Retail brokers pressure wholesalers
to consolidate. Smaller wholesale brokers hit hard.
Cut in half. Crushed. Decimated. All words no one wants
applied to their business.
Words that force operations to make painful changes. Words
that Tim Turner, president of CRC Insurance Services, has
worked to avoid by spending the last few years on an intense
schedule of meetings and requests-for-proposals.
They are also the words he selects to describe what is
happening to many regional and smaller wholesale distributors
as a result of what he calls a “sophisticated and
aggressive” consolidation effort by retailers hoping to
increase quality control by pushing more business through fewer
Why the push among retailers to consolidate wholesale
vendors? Why now? The default answers blame adverse market
conditions and shaky economics. They are certainly part of the
story, but they are not the only factors.
Efforts to stay on retailer approval lists started taking
shape five years ago when large retailers began divesting their
captive wholesale operations.
“During this time other retailers started looking
closely at their wholesalers and began to think they had too
many wholesale intermediaries,” Turner says. This sparked
a concern among retailers that too many intermediaries resulted
in diluted relationships; so much so that the retailer was not
able to gain any real clout with wholesalers or control over
the business. “Retailers wanted to regain some control
over their wholesale vendor lists,” he says.
Retailers began requiring wholesale partners to enter into
an RFP process; wholesalers had to apply to maintain a vendor
code (translation: “make the grade”). This process
led many retailers to drastically cut their approval lists.
“Some cut 50% to 70% in efforts to maintain quality
control. Smaller wholesalers [in particular] were getting
crushed,” he says.
Such efforts are not new.
“We’ve seen vendor consolidation before. But
this time it’s more sophisticated and aggressive,”
Turner believes a major reason is that, in previous market
cycles, large retailers looking to consolidate wholesale
vendors did so by pushing more business through their own
captive wholesale operations. The decline in captives in recent
years opened up the wholesale channel to other vendors, and the
marketplace became crowded. Now, Turner says, with many large
retailers looking to consolidate, they are being very
selective. He describes the approval process in a word:
“We’ve spent a great deal of time over the last
two years getting appointed and re-approved by our clients.
It’s a lengthy, tedious process to stay on the approved
After a noticeable sigh of relief, he says he believes most
retailers are in the concluding stages of their consolidation
efforts. “The main flow and process of RFPs has already
taken place. Results we’re seeing from the top four or
five wholesalers are reflective of that.”