The margin evaporates on both sides. What the smartest wholesalers do about it.

Your purchase price has risen by an average of 8 to 12 percent over the past year. Your wage costs are up by 5 to 7 percent, partly due to the collective labour agreement increases in the logistics and wholesale sector. Your transport costs are structurally higher than before 2022. And your customers? They accept a price increase of 3 percent if you are lucky, and otherwise move to a competitor who has given away the same margin.

On the cost side, everything goes up. On the revenue side, there is a ceiling. The result is a margin that gets a little narrower every quarter, without a single major cause to point to. Just the sum of inflation, labour market tightness and fiercer competition, at the same time, without pause.

You feel it. Where you still have room to steer is another matter.

In the first part of this series we looked at the labour side of that pressure: manual processes that become ever harder to staff in a tight labour market. Here it is about the financial side. Because those same processes do not only cost capacity. They cost margin.

Where the margin really leaks away

Purchase prices are visible. Wage costs are on the P&L. But a large part of the margin pressure is hidden in processes you have never consciously seen as a cost item, because they have simply always worked this way.

Take order processing. At many wholesalers, a large share of orders still comes in by email, fax or phone. Those orders are entered by hand, checked against pricing agreements and confirmed. Every manual step has a margin for error. An error in the price: a credit note, a conversation, correction costs. An error in the item number: a return, extra transport, a customer who has adjusted their planning. Research by Conexiom shows that manual order entry has an error rate of 1 to 3 percent per order line on average. At 500 order lines a day, that is a structural 5 to 15 errors. Each one with a cost attached.

Then the quoting process. A sales rep draws up a quote, sends it by email, and that email disappears into the inbox of a buyer who returns it three weeks later with the question whether the price still applies. Meanwhile your purchase prices have changed. You honour the quote anyway, because the relationship matters more than the margin on this one order. Understandable. But multiply this by thirty quotes a week and the damage is structural.

And then there is inside sales as an information desk. Customers calling about an order status. Buyers asking whether an item is in stock. Dealers requesting the packing slip for the third time. All those conversations cost the time of employees who quickly run to 50,000 to 65,000 euros a year. When 40 percent of their day goes to questions that could have been answered online, you are paying a lot of money for work that adds nothing.

So the margin does not only leak away through purchasing. It leaks away through the way your operation is set up.

The hidden cost of legacy systems

There is another cost layer that is rarely fully in view at the CFO level: the total cost of ownership of the systems the operation runs on.

An ERP or e-commerce platform that was put into use five years ago looks cheap at first glance. The licence is paid, the implementation is written off. But underneath sits an iceberg of costs that keep running. Customisation that has to be tested and adjusted again with every software update. An external IT partner who bills three hours for every small change to an integration. Upgrades that get postponed because they are too expensive, so the system falls further and further behind. And at some point a migration that is unavoidable, but now twice as expensive as ten years ago, because the deferred adjustments have piled up.

What we see in practice at wholesalers that seriously calculate their platform costs: the real TCO is structurally higher than what is on the IT budget. Not because anyone is hiding anything, but because the indirect costs are spread across departments that do not recognise them as IT costs.

An integration that costs 15,000 euros a year in maintenance seems manageable. If that same integration also goes down for a day twice a year, keeps two employees busy at every update and requires two emergency repairs a year, the real bill is a multiple of that invoice.

Digitalisation as margin recovery

In many organisations, digitalisation is discussed as an investment, a cost item, a project. That is true in the start-up phase. But when you honestly calculate the revenue side, it is exactly the reverse.

A well-designed B2B customer portal, directly connected to your ERP, ensures that customers place their own orders, consult order history, download invoices and check stock. Without your inside sales team. In practice, we see a sharp drop in incoming service questions at wholesalers that take this step, sometimes down to half of the previous volume. That is structurally less pressure on a department that is already hard to staff.

Better data also leads to better purchasing decisions. When your order data flows fully digitally, without manual entry and without delay, you see patterns you did not see before. Which customers are at risk of leaving based on order frequency. Which items structurally carry too much stock. Which customer groups are the most profitable per order line. Those insights steer your purchasing policy, your assortment choices and your customer conversations. Not on gut feeling, but on data.

And then there is the cost side of the platform itself. Modern systems require less customisation, have standard integrations and process updates without you having to call your IT partner. That is not spectacular. But it saves structurally on management costs.

Digitalisation is not a luxury. It is the means by which you recover the margin you lose in your own processes.

Fixed costs, no surprises

For a CFO who takes a critical look at IT investments, "what does this cost to buy?" is rarely the right question. What it costs over three years is.

CloudSuite works with a fixed implementation price and a transparent licence structure without extra costs as the number of users or your revenue grows. That sounds like a detail, but it is a fundamental difference from platforms that open a new commercial discussion with every expansion. No unexpected costs when you add two new locations. No higher bill when you go from 500 to 1,000 active customers.

The implementation is also based on a fixed approach, built up from years of experience with wholesalers and manufacturers in the Benelux and beyond. That means shorter lead times, less dependence on external consultants and less risk of cost overruns. The fixed price is not a marketing term. It is the result of enough comparable projects to know what such an implementation truly costs.

Where do you start?

The margin is under pressure and that will not pass on its own. But the cost structure of your operation is not unchangeable. There are cost items you can tackle without compromising the quality of your service.

An honest starting point: add up how many hours a week go to manual order processing, to IT maintenance and integration management, and to service questions that customers could have answered themselves. The outcome is rarely what you expect.

Want to know how wholesalers in the Benelux have made that move? Get in touch with CloudSuite for a conversation about what there is to gain in your operation.

The margin evaporates on both sides. But not everywhere to the same degree.

This was part 2. In the first two parts the pressure was mainly about what happens within your own walls: capacity and margin. But there is also pressure from the outside. In part 3, Growing big without growing big, we look at the consolidation wave in the wholesale sector and how you compete with players operating at scale.