Text 2 comeback and future of wholesalers

Most wholesalers are concentrated near transporting, storing, and financing facilities as well as near large populations. In general, that means that they tend to locate in or near large cities. In the United States, about 40 percent of all wholesale sales are made in the 15 largest Metropolitan Statistical Areas. Similar concentrations are found in most countries around the world.

When a number of competing wholesalers are located together, competition can be tough. And channel relations are usually dynamic as producers and middlemen seek lower costs and higher profits.

In earlier days, wholesalers dominated distribution channels in the United States and most other countries. The many small producers and small retailers needed their services. This situation still exists in many countries, especially those with less-developed economies. However, in the developed nations, as producers became larger some bypassed the wholesalers. Similarly, large retail chains often took control of functions that had been handled by wholesalers. In light of these changes, many people predicted a gloomy future for wholesalers.

Yet partly due to new management and new strategies, wholesalers have held their own, and many are enjoying significant growth. To be sure, many still operate in the old ways — and wholesaling changes less rapidly than retailing. But progressive wholesalers are becoming more concerned with their customers — and with channel systems. Some offer more services. Others develop voluntary chains that bind them more closely to their customers.

Modern wholesalers no longer require all customers to pay for all the services they offer simply because certain customers use them. Now some wholesalers offer basic service at minimum cost — then charge additional fees for any special services required.

Most modern wholesalers streamlined their operations to cut unnecessary costs and improve profits. To cut costs, they use computers to keep track of inventory — and to order new stock only when it's really needed. Computerized sales analysis helps them identify and drop unprofitable products. Wholesalers are also more selective in picking customers. They use a selective distribution policy — when cost analysis shows that many of their smaller customers are unprofitable. With these less desirable customers gone, wholesalers give more attention to more profitable customers.

Many wholesalers are also modernizing their warehouses and physical handling facilities. They mark products with bar codes that can be read with hand-held scanners — so inventory, shipping, and sales records can be easily and instantly updated. Computerized order-picking systems speed the job of assembling orders. New storing facilities are carefully located to minimize the costs of both incoming freight and deliveries. Delivery vehicles travel to customers in a computer-selected sequence that reduces the number of miles travelled. And wholesalers who serve manufacturers are rising to the challenge of just-in-time delivery systems and making renewed efforts to add value in the distribution channel.

Wholesalers are helping retailers reduce costs too. Retailers can wait until they really need a product to order it — and the order can be instantly placed with a fax machine, toll-free telephone line, or computer-to-computer EDI hookups.

Not all wholesalers are progressive, and some of the smaller, less efficient ones may fail. Efficiency and low cost, however, are not all that's needed for success. Some wholesalers will disappear as the functions they provided in the past are shifted and shared in different ways in the channel. Cost-conscious buyers for Wal-Mart, Lowe's, and other chains are refusing to deal with some of the middlemen who represent small producers. They want to negotiate directly with the producer — not just accept the price traditionally available from a wholesaler. Similarly, more producers see advantages in having closer working relationships with fewer suppliers — and they're paring the vendor roles to exclude wholesalers who do a poor job of meeting their needs. Efficient delivery services like UPS and Federal Express are also making it easy and inexpensive for many producers to ship directly to their customers — even ones in foreign markets.