Editor’s Note: This is the second of a two-part series. See part 1 here.

Many distributors have untapped opportunities to market and sell services that larger companies like Amazon and even OEM sellers largely do not provide. These value-add services take advantage of distributors’ often deep customer knowledge and relationships (something low-cost players like Amazon lack) and extensive customer base and represent a sustainable source of competitive advantage and long-term value creation. 

Value-add services are also becoming a more important part of distributors’ business with some distributors reporting margins of up to ~40% on some service offerings. Service offerings vary based on the distributor. Value-add services enhance the customer experience by going beyond the traditional “move product from A to B” distributor model.  

Read Redwood Advisors’ full report covering distributors’ five imperatives here

Buying & Fulfillment Value-Add Services 

Services such as kitting, light assembly, installation, and quality assurance (QA) add value to the traditional distribution product delivery business model by helping customers solve more complex and challenging problems. For example, kitting saves customers time and effort by pre-gathering related pieces so that customer staff do not need to do that on their end. Light assembly goes even further and assembles a few to sometimes hundreds of different parts into one or more assembled units ready to be used by the customer’s production process (either as inputs or pieces of production equipment).  

Distributors can also help customers install equipment with professional installation support and run QA checks to ensure that products meet quality standards before they are shipped. This results in several benefits for customers, including better quality, consistency, and typically lower total costs. 

Post-Purchase Services 

Distributors can also provide value-add services post purchase and fulfillment. More distributors are now offering repair services to repair higher-value equipment on-site or even remotely for machinery or parts that can be shipped back and forth. Distributors also offer training on key topics customers want. These services not only create another business line for distributors but also create opportunities for sustained customer engagement and revenue growth beyond the initial sale. 

Ongoing maintenance and servicing helps ensure equipment remains in great working condition. Warehousing services allow customers to store inventory in a secure, managed, third-party facility. With this service, distributors help customers streamline operations, reduce footprint, and get quicker access to parts. 

Value-add services introduce some complexity but can help distributors create significant value and get more embedded into customer operations. They also help distributors differentiate from other players that may lack the customer knowledge or relationship to provide these more complex solutions and position themselves as a more premium, value-creating partner (versus just a distributor of products). 

Go Much Deeper in Our Research Report 

Key changes in the distribution space from new GTM models to advancing AI provide new ways to create value for customers while also creating new threats to traditional distributors. Based on in-depth interviews with over 25 distribution leaders, a survey of 100 respondents, and in-depth market research, we identified five imperatives distributors need to respond to for them to thrive and create more value in this high-potential but increasingly competitive market. One critical imperative is building out your core value-add services. 

Our full report provides an overview, implementation tips & tricks, and key quotes from distribution leaders on each imperative to give readers both insights and practically useful tips to put these imperatives into practice at your company. You can read the full report covering all five imperatives today at this link.