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If you're what we refer to these days as a traditional distributor, inertia can keep you going for a while. Even if you've fallen behind on technology adoption, and you haven't changed your sales process in 20 years, you may not be noticing dramatic changes in your customer base or bottom line – yet. But whether you've realized it yet or not, the gap is widening between distributors who are embracing change and those that are just coasting.
I used to make predictions about the year 2020 as if it were some hypothetical far future. Now, we're only two years away. When the ball drops at the end of 2019, will you have closed some of the gap between you and your most innovative competitors, or will that gap have widened so far that you can no longer cross it?
Distributors primed for growth in 2020 will have the following qualities, which I discussed in more detail during the recent MDM Webcast panel discussion "The Future of Distribution" (access a recording of the program here). How does your business compare?
7 Qualities of a Digital Distributor in 2020
- Selling, general and administrative expenses of less than 10%
- Ability to obtain an EBITDA margin of 10% at the top of the consolidation cycle
- Sells at margins well under 15%
- Collects >90% of sales via LOOP (lights-out order processing)
- Gives customers access to cutting-edge digital purchasing tools including custom reorder catalogs and visibility into past transactions, all available via their mobile devices
- Leverages customer data for market information that has value with suppliers
- Electronically manages transactions and warrantees with suppliers
Some sectors of distribution will be further along than others, but this is a good benchmark for anyone trying not to just coast, but to get ahead of the pack. Once you've identified where you're furthest behind, you can start to identify the strategies that will help you catch up.
Obviously, you don't have to accomplish all of these within the next two years to stay in business. But the longer you wait to make progress, the harder it will be to get a leg up on your peers. If the gap grows too wide, inertia may not be enough to get you across.
Mike Marks is managing partner of Indian River Consulting Group and specializes in helping distributors and manufacturers accurately diagnose problems and identify risk-bound alternatives, so they can take their next steps confidently. Call IRCG at 321-956-8617 or visit ircg.com.
Join Mike Marks and other industry experts June 26-28 in Denver, CO, for Sales GPS, MDM's 1-½ day, hands-on conference designed exclusively for wholesale distribution executives motivated to change their single-channel models into more adaptive and customer-responsive multichannel models.