Retail trade demands on distributors : strategic and operational implications

Abstract: The global trend of consolidation holds true also within the British Do-It-Yourself (DIY) retail trade and Builders Merchants (BM), resulting in inter alia the rise of 'mega-retailers' such as B&Q. The manufacturers and suppliers of wood products have been slow in the adaptation to the changed market situation. The suppliers' limited adaptation can to some extent be blamed on low levels of knowledge on the actual demands from the reshaped retail trade landscape.Wood based products. are from a retail trade perspective, a strategically important product which often represents from 4% to 20% of the retailers total turnover. Due to the products' relatively low-valued and bulky character, the retailers normally refuse to distribute them through their internal distribution centers, hence requiring the supplier to provide that service. Very low academic interest has been placed on this phenomenon. Thus, the purpose of my thesis is to describe and explain the demands of retail trade on suppliers of wood based products and explore what consequences these have on a strategic and operational level within a supplying company. The study is commissioned by SCA Timber, whereby the focus is not placed on theory generation, but rather on bridging theoretical gaps and increasing the knowledge in the area.To meet the purpose of my thesis, a case study has been conducted in the UK including three cases; first the supplier and also focal case company SCA Timber Supply UK (SCATS), followed by the DIY and BM segments described as two separate cases.The analysis shows, that the British DIY retailers and national BMs can be divided into three groups reflecting their demand profiles (DIY, BM1 and BM2). These demand profiles can be translated into corresponding offers building upon three parts; the core offer, augmented supporting services and long-term relations. In the later part of the analysis, different strategic options are discussed and their consequences are analysed against three perspectives; the marketing channel, customers and competitors.Distribution is a critical part of the core offer to the groups DIY and BM1. On the well-consolidated British distributor market, the distribution service needed acts as a strong entry barrier to competing suppliers with no own distribution solution. The entry barriers are raised further due to the close channel partnerships developing between supplier and buyer, where the latter can be seen as outsourcing some traditional gatekeeping functions to the supplier in order to increase the competitiveness in the whole marketing channel. Further my study stresses the importance of a high dynamic effectiveness within the supplier's organisation in order to have and maintain a high flexibility towards changes in the customers' demand profiles, and to provide its customers with individually adapted offers.