This article is the introduction to the MDM series: The Shifting Competitive Landscape.
Most have heard the classic tale of Blockbuster, once the king of the video rental market, not responding to online rental service Netflix until it was too late. Or Sony’s failure to recognize the shift to digital music from tapes and CDs, moving Apple into mobile music market leadership with the iPod.
These stories remain some of the clearest examples of what can happen when your competitive focus is too narrow.
No company should outright ignore its traditional and long-standing competitors. But an ever-increasing pace of change, thanks in part to technology, dictates that distributors think outside of the competitive box when considering their next moves.
Many companies view the market from the top down, by looking at the flow of goods through the channel, according to David Gordon of Channel Marketing Group. In other words, they think in terms of a product moving from manufacturer to distributor to the end-user. This could be considered the “traditional” channel.
But when you view the markets through the eyes of the customer, Gordon says, it may reveal multiple ways to market and a much different competitive landscape. “Customers may be buying from multiple channels or entities that are easier to buy from for various reasons,” Gordon says, including ease of use, technical expertise, convenience or end-market expertise.
Take newer technologies, such as LED lighting. Gordon says the niche suppliers of LED products are more likely to sell direct to the end-user or even sell through alternate distribution channels, including the seemingly unrelated sectors of medical supply and petroleum. “That distributor is focusing on a particular customer segment,” Gordon says. “He’s asking his customer ‘What else do you need?’ The customer wants to order on the path of least resistance.” That’s a challenge to the electrical distribution channel.
For years, distributors have been expanding their products and services reach beyond their traditional expertise. But the idea of a shifting competitive landscape goes beyond converging channels, though that is part of the story. As MDM Publisher Tom Gale wrote back in 2005, there are enough diverse customer segments to support a range of models. This is even truer today, thanks to the rise of e-commerce, which has had a profound impact on the channel.
No matter the decision you make on how to react to an emerging trend or competitor, it should be based in the reality of the markets. It shouldn’t be viewed as a threat; it should be an opportunity to rethink how you can better serve the customer.
In a new monthly series, MDM is going to take a look at the shifting competitive landscape and what it means for independent distributors.
Topics we’re going to cover in this series through the first quarter 2013 include:
- Competing and non-competing distributors collaborating in local markets
- The impact of the Internet and online transactions on the competitive landscape
- How Amazon’s model has and will continue to challenge the traditional distributor
- The impact of international distributors expanding in the U.S. market
- Entrepreneurs building their own businesses to serve a piece of the traditional distributor’s market
- How distributors can prove value to their customers despite the changing landscape
According to Stuart Mechlin of Stuart Mechlin Advisors, former senior vice president of Affiliated Distributors’ Industrial Supply Division, when it comes to thinking about nontraditional competition, companies need to think beyond just Amazon.
“You’re going to have people becoming competitors in this field who are coming from very different disciplines,” Mechlin says. As an example from another industry, he referenced successful businessman Richard Branson’s diverse group of companies, which started with a focus on music and record stores but now includes a cell phone business and an airline, Virgin Atlantic Airways.
Look beyond the product to the other elements of the distributor’s value proposition, including logistics, process, expertise and financial services. Just as logistics was taken over by UPS and FedEx decades ago, Mike Marks of Indian River Consulting Group says that technology has fueled a “refragmentation” of traditional distribution functions, allowing someone to sell products or services and compete without ever having to carry inventory. “There’s a whole economy going on that a lot of distributors are clueless about,” Marks says.
While no distributor can predict what might happen next, it’s critical to take a closer look at what could affect your business in the next five to 10 years and what you’re doing to remain relevant in an increasingly busy marketplace. “If you’re out there innovating, it’s an opportunity,” Marks says. “If you’re not, it’s a threat.”