Accelerating technological innovation and the proliferation of e-commerce have given nontraditional competitors easier access to distributors’ traditional markets. Executives at foodservice distributor Sysco, with $44 billion in fiscal 2013 sales, recognize the growing significance of this shift.
“Nontraditional competitors have become more of a factor,” said President and CEO William J. DeLaney during Sysco’s recent earnings call. He said that these newer competitors are taking share from “broadliners.”
Here are three on Sysco’s radar, according to DeLaney:
1. Group purchasing organizations. Group purchasing organizations are starting to play a bigger role in the market, according to DeLaney. This requires Sysco to have a much more competitive bundle of goods and services.
2. Club and cash-and-carry stores. Over the past three to four years, these types of stores have become more attractive due to the recent recession.
3. “Amazon or Amazon-like businesses.” While the impact of Amazon on Sysco’s business so far has been minimal, DeLaney said the distributor is keeping an eye on it. “We see it. We recognize it. And we're watching it very closely.”
There are challenges around profitability in an Amazon-type model, DeLaney said, but he still sees opportunity for Sysco there. “We’re certainly respectful of that channel and attempting to find ways that we might be able to participate in it.”
He said that in general, countering new types of competition will mean ongoing enhancement of Sysco’s business model, possibly with the help of acquisitions to supplement Sysco’s current capabilities.
In Beyond Amazon: E-Commerce's Impact on Wholesale Distribution Markets, Associate Editor Jenel Stelton-Holtmeier examines how e-commerce has changed how some distributors view the market. The article is part of the MDM Special Report The Shifting Competitive Landscape in Distribution, available only to MDM Premium subscribers, which also covers the impact of big-box stores on distribution markets and the rise of the “new” distribution company.