The Future of Independent Retailers: What Wholesalers Need to Know

September 21, 2015

The rise of big box stores like Walmart and Target and the prevalence of eCommerce retail are two big challenges currently facing independent retailers. Wholesalers who supply independent retail stores, meanwhile, are left wondering whether they should stick with their strategy of selling to independent retail, shift their business online, or seek out new business opportunities with big box stores. We’ve talked about the pros and cons of shifting your distribution to big box retail: the potential for increased volume must be weighed against lower margins and loss of perceived value for your brand. Shifting your business model to online marketplaces also creates challenges – not all wholesale businesses are prepared to handle the distribution challenges involved with that strategy. But what about the third option of sticking with independent retail? Do new opportunities still exist? We believe the answer is a solid yes. There are several trends pointing to a bright future for independent retailers. A few of the signs we see as most promising for independent retail are consumer shifts toward exclusive, unique shopping experiences, retail clustering, and social sharing.

Boomers and Millennials Seek the Unique

Boomers and millennials still drive retail. Boomers have been slow to get comfortable with online shopping, while millennials have grown up in a one-click world. However, one trend that is common to both generations is the desire for unique experiences as they shop. In spite of their comfort with eCommerce technology, millennials still do a significant portion of their shopping in independent brick & mortar retail stores.  Millennials – those in their 20s and 30s – account for 21 to 26 percent of the population, but 33 to 35 percent of retail spending. Their shopping habits differ from their Boomer parents in that they do their research online, often using social sites like Instagram and Pinterest, before they buy. However, when it comes time to pull out their wallets, they tend to go to brick and mortar stores to do it. Boomers, who were primarily concerned with convenience and abundance during their child-rearing years, no longer have children at home and have less need for the one-stop, fill-the cart shopping experiences they once preferred. With more disposable income, they too are now seeking more exclusive items and unique shopping experiences. Wholesalers can take advantage by working with their independent retail partners to create unique branded experiences. Wholesalers frequently help retailers with merchandising and point of purchase displays; keeping up with the latest trends that will appeal to your market segment will allow you to help your retail partners create the unique experiences they seek.

Independent Retailers: Clustering Attracts Customers

This is actually less of a shopping trend and more of a fixed consumer behavior––one that big-box stores have been taking advantage of for years. As any real estate agent will tell you, it’s all about location. Independent retailers that are located in proximity to others that have a similar customer base can also create clusters that attract the right kind of customers. Why does clustering work? Shoppers are willing to travel farther for some items than others. This is why every town of any size has a grocery store, while higher end goods and luxury items tend to be clustered in larger towns and cities, in big city shopping districts or small town main streets. This tendency even has a name: central place theory. Clustering is playing a role in the success of the “Buy Local” and main street movements. Consumers still value being able to shop in independent retail stores, but they also aren’t willing to drive far to visit a single store. They will do so when there are several stores to choose from. Stores that use clustering and central place theory to their advantage will be more successful. Wholesalers can turn this to their advantage by establishing customer relationships with independent retailers that are located in thriving central places––mot just malls and big cities, but also smaller towns with popular shopping districts. These can be important placements for wholesale brands.

Social Sharing and Independent Retailers

Although many in the independent retail business have looked at the Internet as a threat to their business, one trend online has the potential to have a positive effect. Social sharing on networks like Twitter, Pinterest, Instagram, Facebook, and popular lifestyle blogs can help drive business to independent retail stores. Customers like to identify and share the brands they support. Today’s customers also like to be able to be seen as trendsetters. Social media offers opportunities to do that, and independent retailers can capitalize by connecting with customers online. Independent retailers actually have an advantage over big box stores on social, as they can more easily create a sense of community and belonging than big box brands are able to do. Taking advantage of social also addresses one of the biggest causes of independent retail business failures––inadequate marketing. Social networks are a low-cost marketing alternative with the added benefit of allowing independent retailers to put customers to work as marketing agents. Wholesale brands should encourage the use of social by their independent retail partners. Brands can partner with independent retailers to create social branding opportunities like Twitter chats and hashtag campaigns. Brands can also leverage their larger social media presence to drive demand and support their independent retail partners by making sure fans and followers know where products can be purchased. Social commerce, where fans and followers – either end consumers or retail buyers – can purchase through social media, is another option for wholesale companies with eCommerce sites. For wholesale companies and independent retailers, change will always be a constant. But change brings opportunity as well as challenges. Wholesale brands that can adapt and take advantage of these opportunities have a bright future. Do you have questions about the future of independent retail? Ask us in the comments.