. Marketing for a wholesale grocery business is based on the dynamics of the sector as well as the type and nature of the individual businesses. Here are some tips for marketing a wholesale grocery business.

Define the marketing plan

Before making a marketing plan it is important to define and refine the strategy for the same. Whether you are formulating a plan for a new business or refining the marketing strategy of an existing business, making a checklist of the areas to focus can help a great deal. This narrow focus on important points is the key to a successful marketing plan and a successful business.

• Define your business. Define the products your sell. Do you deal in only food items or other household products as well? What type of food you sell or intend to sell? Even if your answer is as simple as ‘bread’ – write it down as it helps to narrow the focus. Then identify what type of bread you wish to sell. There is a huge variety of breads in the market these days – from plain bread to wholegrain variety to gluten-free and many types of gourmet breads. Each type of bread will need a different marketing plan as the target audience is different for different breads.

• Also see if your products are different from what is currently available in the market. Will you be selling what is already selling in the market and be a part of the existing competition? Or will you source your product from a new vendor who has also just entered into the market? Buying from new manufacturers or vendors can give you an edge as you might have products to sell that are not in the market yet. Or you might wish to try for a product range that is a mix of existing and new types of products. Your bread products can include the usual varieties that regularly sell in the market and include breads that introduce new flavors in the market.

• This brings us to the point regarding target audience. Identify the end-users of your products as this will help you reach the right convenience stores for your business. The demographics of a location and the type of convenience store are the two factors to consider here.

• Now think how the above points help you with refine your marketing plan even more. The market competition in your chosen product category helps here to determine how aggressive your marketing needs to be. Also to consider are things like how you want to position your business. In other words do you want to become a market leader in your product category? Or do you want to launch new products? For instance, do you want to introduce new types of gourmet breads in the convenience stores or you are happy to sell the breads that are already selling in the market?

• Also consider the size of the market. How many convenience stores you want to cover at the start? What market size is already covered by your competitors? Do you want to reach out to newer markets or stick to existing stores already served by your competition? To continue with our example of breads here – do you wish to only sell to few convenience stores or do you wish to sell a few varieties of breads including gourmet breads and enter new markets like restaurants and high-end stores.

Formulate the marketing plan

Now comes the part of devising a plan based on the above factors. Once you know your products and how you can position your business given the current situation in the market or the competition existing in the market, you can make your marketing plan that will take into account all the factors that influence or might influence your wholesale grocery business.

• First thing to do here is to think over the pricing of your products. Do you wish to price your bread lower than your competitors’ pricing or keep the price a tad lower so as to beat the competition? Or on the other hand, are you so confident of your products that you decide to price them above the existing competition? Or on a neutral front, you price the products just as your completion in the market.

• Think beforehand how you plan to tackle price fluctuations in the market. These fluctuations are a normal part of any business. Rise or fall in price of a single ingredient can affect the cost of the final product. Say for instance, you buy multigrain bread from a vendor at a certain price, but the price of sorghum flour rises due to some reason.

So if your multi-grain bread has sorghum flour as one of your ingredients then this will affect the cost of the multi-grain bread. Now here you will need to decide whether you are in a position to charge more from the retail stores or you will need to bear the cost yourself? A new business or a business in a very competitive market needs to regularly take such decisions. Having a contingency plan in mind beforehand to handle price fluctuations can help a great deal when suddenly you are faced with such a situation.

• How do you plan to reach your target market? If this is a new business for you then how do you plan to reach out to convenience stores and have you decided on the stores? Have you made flyers to distribute that list your product range and the unique qualities of your products? Do you think you will need a website to promote your business? Do you have the funds in your marketing budget for a website? How you present your business and make the first contact with your clients are important factors in any marketing plan.

Wholesale Grocers and Independent Convenience Stores – The Present and the Future

Wholesale grocery business has seen many fluctuations in the market but is still going strong. Industry experts and analysts study the markets and release new trends based on the current scenarios that govern the wholesale grocery business and the convenience stores. The wholesale grocery business has changed a lot for sure. But is it here to stay? What about independent stores? Will they survive?

The past

There is no doubt that the wholesale grocery business is one of the most competitive businesses. But this is also true that this business has been around for centuries and still existing. The wholesale grocery business has continuously reinvented itself given the opportunities in the market as well as the changing trends in the market.

Gone are the days of goods arriving through ships and merchants haggling at the ports and the goods then being transported through carts. The merchant trade began this way – goods reaching one continent to another – creating a unique marketplace. But the 20th century changed all of this.

The changes in the wholesale grocery business that happened during and after the World War II established many grocers and establish big business conglomerates. The innovations that happened during those years helped to streamline the wholesale grocery business in a big way. New ways to cut costs, new types of warehouses, new product categories, creating the capacity to sell these new products and reaching out to convenience stores in new ways.

The changing face of the wholesale trade also affected the establishment of convenience stores. From independent stores in the neighborhood corners to high-end retail stores – all this happened as the wholesale grocery business changed over the years.

The present scenario

The wholesale grocery business saw a new trend in the late 20^th century — the rise of the mass merchants. This affected the wholesale grocery business in a big way. Were the profit margins of the wholesale distributors affected as a result? Yes. Was the wholesale grocery business this changed forever? Yes again.

Distributors playing the role of wholesalers and reaching out to retail stores trough their own network of distribution was another huge change that the business of wholesale grocery has seen. Big establishments with their big budgets could establish their own distribution channels, which otherwise takes time and patience and of course money.

Big merchants can work out larger discounts and pass the same to the consumers. This is what their business model is based on – huge variety of products along with even bigger discounts to the end-users. Aisle upon aisles of products in every category coupled with huge discounts no doubt attracts customers but has this consumed the business of wholesale grocers and independent convenience stores. The answer is simple – no.

The 21^st century is the age of the Internet. With the new technological advances made into this field emerged the online retail stores. Some big players emerged and countless small businesses opened and either shut shop or thrived – just as it happens for brick and mortar stores. But then who serves these online retail stores? Similar to large businesses that handle their own distribution and source their products from various places, these big retail stores also run on a similar model. But then there are countless medium to large establishments that rely on wholesale grocers to supply them the goods.

The Future

What the future for the wholesale grocery business holds and how it affects the independent retail stores?

With all the changes the wholesale grocery business has witnessed, one thing is sure – the business is here to stay. This business has survived the threats from big merchants and distributors. But with the changes in the wholesale business also came the transformations in the retail industry.

From small convenience stores serving the need of the entire neighborhood to high-end stores storing just about everything – the retail business has also grown by leaps and bounds. The convenience stores and big retail stores, both the models still need distributors to supply them with the products they sell. There is a need in the market for distributors catering to all sizes of businesses. Not only all sizes but all types of retail businesses.

The online retail stores also need distributors to purchase their stock. Be it food or groceries of all kinds – it is the wholesale grocers and their businesses that serve this market.

The wholesale grocery business is never going to cease to exist. The need of the hour is constant innovation. This business has survived threats from big traders and merchants. The wholesale grocers have faced the challenges from changes in the distribution business. But the truth is that this business is so big that all types and sizes of wholesale grocers can thrive in the competition provided they are willing to innovate to suit the changing need of the market.

A wholesale grocer who refuses to launch a website or doesn’t try to reach out to online retailers might miss out on big online business. If the wholesale grocery businesses during the war or in the 1990s didn’t transform their businesses or didn’t take advantage of the opportunities offered to them then they might have not become as big they could.

It is all about surviving the changing marketplace and embracing new technologies for innovations in the business. And this is also about relationships between wholesale grocers and the retail stores. This business relationship is an important factor that determines how the two fare and survive in a challenging market situation.

Constant changes that have happened with the independent store businesses have helped wholesale grocers a great deal. The more the independent stores thrive in this day and age of competitive and dynamic marketplace, the better it is for the wholesale grocery business.

Independent stores may be smaller in sizes but they also have low overheads. They have long-established relationships with their grocers and with timely innovations on the part of both grocers and the retailers; the future of this business is bright. The wholesale grocers as well as convenience stores are here to stay.

Grocery Store Distributors AKA Wholesale Grocers

Grocery store distributors are the link between manufacturers and retailers. These distributors or wholesale grocers help reach thousands of products into various stores and hence to the consumers.

Grocery store distributors are solely in the business of distribution of products from the manufacturers or vendors to the retailers. These retailers can be independent stores or high-end supermarkets. Some manufacturers undertake the task of reaching out to the stores directly while others do so at least at the start of their business. This might save time or money or both in the initial days of a new business. But as the business grows vendors need to reach more retail stores in the most cost-effective way and also with the most ease. Therefore there are several advantages of working with a grocery store distributor AKA wholesale grocers.

Grocery store distributors offer several benefits to manufacturers or vendors

Working with wholesale grocers is cost-effective business decision for the manufacturers. Grocery store distributors provide manufacturers with an option of distributing their products in ways that will save them money. Catering to the supply needs of an independent store is a big task. More so if the store is a high-end supermarket dealing with thousands of products. The distributors can make this task easier for the vendors by taking care of the distribution of the products and managing supplies to the stores.

Supplying to the stores needs a different infrastructure. The transport alone can cost a lot of money as the vehicles need to be purchased or leased. Then there is the fuel cost. Wholesale grocers have the infrastructure in place to distribute food and other groceries in an efficient manner. Bringing this infrastructure in place can be a time-consuming as well as expensive endeavor for most manufacturers or vendors.

Working with distributors saves time. Grocery store distributors have their logistics in place for the business. There is an inventory to take care of and deal with ongoing demands of hundreds of stores. There are discounts and offers to handle and manage. There is task of invoicing and collection and establishing the terms of the credits. Wholesale grocers have to maintain storage for their stock and take care of products that reach them through shipping or as air cargo. There is a ton of stuff to handle in the distribution business. Grocery store distributors take care of all these tasks that are necessary in the business. Establishing and maintaining such logistics takes time and requires long-term efforts.

Working with wholesale distributors offer vendors the advantage of their huge network. Grocery store distributors work through a large network of vendors and retailers. This is built through years of business. They know and understand the requirements of their clients and can serve them better by providing them with the best of supplies. This works out for the benefit of all parties involved in the business.

Working with wholesale distributors gives the vendors the advantage of marketing. It is through distributors that promotional banners and flyers reach retail stores. When these are placed in the store for the benefits of consumers; stores can get advance orders for the same. This can give an idea about the response to the new product to the manufacturers or vendors and they can work on arranging the requisite numbers to supply to the retailers.

Working with wholesale store distributors help manufacturers reach newer markets. Wholesale grocers have solid business relationships with retail stores of all types. They know what product will fare better in what location. A store with predominant population of a particular community will do better with products catering to that community. It is also in the interest of the distributors to reach as many stores as possible.

Only distributors can continually look for newer markets, which not only helps them but also the manufacturers. Working with wholesale store distributors can reduce the workload of the vendors. It is the distributors who take care of returns and credits of the retail stores. This helps manufacturers and vendors considerably as these processes need time.

Grocery store distributors offer several benefits to retailers

Grocery store distributors work with each retail client to supply them with the best of products from the best of vendors. Not all distributors supply all the products. Some distributors might be in the business of supplying only poultry products to retail stores or they might deal in only vegetables. When a distributor dealing with only meat products is aware that a retailer might need a huge supply of chicken in a particular month, the distributors can make the quantity available to that retail client.

Grocery store distributors bring offers and discounts to retailer. These discounts or promotional offers come directly from the manufacturers and these help the retailers sell more products to the consumers. Every new product comes with a promotional discount or offer. Then there are seasonal and special holiday offers. Some manufacturers work on special products that are only available through the holiday season. These can reach a retail store only through a distributor who can notify the stores well in advance and retail stores can manage their orders for the same accordingly.

Grocery store distributors also do the job of providing feedback from the retailers to the vendors or manufacturers about the products. If customers are not satisfied with a product or a store is handling many returns then the same can be conveyed to the manufacturer. This helps the retailers as the manufacturer might replace the product or reduce the cost of a defective product.

Grocery store distributors ease the supply worries of the retail stores by making sure manufacturers are supplying all necessary products in time and in the right quantity.

Grocery store distributors help retail businesses by introducing new products in their stores. The better the business terms between a distributor and a retailer, the better deals for the latter. The manufacturers might give promotional placements products for a few retail store only. It becomes the prerogative of the distributors to decide which store gets the free promotional products.