Big-box retailers such as Staples, The Home Depot and Lowe's have expanded their online presence and increased their focus on professional markets. In the latest issue of MDM Premium, I take a closer look at this trend and how it is impacting the distribution channel. The article, part of MDM's series on the Shifting Competitive Landscape, provides insights on what's happening in the industry and what distributors can do to compete a changing market.
Here are three key ways the retail channel is impacting distributors, as outlined in the article:
- Sales are lost due to customer price shopping. Kathleen Durbin, CEO of Sun Valley, CA-based General Industrial Tool & Supply, says the increased focus from retailers on B-to-B markets has affected the commodity products the distributor sells, highlighting price, not the total cost of procurement, as the most important metric to customers.
- Margins are decreasing. Ted Stark, president of janitorial supplies distributor Dalco Enterprises in Minneapolis, MN, says even when the distributor wins bids against retail competitor Staples, it still feels the retailer’s influence. “We are finding ourselves bidding against them, so prices are decreasing, and consequently, gross margin is being squeezed,” Stark says.
- Distributors are losing leverage with their suppliers. Selling through the distribution channel provides certain advantages from the manufacturer’s perspective, but when it comes to leverage with manufacturers, SIA Abrasives’ Joe Smith says the benefits of selling through industrial distributors must be weighed against the high volumes generated by home centers. “Volume speaks volumes,” he says.
Geothermal heating and cooling has been in use for several decades and is a key part of many states’ energy efficiency initiatives. Also in the latest issue, Jenel Stelton-Holtmeier looks at the current state of the geothermal industry and the roles distributors are playing in it. Find out where the opportunities are and how to approach them in Geothermal: Opportunities Underground.
And finally, Lindsay Konzak recently spoke with Mark Dancer of Channelvation Inc. about a recent growth in interest in using customer relationship management software to manage sales pipelines, leads and marketing programs. In this interview, Dancer provides insight on how to overcome the typical challenges related to implementing CRM. Read more in Breaking Down the Barriers for CRM.
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