Oct 6, 2008
ARLINGTON, VA — October 5, 2008 — Most independent retailers have had a long relationship with their primary grocery wholesaler, averaging 19 years, and would recommend this company to others “absolutely” (60 percent), according to the Food Marketing Institute (FMI) report Independent Operator Insights into Wholesaler Relations and Services released here today.

     Another 34 percent would recommend their wholesaler, but “with reservations.” This qualified endorsement reflects less than full satisfaction with many wholesaler services, including support that independents need to compete effectively with larger retailers.

     “This research sends three key messages: Independent operators and wholesalers have strong and enduring ties, a rock solid foundation that is essential for successful business partnership. Wholesalers can improve their services and, in some cases, independents can use them more. And, the strong partnership suggests that wholesalers will make improvements to help their independent customers succeed,” said Jeff Rumachik, FMI vice president of wholesaler and member services.

     This report is the second in a series of three on the future of food wholesaling, conducted in a partnership with Saint Joseph’s University. The Gerald E. Peck Fellowship is funding this project. Richard J. George, Ph.D., Saint Joseph’s professor of food marketing, performed the research for the first two reports.
Wholesalers Striving to Meet Specialized Needs of Independent Customers
“The findings of this report might best be viewed in the context of the first one in this series, Past and Present Landscape of Food Wholesalers, which was based on extensive interviews with leading wholesaler executives,” said George.

     “Wholesalers recognize that independents can outflank supercenters with value-added strategies that emphasize organic products, foodservice, catering, fresh perishables and products and services tailored to a specific ethnic community,” he said. “As a result, wholesalers must tailor their services to the specific needs of each customer. Meeting this considerable challenge requires innovations in technology and logistics, which wholesalers are striving to achieve.”

     The research asked independent retailer executives, mostly owners or CEOs, whether their wholesaler offers a wide range of services, whether they use the services and how satisfied they are on a 1-5 scale with 1 being “very dissatisfied,” 2 “somewhat dissatisfied,” 3 “neither dissatisfied, nor satisfied,” 4 “somewhat satisfied” and 5 “very satisfied.”

Marketing Services Receive Mid-Level Ratings
The ratings in nearly all cases fell between 3 and 4. Most meaningful were the ratings for the most highly used services. For example, executives reported the following use levels and satisfaction ratings on the following marketing services:


  •      Category Management Strategy, 71 percent use with a median rating of 3.5.
  •      Competitive Pricing Services, 70 percent, 3.4.
  •      Assortment Strategy, 66 percent, 3.5.
  •      Merchandising Strategy, 66 percent, 3.6.

     One respondent commented, “One of the things we are totally lacking is help in merchandising perishables.” Another said, “We need our wholesaler’s help in doing private label better, much better.”
Independents Most Satisfied With Communications, Order Management
Retailers gave some of the highest ratings to communications and order management services:

  •      Product Recall Information, 94 percent use with a median rating of 4.2.
  •      Timely Contact With Account Executive, 77 percent, 3.9.
  •      Industry News Updates, 60 percent, 3.8.
  •      Handheld Order Entry, 91 percent, 4.1.
  •      Computer Assisted Ordering, 54 percent, 4.0.

     The report notes that more efficient order management systems increase efficiency and help give independents a higher return on assets.
Financial Services Highly Rated, Underused
Retailers also gave high marks for accounting services such as bookkeeping and rebilling (4.4) and insurance coordination (4.1), but only 27 percent and 21 percent use these services, respectively. Mounting financial challenges could lead more independents to use financial support in the future.

     The third report in this series will focus on the largest cohort of consumers in the future with the title Generation Y: Food Shopping Attitudes and Behaviors.
Methodology
The report Independent Operator Insights Into Wholesaler Relations and Services was based on a survey of 142 executives from February 1 to April 15, 2008.

     To purchase a copy of this report and the first one in the Peck Fellowship series, contact the FMI Store at 202-220-0723 or visit www.fmi.org/store/. The cost for each report is $50 for FMI Retailer/Wholesaler Members, $75 for FMI Associate Members and $95 for nonmembers.