The 2020 Mid-Year Economic Update_long

August 10 2010

Volume 40, Issue 15

Volume:

40

Issue:

15

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Features
This is the pdf of this issue of Modern Distribution Management. Apply the full $24.95 pay-per-view cost toward an annual subscription, which includes two issues a month plus access to more than eight years of online archives and market data. Call 1-888-742-5060 or email info@mdm.com to subscribe. Subscribers log-in to download this issue.
As banks have cut back on lending to businesses - especially small business - the role of trade credit has become more important to the channel. This article explores how distributors are balancing the risk of economic uncertainty with the need to use trade credit to grow sales.

Having up to 90 percent of a company’s customers reliant on distributor financing is not uncommon in the wholesale distribution space.

“Around the world, as commercial lenders have cut back on lending money to business, we’ve seen companies step forward to make up that gap,” says Abe WalkingBear Sanchez, founder and president of A/R Management Group, a consulting firm focused on cash flow management and credit sales.

In some sectors, such as those that serve construction end-markets, distributors have seen an even greater need these services from their customers.

This article looks at buying and marketing groups’ value propositions and how they have evolved to draw and retain new members. The second part of this article will appear in the Aug. 25, 2010, issue of MDM and will focus on challenges buying and marketing groups face in today’s markets.

Dozens of organizations in the distribution industry exist with the sole goal of leveling the playing field for independent distributors. At their core, these organizations want to leverage volume through pooling distributor member purchases with a group of preferred vendors.

These buying and marketing groups continue to grow revenues to compete with the purchasing power of large national distributors. For example, NetPlus Alliance, founded in 2002, has 388 distributor members with $5.2 billion in combined annual sales. Affiliated Distributors has 530 distributor members, with a combined $27 billion in sales across six product categories. IMARK Group in the electrical sector has more than $15 billion in combined sales.

“The groups keep the independents independent,” says Susan Vinson, president of Consolidated Distributors Inc., a buying group for distributors of foodservice disposables with combined sales of $2.5 billion. “We have a lot of large chains operating in our industry. For the independents in our group to have the same advantage, they need a group affiliation.”

Many in the industry say that if these groups want their model to be sustainable, they must continue to add value that goes beyond just pricing and rebates. Adding value to the entire channel – manufacturer, distributor and end-user – is the key.

It’s more than ironic that at a time when the economy is choking on high unemployment, many distributors are finding it hard to find good talent. It’s a warning sign you can’t ignore. How good do you want your company to be through all this turbulence? Pretty good? Great? The best?

You need engaged team members scrambling just as hard as you to find the right answers to deal with the upheaval right now. In most cases it’s not the same skills as five years ago.

The latest recession has introduced a new buzzword: the “new normal.” In this uncertain environment, how distributors have traditionally done business has been challenged, including the sales process.

“The key thing here is that the old distribution sales model broke back in the 90s,” says Mike Marks, managing partner at Indian River Consulting Group. “Asset and economic bubbles just hid it until now.”

Marks, along with partners Steve Deist and Mike Emerson, provided suggestions for improving your sales team in a recent MDM Webcast, “Understanding Territory Coverage Economics,” part one of a three-part series available at www.mdm.com/effective-sales-webcast. This article is an exclusive summary for subscribers.

How does a distributor adapt to the new reality? A good starting point, according to Marks, is by looking more closely at your current sales structure.

PDF Download
This is the pdf of this issue of Modern Distribution Management. Apply the full $24.95 pay-per-view cost toward an annual subscription, which includes two issues a month plus access to more than eight years of online archives and market data. Call 1-888-742-5060 or email info@mdm.com to subscribe. Subscribers log-in to download this issue.
As banks have cut back on lending to businesses - especially small business - the role of trade credit has become more important to the channel. This article explores how distributors are balancing the risk of economic uncertainty with the need to use trade credit to grow sales.

Having up to 90 percent of a company’s customers reliant on distributor financing is not uncommon in the wholesale distribution space.

“Around the world, as commercial lenders have cut back on lending money to business, we’ve seen companies step forward to make up that gap,” says Abe WalkingBear Sanchez, founder and president of A/R Management Group, a consulting firm focused on cash flow management and credit sales.

In some sectors, such as those that serve construction end-markets, distributors have seen an even greater need these services from their customers.

This article looks at buying and marketing groups’ value propositions and how they have evolved to draw and retain new members. The second part of this article will appear in the Aug. 25, 2010, issue of MDM and will focus on challenges buying and marketing groups face in today’s markets.

Dozens of organizations in the distribution industry exist with the sole goal of leveling the playing field for independent distributors. At their core, these organizations want to leverage volume through pooling distributor member purchases with a group of preferred vendors.

These buying and marketing groups continue to grow revenues to compete with the purchasing power of large national distributors. For example, NetPlus Alliance, founded in 2002, has 388 distributor members with $5.2 billion in combined annual sales. Affiliated Distributors has 530 distributor members, with a combined $27 billion in sales across six product categories. IMARK Group in the electrical sector has more than $15 billion in combined sales.

“The groups keep the independents independent,” says Susan Vinson, president of Consolidated Distributors Inc., a buying group for distributors of foodservice disposables with combined sales of $2.5 billion. “We have a lot of large chains operating in our industry. For the independents in our group to have the same advantage, they need a group affiliation.”

Many in the industry say that if these groups want their model to be sustainable, they must continue to add value that goes beyond just pricing and rebates. Adding value to the entire channel – manufacturer, distributor and end-user – is the key.

It’s more than ironic that at a time when the economy is choking on high unemployment, many distributors are finding it hard to find good talent. It’s a warning sign you can’t ignore. How good do you want your company to be through all this turbulence? Pretty good? Great? The best?

You need engaged team members scrambling just as hard as you to find the right answers to deal with the upheaval right now. In most cases it’s not the same skills as five years ago.

The latest recession has introduced a new buzzword: the “new normal.” In this uncertain environment, how distributors have traditionally done business has been challenged, including the sales process.

“The key thing here is that the old distribution sales model broke back in the 90s,” says Mike Marks, managing partner at Indian River Consulting Group. “Asset and economic bubbles just hid it until now.”

Marks, along with partners Steve Deist and Mike Emerson, provided suggestions for improving your sales team in a recent MDM Webcast, “Understanding Territory Coverage Economics,” part one of a three-part series available at www.mdm.com/effective-sales-webcast. This article is an exclusive summary for subscribers.

How does a distributor adapt to the new reality? A good starting point, according to Marks, is by looking more closely at your current sales structure.