The effect of retailers' business activities influence on wholesalers' effectiveness in Gaborone

Abstract

The research centres on the effect of retailers' business activities on wholesalers' effectiveness in Gaborone. There seem to be a general perception that the diversification of retailers' activities has a negative effect on the survival of wholesalers. From this the analogy can be drawn that wholesalers need to establish what to do to counteract retailers' extended business activities, which create a negative effect on wholesalers' survival. This research study aims to identify solutions to the cannibalistic actions of retailers towards the wholesalers in Gaborone. In order to achieve the purpose, the study sets out to determine the theoretical differentiation between wholesalers and retailers. The research design is based on 'survey research' conducted in the social world. The research is theoretical in nature using the quantitative and qualitative research paradigm. Survey research served as the research method. The sample frame constitutes seven wholesalers and 42 retailers in Gaborone. The unit of analysis used is represented by these seven wholesalers and 42 retailers. Data collection was facilitated by means of a questionnaire for the management staff of the selected wholesalers and retailers. The questionnaire was issued and completed at the different retail and wholesale outlets in Gaborone. The aim of the data collection was to find out what are the challenges wholesalers are facing due to the business activities of the retailers. The results of this study will identify opportunities for implementing strategies to overcome the trading challenges facing the retailers and wholesalers, and separate the business activities of each without affecting each other's business. The formal retail trade in Gaborone has historically been small in comparison to the wholesale trade. Retailing has generally been done by independent smaller retailers. This has been a result of suppliers not distributing to the smaller retailers due to economies of scale, i.e. small volumes and long distances. As the formal retail chains started gaining acceptance by the population, and the brands became better known, these retailers started to move into other previously underrepresented areas. Due to the comparatively larger size of these formal retailers, as well as their larger buying power, it became economically feasible for suppliers to start distributing to these areas. The effect that this has been substantial in destroying the former independent traders. As the formal bigger retailers have been able to offer lower prices and larger ranges, customers have moved allegiance to these retailers. The spin off benefit to these retailers is that they are then getting additional exposure and when they move into additional territories, they then already have the brand name support from the new communities. This trade background results challenges to wholesalers and for their survival. This should be addressed by doing proper functional guidelines to wholesalers and retailers. Wholesalers should remain competitive in the market by offering better service to customers, better price margins, offerings that the formal retailers offer to customers, i.e. bigger selection of products, fresher produce, more competitive pricing and more convenient trading hours. By doing so wholesalers can gain a competitive advantage, can improve their business and can survive in the market. The existing trade act defines the term wholesaler and retailer very specifically. In the Trade Act, a wholesaler is limited to selling only bulk items that are items in case lots. This onerous provision makes it difficult for the wholesalers to trade where the value of products has gone up substantially, and the result is that independent small retailers can't afford to buy case lots, bulk of products. Retailers on the other hand are not restricted in a similar manner in that they can sell single units or bulk, as they see fit. The effect that this legislation has had therefore is that the wholesalers are limited to only trade in a certain way whereas retailers do not have these restrictions. The net result is that retailers are cannibalizing on the wholesalers core business whilst the wholesalers have no recourse against this. Current Trade Act should not limit wholesalers' functional guidelines in order to address these challenges of wholesalers. The current Trade Act regulations should set clear functional guidelines for wholesalers and retailers. Also, the Competition Act legislation has not yet taken full effect with regard to this problem, but the possible implications could be severe for all parties in the Fast Moving Consumer Goods Industry. Although the Trade Act allows for the formation of the Authority, there is no clear indication of what rules and regulations will be enforced. This could have severe limiting constraints on companies and how they operate their businesses. In this regard, it is advisable to set clear rules and regulations in the Competition Act together with the Trade Act as a solution to this problem.