Despite the significant changes that have taken place around the world over the years, wholesale activities remain a key component of every economy. It is therefore very unlikely that this will stop in the foreseeable future. What is certain, however, is the fact that the way wholesale businesses are run will change.
The Current Disruption
According to a paper published by Deliotte, there is evidence that shows that the wholesale distribution industry is at an inflection point. What this means is that, after years of growth, the wholesale sector is currently facing many disruptive forces.
While most business owners have built their businesses by expanding the physical reach they have in the market, this is quickly changing. Deloitte believes that these changes are bound to become more apparent in the next three to five years. However, numerous indicators already show that these changes may not be that far off.
The Future is in E-commerce
Many people think about e-commerce only in terms of retail business. However, some major organizations are changing this perception. One of the best examples, and the most prominent e-commerce brand, is Alibaba. In the year 2014, Alibaba reported that 11.8% of its revenue came from wholesale business. While this may sound meagre, but it actually constitutes US $ 1 billion. That is not a small amount considering that it has numerous competitors around the world.
Another top brand that is changing its approach to business is IKEA. For years, IKEA has based its business model on having direct contact with customers. However, this is slowly changing. IKEA is now focusing on offering more of their product online. While this does not constitute a shift into wholesale, it’s a risk for businesses in this sector.
What this means is that more and more customers will have access to IKEA products. This means they will skip the need to have middlemen. Wholesalers will therefore be obligated to quickly change their approach, and especially how they distribute their products and reach customers.
As customers and retailers get used to the notion of online business, there is need for wholesalers to take this into consideration. Business in general will increase as information sharing becomes more widespread. However, the methods that were used to target customers 10 years ago are insufficient for businesses that wish to remain competitive.
Competition from Smaller Players
Another cause for concern for wholesalers is the fact that smaller players are joining the wholesale sector thanks to technological advancements. In the past, it was not very easy for retailers to bypass wholesalers and purchase goods directly from manufacturers. That, however, is quickly changing.
Technology is quickly making the field even and lowering the requirements for entry. Companies like Alibaba, Amazon, and Walmart no longer requires suppliers to get their products. They can easily get the items they require right from the manufacturers. Increasingly, these ecommerce giants are sourcing products directly from countries like China. This is bound to increase in future.