FUNDAMENTAL shifts in African food systems are accelerating changes in the food distribution landscape, blurring traditional boundaries between distributors, wholesalers and retailers.
These structural challenges are dismantling the wholesaling business model, forcing wholesalers to continuously rethink their aggregation and distribution strategies to remain relevant.
In a fast and fluid distribution landscape driven by ICTs, it appears aggregation is becoming more viable than traditional wholesaling. Aggregation is simply mobilising food, sorting and quickly distributing it.
Shift in value creationThere is no doubt that African food systems are going through several transformative changes such as the decreasing relevance of wholesaling as well as the shift in value creation towards fast distributors like runners and traders.
In many African countries, wholesalers are losing ground and market share to retailers, runners, tuckshops and transporters whose food handling and distribution models are faster, furious and fluid.
Wholesalers have to expand their roles beyond their traditional core and build enough ability to generate additional advantages for customers through value-added services. It is no longer enough to be just a wholesaler.
Who needs a wholesaler when ICTs are enabling consumers to speak directly to farmers and food processors?
New partnerships and relationshipsTraders in mass food markets are bonding to build sophisticated distribution partnerships that are assuming the traditional roles of wholesalers. These traders are also investing in understanding food items, production practices and product differentiation.
- eMkambo: Who needs a wholesaler?
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They are also providing diverse services to food producers like farmers and incentives to consumers as part of forging long-term strategic partnerships with key actors including transporters who are also handling packaging.
Through this level of consolidation, informal food traders, retailers and runners are altering the food distribution landscape, gaining additional leverage and influence at the expense of wholesalers.
Instead of trying to protect wholesalers, African policy makers should study and understand these dynamics in order to generate appropriate frameworks for building genuinely inclusive business models that speak to the evolving context.
Policies should not continue to blindly protect traditional models like wholesaling but recognise the new emerging models which respect the fact that customers are now increasingly looking for a broader set of choices and more sophisticated food products that traditional wholesalers cannot provide but can be found in mass markets, for instance.
Captive distribution models are being disrupted rapidly, giving way to new distribution channels controlled by new economic actors who should be recognised for their roles in ensuring food and nutrition security for the majority and sources of income for marginalised groups.
More potential for new technologiesWhile most of the disruption in food distribution systems can be attributed to digital technologies such as the proliferation of mobile technology, there is still emerging potential for artificial intelligence to influence the continuous redefinition of wholesaling and the speed at which distribution happens as well as improving customer satisfaction.
More agile competitors like retailers and runners are fast developing broader distribution models in line with the seasonal nature of food production and availability. On the other hand, traditional wholesalers lack that kind of agility as they are still stuck in legacy models in which decisions on price changes are centralised.In tandem with evolving consumer preferences, traders and food distributors with customised transport systems are colonising value chains to address specific customer needs comprehensively.
To stay alive, financial systems that have always derived comfort from financing wholesales are also being forced to design appropriate financial packages in new ways that engage with a wide range of food distribution actors including wholesalers, vendors and runners.
All these changes in the African food distribution marketplace, along with continued uncertainty in the macroeconomic environment, will have significant implications on wholesalers’ operating models.
In order to cope with dynamic, fast and furious market conditions, wholesalers need to strengthen their capabilities in building strategic distribution partnerships. Others are awakening to this reality by working with tuckshop owners and vendors who are always close to household customers.
Cultivating such symbiotic relationships is more productive than coercing government to protect them from the fast-evolving competition. Investment in data collection and digital solutions can go a long way in giving wholesalers the full picture. It will also enable more seamless interaction with customers and fluid experience sharing on real-time food flows in diverse supply chains.
- Charles Dhewa is a proactive knowledge broker and management specialist
