This is a part of the 2015 Distribution Trends Special Issue. The annual feature was researched and written by MDM editors based on interviews with dozens of distributors, as well as industry experts and manufacturers. MDM also conducted a survey of its readers to uncover the trends outlined in this issue.
2015 Distribution Trends Special Issue
Historically, wholesale distributors have relied on relationships for sales. And while the distribution business model is still reliant on relationships, the timbre of those relationships has shifted, thanks in part to evolving customer and supplier expectations and the proliferation of the Internet as a commerce tool in the business-to-business environment.
“Industrial distribution is still a relationship business,” says Pete Biocini, president of R. S. Hughes Company Inc., Sunnyvale, CA. “But if you are only focused on the relationships, you are kind of a dinosaur. And if you are only on the Internet you may be a little ahead of your time. You have to blend the relationships with suppliers and customers.”
Managing relationships in the current environment requires a more sophisticated, holistic approach, says Guy Blissett, wholesale distribution specialist leader for Deloitte Consulting LLP. The number of touchpoints with customers and suppliers makes it more difficult to leave it to the salespeople.
“There’s also a tug-of-war over who owns the relationship,” Blissett says. “Is it the salesperson or the company?” As sales become more management-directed, management is also trying to lay a stronger ownership claim to the relationship – and make sure it’s not tied to a single person.
The Internet has made it easier for customers to do their own research on products and application, says Bernard Martin, president and founder, Rapid Production Marketing, meaning distributors have to bring something more to the relationship.
“There’s more demand for alternatives – new solutions, new products,” he says. “Something that will do it better or in a different way, that’s the value.”
Business relationships have to be deeper, says Roger Woodward, president of Alliance Distribution Partners LLC, Gallatin, TN. Distributors have to provide the higher level of consultation; they have to better understand the business of their customers into order to provide that additional level of value.
“The (old style of) relationship is what will get you in the door to have the bigger conversations,” he says. But they won’t keep you in the door if you can’t have the bigger conversations around cost savings or inventory management, for example.
And that directive goes up the supply chain, as well. “(Manufacturers) are developing direct relationships with customers, as well,” says Andy Behr, director of marketing for Hisco, Houston, TX. “So it’s becoming incumbent to clearly define the value the distributor brings to the supply chain – being more cogent about the value proposition you bring and what that’s worth.”
That said, some manufacturers are “doubling down on the distributor relationship,” says Ranga Bodla, wholesale distribution industry lead for cloud technology provider NetSuite. They may have tried going direct through online channels already and realized there’s more to it than just posting a price.
Relationships will likely always have a role in distribution, but the new environment requires distributors to be more nimble about how they manage those relationships.
“There are some cases where you might have a fantastic relationship, and you’ve been dealing with someone for 10 years or more. Then, all of a sudden, you lose the business because it went to a large contract where there were products being bundled,” says Don Fritzinger, president of Singer Equities, Pearland, TX. “It happens to the independent distributor all the time.
“But at the end of the day, to continue with those relationships, you have to be able to continue to be the guy who’s bringing on new products, new services, and being involved in diversification in certain ways that helps you steer your way around some of those icebergs.”
