Malcolm Scott, Swift’s commercial director, dismisses Bill Miller’s predictions that mass market distribution is dead and examines the strategies of manufacturers stockpiling products in case of a no-deal Brexit
Bill Miller of the KBBG made a few interesting observations but reached a wild conclusion based on very little evidence.
Much of the evidence on public record proves Bill wrong. Distributors have been evolving for years, but fundamentally do not, and never have, performed a buying group-style role in the UK.
Distributors provide a quite specific service that is very different from what buying groups offer. Swift is a substantial supplier to, and a great supporter of, the Sirius Buying Group, working closely with Symphony to support Sirius kitchen outlets. Distributors offer factory owners who do not have warehouses or transport fleets in the UK a method of delivering to retailers.
Joint stockholding across kitchen channel distributors, such as Swift, PJH, O’Neills, Leaker, JPD, Sinks and Things, KTS, Blackheath, KA, Gardiner, PWS, Häfele, TKC, MAK, Plasman, IDS, LDL and THD, will certainly be over £50 million, with a joint fleet of about 200 trucks, plus warehousing of well over one million square feet. This does not include the companies that Miller identified as changing from distributors to manufacturers who do their own distribution.
I’ve heard no evidence that these ‘newly-arrived’ European buying groups will perform this kind of a role. Additionally, distributors offer a credit line facility to retailers that enables manufacturers to supply a large number of outlets without the cost of having a credit control department. Kitchen channel distributors jointly employ well over 200 area and regional sales managers who can take a manufacturer’s message to a very large number of retailers. I do not believe buying groups will ever offer manufacturers a similar service.
Buying groups do not appeal to smaller kitchen studio retailers or any other occasional purchasers, but rather to larger, high-turnover low-margin retailers such as electrical shops, where a few per cent extra discount per year adds up to a lot of money. The larger kitchen studio retailers are already buying most key lines on direct trading accounts and so already have extra ‘off-invoice’ discounts or rebates negotiated over many years.
The Sirius formula works because the group is targeting its existing independent electrical members, who are new to the kitchen channel and do not have historic deals. Neither KBBG (Der Kreis) nor MHK have had much success securing new members from the estimated 5,000-plus UK retailers who sell kitchens.
The established buying groups in the UK, Sirius and CIH, have already targeted kitchen retailers over the years, but have found manufacturers will not support their efforts, as they cannot offer any clear reason to give greater discounts.
I do not believe these new European buying groups will change the face of the UK retail kitchen channel anytime soon. The European model might work for mainland Europe, but we do things differently here.