Des Spillings’ distribution career has a familiar ring to it.
Twenty-five years ago, he joined Acorn Industrial Services Ltd. UK — a Sheffield, England-based distributor of bearings and mechanical power transmission products — as a warehouse employee. Then he worked his way over to customer service before being promoted to sales director.
After 10 years of gaining invaluable experience across the company’s key departments, Spillings and another colleague, Martin Povey, acquired the company in a management buyout. They would own the business together for 10 years, selling to the family-owned, Swedish private equity firm Axel Johnson International AB in 2015.
Five years later, Axel Johnson still owns the business, and Spillings and Povey still run it, having grown Acorn into a £33 million (US$42.7 million) company that boasts 55,000 SKUs and 4,000 customers.
Now, Spillings gets to add another bullet point to his resume. He is taking over as the 2020/21 president of EPTDA — the executive association for industrial distribution distributors and manufacturers across Europe, the Middle East and Africa.
MDM caught up with Spillings for a trans-Atlantic video chat, where he dished on everything from EPTDA’s goals to what’s happening with European and UK distributors — many of whom are facing the same situations as their American counterparts. Here’s our conversation.
MDM: Congratulations on being elected EPTDA president. Are you excited about both the challenges and opportunities in this role?
Spillings: I’m excited. It’s a strange time to come in, but it’s an exciting time, too. If ever we’re going to make any changes, then we’ve got to do it now. If we don’t make changes now, then we’re never going to make them. I like that. I like the fact that it’s going to be a period of making changes and changing things for the better. I hope to open the organization a little bit more and encourage more people to become a member or just have a look and see what EPTDA is all about.
MDM: What do you hope to accomplish in your year as president?
Spillings: The key thing that we’ve talked about over the last couple of meetings within EPTDA is that it needs to change, it needs to adapt. If we don’t do that, then we can’t be of any help to our members. The key thing now is to provide more content for the members — and the right kind of content, to pin down what they want and how quickly they need it. I don’t have a magic wand on exactly what that content is at the moment, but we’re aware that there’s a desire for that, and we’ve got a desire to change to make sure we provide it.
MDM: Is now actually a chance for EPTDA to perhaps grow during this time when people are thinking about contraction and shrinking?
Spillings: The membership levels have been pretty consistent probably for the last four or five years. There’s not been any real growth in members — a few drop in, a few drop out, as always. I think this is a chance to change the nature of EPTDA and change how people think about it and what it brings. For somebody who’s maybe considering joining but hasn’t done so in the past, we can show them the benefits, such as sharing problems or ideas with likeminded people.
There’s always a few competitive worries; we understand that. But, on the whole, you tend to find out that the problem you’ve got, 10 other companies have the same problem. Normally, you can work things out when you talk about it.
MDM: Let’s shift gears. How has business been the last six months or so for your company specifically but also for the distribution channel in the UK?
Spillings: I don’t think it’s been as bad as we thought it was going to be, to be quite honest. When we first started looking at the numbers, we were thinking maybe a 30%-40% reduction in revenue, but that’s been closer to a 12%-13% reduction over that period, Certainly, April was the worst when we were probably down 25%. May got a little bit better. June was a little bit better again. July was almost back to normal. August was bad again, but to be fair, it was a short month and is traditionally a holiday period, so that’s to be expected. And then September is good — I wouldn’t say quite back to where we were pre-COVID numbers, but not far away. September was, let’s say, the first real month of the “new normal.”
If you look throughout Europe, it’s a little bit harder to judge because some countries have been hit worse than others. I think the UK, Spain, France were probably the three worst. Now, we’re all going through this second wave and some of the lockdown elements are coming back. In some sectors, we’ve been quite buoyant — food and beverage, medical. If we look at our transactions, we’re probably in front of where we were pre-COVID, but what we’ve seen is the big orders aren’t quite there. Efficiencies in the business have been key to making sure we can handle the extra capacity.
MDM: Has there been a shift with Acorn, or across European distributors in general, to some of the “COVID” product lines like PPE or JanSan?
Spillings: Yes. Acorn owns another company called Town and County Engineering Services, and they’re almost 100% in the food production sector. They have the full janitorial — masks, sanitizers, wipes — and initially, they had a real spike in demand. It’s lessened as people have gotten their supply chains a little bit more stable, but they’ve certainly moved into that to a greater extent than they were before. At Acorn, not so much.
We decided not to do that because we thought, “OK, we might get a short win, but then after a certain period, people will go back to their traditional suppliers for that product.” We decided to stick to mechanical power transmission and concentrate on that.
MDM: The U.S. is seeing an inflection point in distribution between the companies that navigated this crisis and are doing well, and those that didn’t adapt and are struggling. Is there a similar dynamic in the UK and Europe?
Spillings: I think so, although it’s hard to tell because we don’t know the ins and outs of everybody’s business. I think we’ll find that out probably at the beginning of next year when some of the results start to land. But the word on the street is there some more traditional businesses that couldn’t adapt as quickly as others and have fallen by the wayside. You can see that in quite a few businesses. I can’t speak for Europe on a broader level, but certainly in the UK, we’re seeing the same trend.
MDM: EPTDA covers numerous countries and even different continents. Are issues that your membership is facing similar across the footprint or do they vary by nation?
Spillings: I think overall the issues are the same, whether it’s the UK, Slovenia or Sweden. The nuances might be different, depending on the local economic situation, but a lot of companies have the same people problems, the same delivery issues. If the automotive industry is in trouble, then there’s a lot of distributors in trouble. There are some common themes that you see throughout the countries.
MDM: I’m glad you brought up people because talent acquisition is a huge issue here. Is there a talent gap in Europe and, if so, how are you addressing it? Does distribution in the UK also have the same stigma as not being a “sexy” industry?
Spillings: That’s a good question. The talent issue isn’t COVID-related — it’s been there for a long time. Yes, we do have problems attracting people because it’s not a very sexy industry. But let’s be honest — nobody goes to the London School of Economics with the hope of selling bearings for the rest of their life.
Nobody goes to business school and says, “One day, sir, I want to sell bearings.” That’s not why they go. They want something far more exotic than that, but we end up there through whatever channel, whether that’s by accident or design. I think this is somewhere that PTDA, EPTDA and MDM can help — it’s just the promotion of the industry as a whole. Distribution is hard at the moment, but it’s an industry where you get to meet different people, see some fantastic places. And it’s quite strange, but once you start getting into the products — I’m never going to say it’s sexy — but you start thinking about how things go together and how they affect everything around us.
MDM: Are there distribution-specific programs in the UK like we have at Texas A&M and Nebraska-Kearney?
Spillings: Not in the UK. You’ve got the mechanical engineering programs, maybe with some business management thrown in. Those would probably be the closest. But as far as I’m aware, I don’t think there’s anything regarding distribution. There’s not anything in Europe as well that I’ve heard of. But certainly, that would be something that would be of advantage to a lot of people.
MDM: Digital is always a topic of conversation here. Where is Europe in terms of its digital advancements within wholesale distribution?
Spillings: Europe is getting better. I think it’s in reasonably good shape in those terms. For us, this digital discussion has been going on for four or five years now, and exactly what’s included in digital and what isn’t included in digital, you can discuss and debate. But if we’re talking about e-commerce, then you’re certainly seeing you know that the big companies getting more aligned and making the sites much easier to navigate and use. It brings new entrants into the market as well. You’ve got companies out there that let’s say aren’t holding stock and have no real technical competence, but they provide a great digital experience, and some customers are attracted to that.
This issue is only going to get bigger, without a shadow of a doubt. Thirty-percent of our transactions are taken over e-commerce, and that’s growing. You can see there’s a shift from customers that they’re not picking the phone up as much. They want to communicate through email or communicate over the website through a chat function. They may still then email the order through or sometimes even they’ll look online and then phone the order through. You’ve got to provide that channel for your customer to come into your company. It might not be everything, but I think if you don’t have it, it’s going to be a real barrier for you going forward.
MDM: How would you describe the distribution M&A landscape in Europe?
Spillings: In Europe, you’ve got a few dominant players — the same as in the States — who are actively consolidating. Axel Johnson is one of the real big consolidators. What we’ve seen in the last six months is that it’s understandably almost stopped completely, but a couple of things have gone through in September. I think the M&A market is starting to come to life a little bit, but I also think people are going to be a little more risk-averse for a while in their acquisition strategy.
Last year and the year before, everything was globalization and consolidation, and then the pandemic happened in March and April, and everything stopped. I think it’ll take a little while to get back to where we were 12 months ago. For the last six months, it was like walking on quicksand. You didn’t know where you were, you didn’t know where the ground was going to stop, where it was going to end. There was a lot of uncertainty.
I think companies now can probably see a bit more certainty for the next six months. It might not be the certainty that they want, but at least that they can see some stability and where the picture is going to be for the next 6, 12, 18 months. That will bring people back to M&A.
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