Shifting channels are among the top trends affecting distributors this year, according to MDM Editor Lindsay Konzak in the recent MDM webcast Top 10 Distribution Trends: How Distributors Are Positioning for 2013.
Konzak said two factors have played key roles in this shift: "The first is that product technology is really changing the nature of some channels. We've seen a lot of, for example, power transmission distributors go more into motion control, and that’s a result of technology."
The way manufacturers view channels has shifted in some sectors, as well. "There are not as many exclusives anymore,” Konzak said. “For some, it's shifting away from that.”
Another factor causing a shift in how channels are managed, she said, is channel convergence. "We've been seeing this for a while now, but with the emergence of e-commerce and other technology tools, the trend is really accelerating."
In the recent report, Key Trends in B-to-B E-Commerce for 2013, Forrester Research estimated that B-to-B e-commerce will reach $559 billion in U.S. sales by the end of 2013. But it also noted that channel conflict will likely grow, which is an oft-cited fear for distributors when discussing e-commerce. (Read more about the impact of e-commerce in Beyond Amazon: E-Commerce's Impact on Wholesale Distribution Markets.)
According to MDM Publisher Tom Gale, big box stores such as Home Depot and Lowes are also playing a role in the changing nature of channels. And the emergence of big box stores as competitors goes across sectors, including janitorial supplies, a sector in which office supplies retailer Staples has been competing more aggressively.
Other distributors, big and small, are also playing a role as they look to diversify. "Everybody's looking for tangential add-on items – certainly safety and jan-san have been the large areas for that," Gale said. Listen to the webcast on-demand or order it on DVD to hear how Gale says the most successful distributors have responded effectively to this trend.
One way is to focus on different types of product lines, Gale said. In the power tools segment, some distributors that successfully managed the transition started focusing on specialty tools with much better margins and profitability, deemphasizing volume.
Ken Jacobson for Principia consulting has also seen how big box stores contribute to channel conflict, particularly in the building material/construction sector. One impact of their entrance into the segment has been the increased availability of information in more places. Big boxes allow consumers to see and touch a wide array of products and get immediate pricing online or in the store.
"Big box stores have also increased their installation services and help desk capabilities, so they're acting more and more like a pro channel distributor or dealer," he said. The full interview with Jacobson, which outlines Principia's forecast for the building materials sector in 2013, will appear in the February 25 issue of MDM Premium.
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Read more about the top trends in distribution for 2013 in this recent MDM article: 12 Trends in Distribution for 2013.
The 10 Trends webcast was sponsored by NetSuite.