Retailers need to put pressure on wholesalers for lower cost prices to increase their profit margins in the face of “huge challenges” such as the National Living Wage.
The advice comes from David Gilroy, a former director, at Bestway, who has outlined a seven-point plan to help retailers increase their gross margin and make changes to improve efficiency.
He told RN retailers could add 2% to their gross margin by “pushing hard” for better wholesale prices, which, for a store taking £10,000 per week, equates to £10,400 additional cash profit in a year or 1,444 man hours at £7.20 an hour.
“The National Living Wage and minimum wage rise might be set to hit independent retailers harder than wholesalers or manufacturers, but this makes their challenge an industry-wide problem that cannot be ignored,” he said. “The trade must work together to allow independent retailers to earn sustainable gross margins.”
Retailers have told RN that increasing wholesale prices have forced them to shop around for the best deals rather than stay loyal to one wholesaler.
The National Living Wage and minimum wage rise might be set to hit independent retailers harder than wholesalers or manufacturers, but this makes their challenge an industry-wide problem that cannot be ignored
Vas Vekaria, of Lever Edge Convenience Store in Bolton, said he saves on average £300 a week by shopping around. “The other week I was buying 15-packs of Carlsberg and they were cheaper at Bargain Booze than the cash and carry. That needs to be addressed,” he said.
Wholesalers told RN they often work off “wafer-thin margins” meaning there is sometimes no room to reduce prices, but added they will continue to do what they can do help retailers and offer the best prices.
Dee Thaya, of Abra Wholesale, added the issue also needed to be addressed by suppliers.
Mr Gilroy’s plan also focuses on improving the profitability of retailers’ sales mix, paying more attention to fresh food and increasing the range of OTC medicines. To improve efficiency, he advised retailers to get stock delivered and to auto-generate stock orders with wholesalers.