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Evolve Value Proposition to Fight the Threat of Disintermediation

Evolve Value Proposition to Fight the Threat of Disintermediation

February 4, 2014

Disintermediation apparently is not a worry of the past. Two-thirds of distributor executives in the latest National Association of Wholesaler-Distributors Facing the Forces of Change survey expect disintermediation, or manufacturers “going direct,” to have a “very significant” impact on their businesses by 2017.

What’s causing this fear? The past 18 months and more have seen strong M&A trends and business model transformation, according to IBM's Guy Blissett, author of Facing the Forces of Change. Blissett moderated a panel of distributors on the topic of “innovating the distributor value proposition” at NAW’s Executive Summit last week in Washington, D.C.

In some sectors, distributors are seeing manufacturers target particular end-markets for direct sales, sometimes using e-commerce; other sectors have seen customer purchasing organizations change the role the distributor plays in the channel.

As we outlined in the MDM Special Report, The Shifting Competitive Landscape in Distribution, consolidation, collaboration and new partnerships, converging channels, e-commerce and more are changing the look of distribution channels, and it’s important to continually evaluate if the way you serve your customers is still relevant and differentiated from the competition.

Even newer technologies and services such as vending are slowly being commoditized as more distributors offer them and more customers come to expect them. “The machine itself and the parts in it are not necessarily differentiated,” Blissett said. Instead, the insights derived from the software in the machines and the services that come from those insights will make a distributor stand out.

Andrew Berlin, CEO of packaging distributor Berlin Packaging, told NAW audience members during the panel that he has taken to viewing services as “income-added” rather than what we typically hear them referred to as: “value-added.” In other words, his business is focused on growing its customers’ income, and employees are incentivized financially to work with their customers with an eye on their profitability. The distributor has built a suite of services for its customers that goes beyond just selling packaging: Berlin Financial Services, Berlin Global, Studio 111 and more.

Blissett says that the process of evaluating your value proposition is not a one-and-done thing. A value proposition should not be static, he says, but should be “constantly evolving.”

Order the Facing the Forces of Change book from NAW.

Listen to this MDM Executive Briefing interview clip from Blissett, who spoke with MDM recently on technologies that may disrupt the distribution industry:

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