Wholesale & Retail Trade

 

Whether you are buying food, clothing, or other necessities, putting gas in the car, picking up supplies for a do-it-yourself project, getting a new pair of glasses, or simply browsing in a mall, you’re using the services of establishments in the wholesale & retail trade industry. This industry is the largest employer in BC, providing just over 15% of all the jobs in 2008 and generating 12% of the province’s total GDP.

What’s included in wholesale & retail trade?

Wholesalers and retailers are in the business of re-selling goods that have been purchased from suppliers. They bring goods produced in the province, or imported from other regions and countries, to the marketplace where they can be purchased by consumers.

Wholesalers usually supply goods for resale or industrial use

Wholesalers can be thought of as “middle men” who supply goods to industrial or business customers, such as retailers, restaurants, manufacturers, or construction companies. They sell single units of big ticket items like farm machinery, heavy equipment and vehicles. They also sell bulk quantities of building supplies, food & beverages, seed, fertilizer, and many other types of products.

These goods may be used as inputs into production. For example, a building contractor would usually purchase materials such as cement, plywood, nails, two-by-fours, sinks, pipes, bathroom fixtures, paint, glass, wallpaper, and so on from a wholesale supplier.

Wholesalers typically operate from a warehouse or office space that is not necessarily designed to attract walk-in customers. These outlets are often located in industrial areas of cities, where it is convenient for their customers to pick up and load supplies, or from which goods can be distributed and delivered directly to their clients.

BC wholesalers of building materials and food, beverages & tobacco product accounted for 45% of total sales in 2008

Wholesalers of building materials (24%) and food, beverages & tobacco (21%) dominate the industry, accounting for nearly half of total sales in 2008. Another 19% of sales were made by machinery & electronic equipment (including computers) wholesalers. These shares have been quite stable, changing only marginally during the last decade or so.

Retailers generally deal directly with final consumers of goods

The main characteristic of retailers is that they sell goods primarily to consumers or households. Supermarkets, gas bars, drug stores, furniture outlets, “mom and pop shops”, hardware stores, car lots, mobile home dealers, and garden centres are only some of the many types of retail businesses. This industry also includes “big box” retailers such as office supply and computer stores, and retailers of building materials, plumbing, and electrical supplies.

Retail outlets are usually designed to have display areas where customers can see merchandise available for sale. They cater to walk-in traffic, so they’re often located in city centres or suburban areas.

Some retailers sell directly to customers…

Not all retailers have store-fronts. The industry also includes establishments that sell via infomercials, vending machines, door-to-door sales, by in-home demonstrations, or by mail order. Some retailers only sell products online.

…and some stores are not included in the retail industry

Some establishments that sell goods to customers are not included in this industry. For example, a produce stand at a farm would be considered part of the farming operation. A bakery that produces and sells baked goods onsite is included in the food manufacturing industry. Photofinishing shops that are primarily in the business of developing pictures rather than retailing products are part of the personal & laundry services industry, and maintenance & repair shops have their own industry group.

On the other hand, meat & seafood markets or optical outlets, which are primarily involved in selling finished products to customers, are part of the retail industry. Cutting meat, preparing fish or grinding lenses is just one aspect of the service they provide.

Retailers of automotive products, including new & used car dealers, RV dealers, and gas stations, typically account for about a third of total sales in this industry. Supermarkets, food, liquor, and beer & wine stores usually take in about one-quarter of total retail revenues. Department stores and other retailers of general merchandise accounted for 11% of total sales in 2008. These shares have remained quite stable since 1990.

Automotive product retailers accounted for nearly a third of total retail sales in 2008

An industry in transition

The wholesale & retail trade industry has seen many changes in recent years¹. These have been driven by technological and market developments.

Retailing has always been characterized by a mix of small, privately owned and operated establishments, and chain stores² that have multiple outlets. Chain stores include local chains, as well as regional, national and international operations.

More than half of all retail purchases in BC are made at chain stores. They account for 84% of total sales by department stores and general merchandisers, and about three-quarters of sales by home electronics retailers, supermarkets, and clothing. Other types of retailing where chain stores have at least 50% of the market include home centres, gas stations, and furniture stores.

Chain store purchases are accounting for a growing share of retail spending in BC³

In the mid-1980s, most of the chain stores in Canada were domestically owned. There were only 10 US-based chains operating in Canada. By 2003, there were 185 US chain stores with Canadian outlets, and 11 of the top 20 retailers in the country were American.

Some of the most significant retailing innovations have originated in the US

What effect has the growing influence of US retail companies had on the industry in Canada? Historically, many of the major innovations in retailing have come from the US.

For example, supermarkets were an American innovation—the first self-service grocery store, called Piggly Wiggly’s, opened in Louisiana in 1916. The concept of the “self-serving store” was so revolutionary that the owner was granted a patent.

Prior to this development, customers at grocery stores had to ask a clerk to measure out dry goods in the required quantities. Pre-packaged goods, fresh fruit, vegetables, meat and dairy products were not available at the grocery store. You had to visit the butcher, or the greengrocer, or the dairy to buy these items.

US retail giants have brought changes to retailing in Canada

More recently, a number of important retailing innovations have originated in the US. These include marketing concepts such as everyday low pricing, big box retailing, warehouse club stores, and specialty store chains, which only stock certain types of goods such as sporting equipment and clothing, computer products, or craft and office supplies.

Big box retailers, factory outlets and warehouse clubs

Big box retailers place an emphasis on self-service, bulk buying, or do-it-yourself assembly. Stores are typically warehouse-style. Because they spend less on decorations or fixtures such as carpets, and may have fewer floor workers than other types of retail outlets, big box retailers can often sell goods—ranging from clothing and food to furniture and appliances—at very competitive prices.

By eliminating the middle man, factory outlets are able to offer their products to consumers at reduced prices. Warehouse clubs offer products in bulk, and at discount prices, to customers who pay a fee to join.

New technologies to manage inventories

Technological innovations have changed the way the industry does business. For example, bar codes, which are used to electronically scan and price merchandise, are also used to implement just-in-time inventory control (a process that allows retailers to keep less stock on hand, since they can order goods from their suppliers “just in time” before they need them).

Radio frequency ID tags, which allow stores to locate merchandise using radio signals, are used as inventory control mechanisms and to simplify the stocking process. Goods marked with these tags can be located even if they are still in packing crates. Technologically advanced distribution centres, and the practice of cross-docking (where merchandise in warehouses is kept ready for shipment rather than being unpacked and put on shelves) are also innovations that arrived in Canada with the US retailing giants.

The “Wal-Mart” effect

The entry of Wal-Mart into the Canadian marketplace in 1994 had a profound effect on retailers of all sizes. Some small independent stores were not able to compete, and have gone out of business. Others have found new ways to market their products, attracting customers who prefer to shop at locations that can offer more personalized service or stock products that aren’t available from the big retailers.

Canadian chain stores have changed their marketing strategies in order to compete with stores like Wal-Mart. Many of them used to offer goods at sale prices from time to time, while charging higher prices in between. Now, they’ve adopted everyday low pricing, or are competing by marketing house brands or using customer loyalty plans.

The “Wal-Mart effect” hasn’t just driven prices down. It has resulted in a lot of changes in the industry supply chain. Big corporations often deal directly with manufacturers, bypassing wholesalers altogether. Because these corporations have a lot of buying power, they’re able to influence the way producers make, package and ship their products. Some of these changes (such as the introduction of radio frequency ID tags) can benefit both small and large retailers.

Retailing has become more efficient, but more uniform than it used to be

All of these factors have made retailing more efficient, contributing to productivity gains in the industry. But there has also been a cost, since some of the diverse and unique features offered by small independent retailers have been lost.

So how does all this affect consumers? They are able to purchase brand-name goods at lower prices. They can find virtually the same stores, offering the same products, in shopping malls all over North America. However, the types of goods offered for sale, and the retailers stocking them, have become more uniform. Independent retailers offering unique products are not as common as they used to be.

Internet shopping is popular…

The Internet has become an increasingly popular source for shoppers looking for books, clothing, flowers, housewares, and even construction supplies. Many retailers and wholesalers offer products for sale online as well as in their stores, and Internet-savvy customers frequently check out these websites before they go shopping, even if they intend to make their purchases in person.

Large book retailers have whole divisions devoted entirely to Internet commerce. Booklovers can purchase rare or out-of-print books online from a network of second-hand book dealers located all over the world.

Wh