This is a part of the 2013 Distribution Trends Report. The annual report was researched and written by MDM editors based on interviews with dozens of wholesaler-distributors, as well as industry experts and manufacturers. MDM also conducted a survey of its readers to uncover the trends outlined in this report.
2013 Distribution Trends Report
Growing online competition continues to have an impact on the market, both positive and negative. In some sectors, such as HVACR, customers are ordering online and then finding out later the product was wrong for their application, causing additional work and challenges for the contractor, and in turn, the distributor. AmazonSupply.com’s impact is limited so far, according to many distributors. “But it caused people to sit up and realize or think about the fact that B-to-C e-commerce has arrived in the B-to-B marketplace,” says Brent Grover of Evergreen Consulting. “I think the standards have been elevated a lot for what constitutes excellence in electronic commerce for wholesale distributors.” Julia Klein, CEO of CH Briggs, a specialty building products distributor, agrees. “We’re all expecting the ease of ordering, the technical infrastructure and the speed of delivery. Once you experience that with Amazon, you begin to expect that in every part of your world.”
Distributors are growing their investment in technology. “We are getting reports of a number of dealers who are buying into technology now that they had not been buying a few years ago,” says Craig Webb, editor of ProSales Magazine, which focuses on the building materials sector.
Sales force mobility grows. Distributors are deploying smartphones and tablets, which are also facilitating interest in and greater adoption of Customer Relationship Management applications. “Now that they’re proven and more widely accepted, I see tablets as a great opportunity for us to better equip our field team,” says Kevin Reidl, president of the National Fasteners Distributors Association and Hodell-Natco Industries, Cleveland, OH.
Collaboration among distributors in some sectors is increasing outside of the traditional associations and buying/marketing groups. And manufacturers in some sectors are seeking out distributors that can respond to demand creation and not just response. They often offer special deals to these distributors, according to Mike Workman, long-time industry expert and professor emeritus of Industrial Distribution at Texas A&M University.
Concerns over the Affordable Care Act (Obamacare) have distributors rethinking their compensation and benefits plans. HVACR distributor Charles D. Jones Company, Kansas City, MO, is thinking about sharing more of the cost of health insurance with employees. “It’s going to be a challenge to keep up with the changes in the Affordable Care Act,” said Royce Henderson, president.
Ongoing additions to distributor services include customer training. Industrial distributor Levac Supply, Brockville, ON, for example, has added a formal industrial health and safety training company, launched last year after doing it in-house several years. End-users have fewer resources post-recession, and fewer resources to do the training in-house, especially smaller customers, providing opportunity to distributors. If distributors don’t get up-to-date on technology, they won’t survive, according to Doug Adams, owner and president of fasteners distributor EFC International.
Big-box stores are getting stronger in some sectors of distribution and making a more aggressive push to target B-to-B customers. This includes sectors like janitorial and office supplies, as well as building materials.
Supplier consolidation: Industrial Distribution Group is making bigger commitments to fewer suppliers. "Less is more, you just have to figure out what the right less is,” said Charlie Lingenfelter, president & CEO of Industrial Distribution Group.
Distributors are facing a battle to keep margins up, in part due to customers increasingly shopping prices online and in some sectors due to commodity inflation.
Larger distributors are employing ‘targeted pricing structures.’ “This more aggressive pricing is putting downward pressure on the independents' margins and is forcing them to employ different strategies to shift the focus off price (not necessarily a bad thing!),” says Scott Bebenek, president, IDI Independent Distributors Inc., Mississauga, ON.