The 2020 Mid-Year Economic Update_long

Distributors Tackle the Rising Cost of Fuel

Nearly a third of distributors in a recent survey by Channel Marketing Group and Allen Ray Associates say that increased fuel costs have significantly impacted profitability" because they can't pass it on to customers. Another 37% said fuel costs somewhat impacted profitability, as most of the increase cannot be passed onto customers. About 22% said the fuel costs have had limited impact, as they have absorbed some but passed most onto customers.
 
About half of respondents had calculated incremental costs, seeing an increase of 25%-40% over prior-year expenses.
 
How are they addressing rising costs? More than half are absorbing them. Another 25% say they would like to add a surcharge, but because competition hasn't, they are afraid they will lose business. About ...

Nearly a third of distributors in a recent survey by Channel Marketing Group and Allen Ray Associates say that increased fuel costs have significantly impacted profitability” because they can’t pass it on to customers. Another 37% said fuel costs somewhat impacted profitability, as most of the increase cannot be passed onto customers. About 22% said the fuel costs have had limited impact, as they have absorbed some but passed most onto customers.
 
About half of respondents had calculated incremental costs, seeing an increase of 25%-40% over prior-year expenses.
 
How are they addressing rising costs? More than half are absorbing them. Another 25% say they would like to add a surcharge, but because competition hasn’t, they are afraid they will lose business. About 17% say they have instituted a fuel surcharge per delivery.
 
Strategies to combat fuel costs: using UPS/FedEx/DHL more and charging for freight (more than half); reducing the number of deliveries; changing the delivery schedule; using fuel credit cards to take advantage of rebates; increasing pricing slightly and using courier and delivery services more.
 
About a fifth say they are using or purchasing more fuel-efficient vehicles. Improving maintenance on vehicles: 16%. Using truck routing software: 11.6%. Just 2% are providing a discount for customer pick-ups. Over 60% of distributors are seeing manufacturer minimum orders increasing as a tool for manufacturers to control their costs.
 
The survey overview says when evaluating your options to recoup some of your losses, it is important to have confidence that your customers want to do business with you if you want to add a surcharge or increase pricing. It all comes back to the value you provide.
 
Read the full results of this survey here: Distributors Consider Ways to Address Fuel Increases

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