Posted by Bobby Martyna on Tue, Jul 13, 2010 @ 11:37 PM
Painful Mistake #1 - Waiting for the Truck
For a long time, the only option for small format retailers, including hotel managers, was waiting for a truck delivery from the local distributor to show. If a hotel is located in a major metropolitan area, a weekly delivery has been possible, but far from optimal. But for most locations, there have been two delivery choices -- sometimes and never.
The reason is simple -- it costs between $50 and $100 for a distributor to make a stop at a hotel. For wholesale orders of less than $1,000 -- or for locations with irregular ordering patterns (that would be most, if not all, hotels), it is uneconomical for a local distributor to service the location. As a result, deliveries are skipped, orders are short shipped and fuel and delivery surcharges are assessed. Not good for the guest experience or for the profitability of the hotel pantry to say the least.
Master distributors, also known as broadliners, do a very good job delivering food service orders for hotel restaurants and are much more reliable. But not all hotels have restaurants -- and in any event, the selection of retail items offered by broadliners is subpar -- they just are not effective wholesale distributors. While prices may be low, case packs are too large and item sizes are too small. If items don't sell at retail, getting them at a good price is false economics. As a result, broadliners are not a viable option for hotel retail.
Some local distributors, relying on cigarettes, candy and convenience stores for 98% of their business, have attempted to service hotels. At best, deliveries are made weekly on a designated day of the week -- but weekly isn't nearly good enough for most hotels -- and requiring orders to be delivered on a fixed schedule makes managing inventory very difficult where there is limited space for backstock. Additionally, cigarette and candy distributors carry primarily lower quality consumables that are meant for the convenience store customer -- because most of their profit is made on tobacco sales. These types of products sell well in very few hotel locations. Again -- false economics.
For these reasons, the local cigarette distributor as a hotel market supplier has resulted in a very bad experience for the 
hotel -- and often, in bankruptcy for the distributor, including QDN and Miller Distributing Corporation in Nashville, TN -- others had more business sense and simply left the market.
Interestingly, a major hotel group purchasing organization -- who understands the truck delivery model for food service -- has failed to understand the business model and economics of truck delivery for hotel retail -- and as a result, is recommending a cigarette distributor as the only solution for their hotel retail customers. Also since cigarette/candy distributors are not able to obtain traditional Direct Store Delivery (DSD) products, such as Ben & Jerry's, Haagen-Dazs and Frito-Lay, they are more than likely selling you diverted or grey market products (more on that in another post). Questionable judgement on the part of the GPO, to say the least!
In our early days, Tradavo built a network of local distributors in an attempt to provide wholesale ice cream to our national footprint of hotels and small format retailers. Frankly, it was an unmitigated disaster, and we very quickly walked it back. Customers were left waiting for weeks, orders were short shipped and invoicing was broken. Since we dropped the program and began shipping wholesale ice cream and frozen dinners via FedEx, our customer satisfaction levels have skyrocketed.
Our experience, after examining all possible delivery methods, has led us to conclude that the best, most economical and most extensible solution involves a truck -- but not a truck from the local cigarette distributor. It's from FedEx and UPS. The advantages of the Tradavo model, which relies on the common carrier distribution network and not on local cigarette distributors, are formidable:
- FedEx and UPS deliver to every zip code in the US for Tradavo customers, six days a week - TODAY
- Customer orders can be placed and delivered as soon as the next business day, and are delivered during business hours, not at 3 AM.
- By using a national network of warehouse partners, Tradavo has far more categories available, including natural/organic, wholesale ice cream and frozen products, gourmet, toys and games, general merchandise and a deep assortment of products within each category.
- Our warehouse partners compete with one another to bring you the lowest prices, greatest selection and highest service levels.
- Because we have a national footprint, we can service all hotels within an owner/operator portfolio with the same high caliber of service levels and low prices.
- Not being bound to a single cigarette distributor with a single warehouse allows us to drive economies of scale, resulting in lower prices. We have lowered prices by as much as 26% in the last year alone
In short, the truck delivery model sounds right, but falls far short of the mark. Our most sincere recommendation is, "Don't wait for the truck".
If you are interested in giving the Tradavo program a try, go to our Registration Page to get started right away!
Happy Selling!
Bobby Martyna
President and CEO
Tradavo, Inc
Follow me on twitter -- @bmartyna