The Distributor Channel

Think about the Great Ice Age – before the great sheets of ice enveloped much of Europe and North America, great Dinosaurs roamed the planet. After the ice cleared away a new breed of highly adaptive animal took over – the mammal. Without being overly graphic, this hardy new breed later gnawed on the frozen bodies of the regal creatures that once reined supreme. The Ice Age was a game changer. Recessions are game changers. What worked on one side of the recessionary dip will not work on the other. I have been challenged to outline some of the metamorphosis associated with the other side. Earlier this week, I exchanged a few thoughts with Craig Justice of Alliance International on “the funded head”. Mr. Justice, wrote a blog covering his very successful experience with the concept click here . Because Mr. Justice lives in the wine country high on a mountain in rural San Diego County California, I conjure up thoughts of vintage Orson Wells stating “We sell no wine before its tim

Changes in the Distributor Environment Earlier this week I was asked about some of the unrecognized effects of the recession on wholesale distribution. Then the question came up a second and third time in a matter of hours. Apparently, this is the time for reflection. Besides creating stress for business people – recessions drive the acceleration of change. I thought it might be interesting to use this forum as a vehicle for exploring some of the generally uncovered changes in our industry and their ramifications. Change Number One (not necessarily in any order) The super “skinnying” of Vendor / Supply partner sales teams Think about your vendors. In some industries it’s getting darn difficult to keep track of the players. Downsizing, right sizing, whatever you call it – distributors are reporting major changes in the sales teams who support their efforts. If the manufacturer had 5 guys in an office serving the market, today there are three people working out of their houses.

What drives competitive advantage? Affiliated Distributor members regularly outperform the general market. Something like "8% greater growth than the market year over year" has been reported. AD uses incentives to encourage their members to build a proactive sales process. Things like vendor planning sessions, targeting competitive accounts and use of modern techniques in the daily operation of the business all come to mind. AD distributors were among the first to use electronic and email communications back in the 1990's. Any reasonable person involved in Distribution understands that we have a problem with data synchronization. As we move into the future, data needs to migrate from manufacturer to distributor to customer and back again - seamlessly, efficiently and without costly human interface. I believe that any distributor who develops this skill ahead of the market will have a competitive advantage. And, this advantage will turn into market share on the oth

--> It’s happening more and more. Distributors and their Supply partners are negotiating special pricing agreements . In some segments of the Electrical Distributing business over 80% of the product sold goes out the door at a price which is below “normal distributor price”. The process usually works like this: The distributor buys a product for full price - Puts it in his warehouse – then sells the product below full price. After the sale, the distributor submits a report to the manufacturer and is issued a rebate/credit. We grew into this pattern little by little. We started off with a few agreements and a couple of catalog numbers. In today’s market, cash is becoming an even scarcer commodity and this practice often involves tens of millions of dollar. A study conducted by The National Association of Electrical Distributors sited that many distributors do without this cash for over 30 days. Often this comes about because the distributor has a poor process. To add

There is absolutely no way to predict the exact time and day, but trust me all things must come to an end. Recessions begin (ours began for most of us sometime in October) and they end. The problem for most of us lies in long range planning. Without planning, we are caught off guard. We may find ourselves reacting rather than following a plan. We tend to act like the recession will last forever. I pose a question, what have you done to build a plan for the recovery. It’s all about positioning. What will you do at the first signs of recovery? What can you do to position yourself now? Recovery May Be Quicker Than Expected Once Turnaround Begins. The Wall Street Journal (2/9, Lahart) reports, "Last year's credit crisis hit the economy with a surprising jolt, and most economists expect the recession to drag on until at least the end of 2009, with only a meager recovery after that." But "history says they could be surprised by the speed and strength of the recovery -- onc

When distributors get together, the most popular question in existence is, “How’s business?” Once unleashed, the conversation gods spin tales of glory, stories of woe and everything in between. It’s interesting talk, a fun icebreaker but it rarely provides any valuable information. I would like to commend Heating, Air Conditioning, Refrigeration Distributors International (HARDI – hardinet.org) for finally putting their information where their idle chat used to be. HARDI publishes a quarterly report on exactly how their members are finding business conditions. While things are not hunky-dory in the housing dependent HVACR world, their members have solid information to steer them through these tough times. Check out the HARDI Trends here .

Fastenal, a leading industrial distributor, continued to post strong growth in their business. Like most companies they have seen a slowdown in the last three months of the year (same store growth), but it would be our guess that while this year will be hard on Fastenal, perhaps it will be even harder on the folks who must compete in this line of trade. Here’s the reason why. Fastenal has mastered the art of bin restocking. They have essentially put together a reliable and efficient system for their customers to outsource a bit of the inventory handling and maintenance. Other distributors should make note and build their own system if they want to compete. Reported from MDM Staff   Fastenal Company, Winona, MN, reported sales for the year end Dec. 31, 2008, were $2.34 billion, an increase of 13.5% from the prior year. Profit was up to $279.7 million, an increase of 20.2%. In 2008, Fastenal opened 161 new stores, an increase of 7.5%. Although the distributor had overall growth,

In a recent article by Jack Keough, Industrial Distribution Magazine reported the results of a reader survey which indicates most industrial distributors are battening down the hatches for a long recession. They are cutting travel, clearing inventory and instituting hiring freezes. In a recession, preserving cash is important, but distributors can also put the recession to good use. Now is the time to drive change in your organization. When it comes to implementing new processes , such as Account Targeting, Planning or CRM reporting, Distributor Sales Managers always find their “old-hand journeyman sellers” to be the most resistant. The new guys are compliant, but the very people who could have the largest impact drag their feet and think of a million reasons to not follow procedures. Often, because of their relationships and skill sets they still manage to perform, but this does not take away from the significance of their inflexibility. These kinds of headlines cause even