Mike McGee is on a crusade to sort out wholesale’s Luddites says Elaine Watson

Everybody knows that Tesco pays some 10-15% less for its goods than smaller retailers and wholesalers, says the boss of Smartertrader. But whingeing about it won’t make any difference, insists Mike McGee, who jacked in his role as boss of Landmark two years ago, put his money where his mouth was and set up his own business.
“Wholesalers are rightly aggrieved by the pricing structures in the industry,” he claims, “but they have become so obsessed with buying terms that they are playing catch-up on almost everything else. Where Asda is talking to suppliers about taking costs out of the supply chain, wholesalers are still arguing over the deal.”
The brainchild of McGee and former Landmark colleague Ron Colley, Rochdale-based Smartertrader was set up to help smaller players bridge the technology gap with the big boys, and as one of its leading shareholders, McGee is taking its progress very personally.
Initially focused on managing Landmark’s data crunching and online ordering systems on an outsourced basis, Smartertrader has built up a team of 18 staff and developed a suite of products for other companies, from warehouse-management systems to data-management tools, text messaging and e-commerce.
The long-term plan is to branch out into non-food and logistics, but the immediate goal is to build more business with clients such as Bestway, Hyperama, United Wholesale Scotland and Sky Blue Wines and become the leading supplier of IT to the wholesale industry.
The potential of technology to make a difference is enormous, chiefly because wholesalers are notorious Luddites when it comes to investing in IT, says McGee.
They are actually sitting on the sort of data large retailers would kill for, and if they would just analyse it to identify precisely which customers are not buying a particular flavour of crisps or not stocking king size Mars bars, they could use it to target them with a better range of products, he says.
“How many retailers know exactly who their customers are and what they buy? Every wholesaler knows this, but how many make use of it? Surprisingly few.”
Wholesalers don’t value space in the same way that the multiples do, he argues. “If they can get a great deal, they’ll buy the stock, without thinking about what their profit per square foot is.”
While larger wholesalers employ IT professionals, the average one or two-depot operation will typically have an ancient UNIX-based system (written by someone that has subsequently left the company) that is neither scaleable nor able to integrate with new software, he observes.
“At the very least, wholesalers need systems that can raise an order based on EPoS data, forecasts and other information. They also need to be able to rapidly book goods in and out of depots so they know how much stock they have at any given time, and raise invoices for retail customers.”
They also need to let suppliers access their depot stock levels and EPoS, he says. “Vendor-managed inventory works just as well in wholesale and cash & carry as retail, but again, the culture of secrecy has held people back. I’m certain that, half of the time, it’s simply because wholesalers don’t want suppliers to realise how bad they are.”
Letting customers as well as suppliers get a real-time view of their stock levels would also make an enormous difference to delivered customers, as they could see what was in stock before they sent in orders, and would not end up disappointed when deliveries arrived and items were missing, he says. McGee adds: “Things are only going to get tougher. Minimum drop loads are going up, which is a major factor driving consolidation in the industry.”
It also potentially means more business will go to companies such as DCS Europe, which buy goods like toiletries in full truckloads for delivery to smaller retailers and cash & carries, he says.
“The trouble, is, this creates yet another link in the supply chain.”
The biggest barrier to progress remains culture, he says.
“We have to change the mindset of what wholesalers are actually there to do. They are no longer low-margin bulk breakers.
“They have to add some value, and if they want to do that, they have to follow the lead of the multiples, and that means investing in systems.”