The Distributor Channel

Vampires, according to the HBO TV sensation True Blood, are darned hard to kill. Seems like no matter how much sunlight, garlic juice or holy water you throw at them, the evil beasts keep coming at you. The same holds true for the price based buying myth. I want a show of hands, how many times have you heard that pricing ranks somewhere at near the bottom of most buyers (not purchasing departments) top 10 purchasing criteria? A recent study of 1,200 companies making purchases in the technology segment conducted by McKinsey and Company revealed many of them claim price is a driving factor in their buying decision. But, their actions are not consistant with their behavior. Could it be that even customers believe the myth? When McKinsey examined what actually determined how customers rated a vendor’s overall performance, the most important factors were product or service features and the overall sales experience. Here are a couple of additional points to consider. Customers were turned of

Way back in 1994, I had the opportunity to briefly meet with George Gilder, a best selling writer, techno-Utopian intellectual, and Presidential Advisor. Mr. Gilder had just written a book called Life after Television which predicts a future where everyone has the technical capacity to produce and distribute their own TV and radio programs. A couple of weeks ago I met somebody who is bringing this vision to life. Eric Dudas (of Fasteners Clearing House) has created Fully Threaded Radio. Fully Threaded Radio is a bi-weekly radio program devoted to the fastener industry. This hour and a half show is designed to be downloaded to your I-pod or listened to via your computer. If you are part of the fastener industry - I recommend you make this a regular download. And if you are part of another industry, let it be known, it's about time we move the wholesale distribution channel into the 21st Century. And by the way - listen to me on Fully Threaded Radio Episode 9 . I cover two topics: H

It happened again. Actually, it’s happening more often all the time. Last week I sat in on a manufacturer – distributor discussion. During part of the conversation gross margin levels came into the conversation. Guess what? The manufacturer’s sales guy didn’t know the difference between “gross margin” and “mark-up”. After the conversation, I politely (and privately) pointed out the error in his calculation. He thanked me, but then said, “My product offers good profit potential, why get hung up on semantics?” Earlier today, I read an article by an industry expert. Somehow his confusion in the gross margin calculation slipped past his editor. It was a small point - just a few cents difference. So, why the fuss? In my mind, it’s all about vocabulary. We develop vocabulary to describe in a couple of words things that otherwise would take many words to describe. We build benchmarking metrics, business formulas and other important descriptors around these terms. One small mi

A few days ago we posted on Benchmarking your sales growth... and getting the information for free. Below is a recent (and more detailed) listing posted today by Modern Distributor Management: Here's a quick synopsis of sales trends for public distributors and manufacturers. Second quarter 2010 is compared with second quarter 2009. (Find specific news about the largest distributors and manufacturers on MDM's Company News page: www.mdm.com/company-news. Find sector-specific news here: www.mdm.com/sector-news.) All of these distributors are MDM Market Leaders. Find the list of top distributors in eight sectors, including 2009 sales trends, at www.mdm.com/marketleaders. •DXP Enterprises: Up 6.6% •Airgas: Up 7% (6% organic growth) •Fastenal: Up 20 % •MSC Industrial: Up 28.5% •Grainger: Up 16% (9% increase in the U.S., excluding acquisitions) •Bossard: Up 18% in first half •Builders FirstSource: Up 20.5% •Wesco: Up 8.6% •L&W Supply: Down 12% And some manufacturers: •3M: Up 18%

I can’t really remember when I saw my first “Red Box”; it probably wasn’t all that long ago. But over the past few months, these things have become a part of my environment. I see them everywhere – at the local Walgreen’s, in the front entry of my neighborhood grocery store and at busy convenience stores. And, last week, I noticed one along side an interstate McDonald’s. For those of you who spent the past 5 years holed up in a hermit’s cave or incarcerated in solitary confinement, the Red Box is a refrigerator sized vending machine that dispenses rental DVD’s. What makes the machine cool is: You can locate and reserve DVD’s over the internet There are 5-6 of these machines within a few miles of my house. I can see which movies are available at the machine standing at the Walgreen’s a half mile from my house. You can rent from one location and return to another You can rent movies while traveling; basically watching movies as one hops from machine to machine across country. Your

Dire Straights’ 1987 song “ Money for Nothing ” just blasted out of my office stereo – concert volume drives creativity. It put the gears into motion. Wholesalers today live in a charmed time. Oh, we hear plenty of negative stuff – the Recession, off-shoring, closing of US manufacturing and the like. But we have tools unlike any and all of our forefathers in the industry. They say information is money – and “now days”, we get it for nothing. Here’s my take on “ Benchmarking for Free ”. So many of the folks I talk to deal in the industrial market – the great US manufacturing sector. The recovery is under way and their business is improving. The problem is they really lack any solid understanding of how much things have improved. Their business can be up 10% but they don’t really know if this is good, bad or otherwise. To combat this I suggest you benchmark yourself against some of the public companies who serve the same market (in this case I selected Industrial but it could

This has nothing to do with distribution and everything to do with distribution. I decided to publish it here so you might pass it along to those folks you know who fancy themselves as "bargain shoppers". My prioritization of safety concerns looks something like this: 1. Theoretical danger 2. Potential danger 3. Real and Present danger Theoretical danger is an event that could theoretically happen. For instance a meteor could theoretically streak from the sky and whack me in the head. They say a meteor killed off the dinosaurs – the same could happen to the last of the Hurtte dynasty. Theoretically, that is. Potential danger is more likely to occur. If you live on the San Andres fault, there is a potential for earthquake damage. To not consider this as a possibility and develop future contingency plans would be foolhardy. Real and Present danger equates to immediate danger. Danger which requires a change in habits or actions falls here. Anyone who ignores this kind

Recessions accelerate changes in way we do business. Yesterday, an old friend made the comment that his (distribution) business is doing well, but it just doesn't feel like 2007. Things were good but different. The recession has put a mark on our world. A few months ago a survey of the sales management teams of industrially oriented distributors revealed that 72% planned to expand their market by adding to their product offerings - Sell more stuff to the same people. This manifests itself in Electrical Wholesalers adding safety products, Industrial Distributors taking on electrical products and Power Transmission Distributors marketing new lines of Automation and Mechatronic technology. At the same time, distributors are changing their style of business. Case in point two recent events nationally known distributors Kaman Industrial Technologies and Graybar Electric. Kaman Industrial Technologies, a distributor of industrial parts just announced a sales/marketing collaboration with

High Velocity Radio Interview Posted using ShareThis

Radio isn't what it used to be. The following is an excerpt from a half hour interview I recently did for High Velocity Radio. Listen to it here. If you would like a full copy of the interview on a disk that you can listen to in your car, email us. It is absolutely free.

The distribution business has a beast looming in the back of the closet. It lurks in your inside sales group, thrives in your sales department and sucks the life’s blood from your bottom line. What is this savage? It’s the practice of cost-plus pricing. Every industry has one - for the electrical wholesaler it’s cost plus 20, or others it’s cost plus 10, 20, 25 or 30%. As an industry we have talked about cost-plus pricing for decades, yet it manages to survive. If your organization doesn’t have a clear cut process for pricing, it’s still hiding in the deep recesses of your company. And, it needs to be killed – before it kills you. Here’s how it works. A customer calls in and asks one of your employees for price and availability on a product. Somehow, someway they believe the ‘system price’ shown on the computer is too high, inaccurate, not supported or non-stock. They quickly look up your cost and then - the monster appears. Instead of measuring the cost of ordering, fr