New Realities, New Business Practices

What does the restaurant business have to do with knowledge-based distribution? On the surface, probably not much, but great ideas arrive from strange places. I was half asleep sipping coffee when I snapped out of groggy fog while catching some business news. The host was interviewing Zane Tankel, the CEO of Apple-Metro which owns 30 plus Applebee’s in metro New York City. Thanks to DVR, I was able to re-watch the interview a couple of times.

I can’t think of an industry harder hit by the coronavirus pandemic than the restaurant industry. I also can’t imagine a worse place to be during this crisis than New York City, yet Mr. Tankel, like most of the distributors I have spoked with, relayed a positive message.

Like many distributors, Apple-Metro is preserving cash, but unlike most distributors, the company has dramatically reduced its workforce from 2,600+ down to 84 people. I believe this has more to do with the makeup of the restaurant workforce, where the personnel side consists of lower-skilled and many part-time workers. Based on our research over the past four weeks, distributors haven’t (at least yet) moved to dramatically reduce workers in place. The Personnel Protection Program (PPP) has influenced this decision. However, I believe the biggest driver is the long-term shortage of qualified people to fill many of the knowledge-based distributor ranks. It’s harder to find a good salesperson (inside or outside) than it is to find a good dishwasher.

Disruptive Intervention grabbed my attention
Tankel described the various changes in the way the restaurant business has changed in the past few years. First labor costs have gone up. The current minimum wage in NYC is now $15 an hour. In a labor-centric industry, this was cause for disruptive intervention. The restaurants responded by applying technology. Things like automated ordering from tablets positioned at tables and some automation in the kitchen were mentioned.

This statement rings loud and clear with many distributors in the automation world:
Minimum wage hikes are technology’s best friend.

Could the next placement of one of your collaborative robots be in a restaurant? Quite possibly, yes. But, keeping with our traditional customers, increases in minimum wage could drive more robots into small manufacturing spots. Thinking about the current situation with COVID-19, social distancing might have a similar impact. Robots require no social distancing and allow workers to avoid clustering together on some tasks.

Disruptive intervention accelerated by the coronavirus outbreak.
For restaurants, disruptive intervention comes from the experience customers hope to enjoy. For years, restaurants enjoyed a reputation as a place for social interaction. Video footage of advertisements shows plenty of sizzling steaks and steaming seafood, but intermixed are backgrounds of groups of people enjoying themselves in festive situations, with social interaction.

Could social interaction go the way of the dinosaur? Many predict concerns about social spacing and viral exchanges will shape human behavior for the foreseeable future. Thought leaders in the restaurant business see “Social Interaction” morphing into “Healthful Interaction” or at least something different from just a month ago. The point is: Change from Corona-quarantine to normal won’t resemble a light switch- off today, on tomorrow. Plus, the post-quarantine normal might not be the same color, shape, and intensity as the old normal (sticking with the light switch metaphor).

While nobody in the restaurant industry can predict the future, the smart ones are at least making contingency plans for a future that doesn’t mirror the pre-COVID normal. As with any kind of planning, a few things show clearly, and others haze over. For example, one might guess restaurants will be more spacious and display greater attention to sanitation. You can bet, the much tossed around bar rag found in many taverns and saloons will be replaced with something a bit more sophisticated. The business model and best practices will shift.

Planning for the “New Normal” in Distribution
Enough of the restaurant story, let’s talk about the disruptive intervention in our business. I believe our business, like those mentioned above, will not see a binary change back to normal. The change will come in bits and pieces, perhaps industry by industry. Donning my prognosticator's hat, allow me to toss out a few predictions:


Some customers will be cash-strapped, leading to credit issues. Some of our customers, especially the smaller OEMs, contractors, and systems integrators may have suffered significant revenue losses. Even with governmental programs like the Personnel Protection Program (PPP), they may find themselves in a position of lacking the cash to pay their suppliers within terms. For distributors, this means we must either use our own credit to support slow-paying customers, find some other way to support these customers, or quit selling to them.

What are our actions or options?

• Become more aggressive with collections practices.
• Establish special pricing agreements with lower prices tied to payment terms.
• Bring third-party project-based financing to your customers.
• Establish lease plans on some products.

Some of our customers will further downsize, resize and reengineer. While past behavior doesn’t guarantee future behavior, every other economic storm we’ve weathered has led to further downsizing and reengineering at end-user customers. When customers downsize, they outsource non-core processes. Expect more companies (both User and OEM) to outsource some portions of their engineering and maintenance functions. For distributors, this presents opportunities to provide either free or fee-based services. If you’re giving away services, expect to give away more. This situation could also obsolete some of your sales guys' contacts in maintenance. Will the new outsourced guys buy from you or will they bring new suppliers with them?

What are our actions or options?

• Institute a plan for fee-based services.
• Determine what services you should never give away.
• Establish management oversight of services provided with approvals in place.
• Lay out a list of customers whose service offerings should be minimized.

Customers will demand more technical and better equipped inside support. Going back to the “light switch” comment mentioned earlier, as your customers ramp up there will be ongoing hesitancy to return to the old model of salespeople immediately welcome with open arms. This will only add to an ongoing thought trend with customers: “Customers judge your service by the quality of their immediate responses. The sooner they get an answer, the better their overall impression.”

Many distributors confuse inside sales, technical phone support and customer service roles, basically using the terms interchangeably. While there is a place for all these functions, I see job functions tied to simply moving information from customer-driven formats (phone, fax, and email) to the distributor's ERP system as becoming less important, perhaps even made obsolete by automation. However, solving customer issues tied to applications, advanced product data, and troubleshooting expands in importance.

What are our actions or options?

• Evaluate your staff by functional position. Determine who is “only” capable of providing traditional customer service interactions.
• Ramp up training for current staff with technical abilities to include advanced application and product skills.
• Reassign existing sales or technical staff to better serve customers by phone.
• If you operate a multi-branch business, consider establishing a technical support center.
• Measure and document the speed of handling issues via phone and work towards improvement.

The move to online buying will accelerate. News reports indicate Amazon’s online order volume has increased by 60 percent since the start of the Coronavirus lockdown. Similarly, online sellers tied to the furniture and office equipment have seen growth in the 250+ percent range. Experts tell us habits require 30 days to develop and the lengthy work from home shutdown exceeds that timeline.

Armed with their newfound habit and confidence in online

Remi Ducrocq, KYKLO President

ordering, customers will bring the practice to work with them. Early signs indicate it is already happening. In an interview with Remi Ducrocq, President and Founder of KYKLO (a company which provides a unique plug and play eCommerce solution to distributors in the automation, electrical and fluid power space), we learned web traffic from customers through their system has accelerated by over 40 percent since the COVID-19 outbreak. Remi believes the numbers will continue to expand.

Distributors need to focus attention on being ready for this shift in buying habits. I believe some of the older legacy systems will fare poorly in the post-Coronavirus recovery. Customers, who have grown used to the rich content provided by Amazon and other players, will not appreciate webstores that lack deep product content or breadth of offering. We have a short time to react.

What are our actions or options?

• If you don’t have a webstore, get one soon. You probably don’t have the time to develop one in-house. Creating the web-shopping framework is not the issue. The problem comes in populating the system with content. Currently, manufacturers are not able to provide the level of content help one might imagine.
• If you have a web presence, objectively review the customer experience compared to other options.
• Train your people on the capabilities of your website and arm them with talking points on the benefits of your site to existing customers.
• Assign a “webstore branch manager” to ensure the content remains relevant, new vendor products are added and sales and traffic are tracked.
• Promote your webstore in customer communications.

A few parting thoughts
As I wrote this article, a newsflash appeared across my desk.
“Harvard Study: Some Social Distancing Measures May Be Needed Until 2022.”

While I have always wanted to be in line with the powerful thinkers at Harvard, this is one time I wish we weren’t in agreement. The reality is social distancing will not be the only change that lingers with us long after the virus steps down from front and center in all the news reports. However, distributors are resilient. We’ve survived dozens of threats deemed worthy of our extinction, but we’ve survived.

Our business model will change. The best distributors will be ahead of the curve, develop a plan and come out of this crisis better and stronger than their competitors. My question for everyone is this: Are you planning ahead?