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Are Wholesalers in trouble?
Wal-mart, Target and K-mart (and a few other large retailers), have obviously changed the Retail environment over the past several years. It is certainly sobering to count the number of Mom & Pop stores that the mammoth retailers have driven into submission. Although this in itself is very depressing, it is only the beginning of the story
The fact that family managed retailers are nearly extinct is quite honestly old news. The current and more critical question is, Who is NEXT on the path of destruction?
In my humble opinion, the apparel Wholesaler is the next victim for the stampede. The giants have turned direction and pointed their horns in an entirely new direction. Have you stopped to consider where the herd is headed? Unfortunately, if you are a Wholesaler, it is headed toward you. In fact, I am sure you already feel the sharp sting.
Knocking small clothing retailers on their heels was an obvious first step in the quest to reduce competition. Now the focus must change from the reduction of competition to a systematic focus on cost saving activities. Let me think
Manufacturer Wholesalers Retailer
The manufacturer produces a garment for $5 and sells it to the Wholesaler for $10. The Wholesaler will then sell the garment to the Retailer for $15. Note: This is how it worked in the past. We all know that Retailers now squeeze the Wholesaler harder and the Wholesaler will squeeze the Manufacturer harder (it is now hard for anyone to make money)
Now, if we follow the general example from above, what is the logical next step for the retailer??? You guessed it a fairly large cost saving activity would be the reduction or complete removal of the middleman.
Why do large retailers focus more and more on Private Label?
Possible Answer: Reduces the dependency on the Wholesaler. Retailers are better off building brand awareness for labels that they own instead of labels that you own. In the long run, does this sound good for Wholesalers? I don't think so
Why does Target Corporation have a subsidiary called Associated Merchandising Corporation (AMC)? AMC sources high quality apparel for the company. AMC also provides international sourcing for a number of other retailers. Currently, they have 53 international locations.
Possible Answer: Well, I think the answer is fairly obvious (they are smart...). If they produce their own garments, the corporation will profit on the Wholesale & Retail side of the spectrum.
On the positive side for wholesalers, it will be difficult for large Retailers to completely eliminate the Wholesaler. Retailers have too much fun (and profit) giving Charge Backs to Wholesalers !!!
Anyway, it is very possible that I am 100% wrong.
This is just a thought.
Written by Apparel Search 1/29/02
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