The Wholesale Change Show: Recent Episodes
Ian Heller, Jonathan Bein
Industry veterans Ian Heller and Jonathan Bein are here to turn up the heat, debating timely and tough topics affecting businesses in wholesale distribution channels.
Can AI truly make a real-world difference, today, in a mid-sized distribution company? The answer is yes and Millcraft is one company who did it by focusing on adopting the latest technology and recruiting and training a workforce that understands how to use it. Among other solutions the company has implemented AI tools for order automation that has increased touchless ordering to 60%. Watch the Wholesale Change Show on-demand with hosts Ian Heller and Jonathan Bein, Ph.D. as we welcomed our guest Travis Mlakar, president of Millcraft. Learn how Travis incorporated AI to make a significant difference, freeing up employee time to focus on what is truly valuable to the customer. Travis also discussed the next steps for the company. Using advanced analytics along with AI, Travis will be optimizing cross selling, supply, and other areas for ready for advancement.
On this episode we welcomed Tim Brooks, CEO and co-owner of Lohmiller & Company, an HVAC distributor in Denver, Colorado. Tim has built a highly successful company based on extensive employee training, aggressive expansion of value-added services, a willingness to invest in new technologies and a focus on building an exceptional culture. These capabilities offer customers the best high-touch experiences with personal interactions but also top-notch digital tools that resulted in 27% of sales coming through electronically in 2023. Listen now to hear from the CEO of a fast-growing, privately-held HVAC distributor who shares his tips for success.
We welcomed Renata Morgan to this episode of the Wholesale Change show. Renata was recently promoted to President of Rheem Northeast Distribution, which is a combination of four previously independent distributors: United Supply Company, P&N Distribution, Mechanical Supply and MCN Distributors. The new division will incorporate 32 branches selling both Rheem and Ruud products across Eastern Pennsylvania, all of New Jersey, and parts of New York and Connecticut. Renata will be tasked with defining core values and setting a vision for the combined enterprise to make the whole greater than the sum of its parts. As in any merging of companies, establishing a new culture that takes in the best aspects of each individual organization will be a key challenge. An HVAC industry veteran with experience driving organizational change and leading diverse cross-functional teams, Renata’s leadership has been recognized by being named a Top 20 Woman in HVAC in 2021 along with a HARDI 40 Under 40 honor in 2016. Renata received a Master of Industrial Distribution degree from Texas A&M University, where she currently serves as a member of the MID Advisory Board, along with a Bachelor of Science in Psychology from the University of Houston.
BradyIFS + Envoy Solutions, a national distributor of janitorial-sanitation, foodservice disposables and industrial packaging products, just unveiled their new name: BradyPLUS. The new corporate identity follows the October 2023 merger of the two companies and is a step toward realizing the company’s priority of operating as one. Get an inside view of the rebranded distributor’s story as we welcomed BradyPLUS Chief Marketing Officer Ian Gresham to the Wholesale Change show. His specialty in marketing, omnichannel strategy and corporate communications is critical in a time of transformation for the merged organization. Hosts Ian Heller and Jonathan Bein talked with Gresham about: The power of the combined distributors and their member companies How BradyPLUS will leverage data to understand customers better Building a digital experience to enable more efficient buying How the distributor balances digital with in-person expertise and value-added services
Traditional and emerging competitors make it more difficult than ever for distributors to hold on to their role as manufacturers’ primary partners in going to market. Marketplaces, large retailers and even options for selling direct to end-users become more tempting to manufacturers when distributors offer poor digital capabilities or are weak at marketing.In this episode of Wholesale Change, representatives from two major manufacturers – ABB and Signify – shared how distributors can become more important to them. Instead of taking defensive action to hold onto existing market share, we discussed how distributors can go on offense and take share from other channels. Watch on-demand for a unique opportunity to hear directly from major manufacturers on how you can become more important in the channel.
During his two-decade tenure with Grainger companies, Kevin Weadick demonstrated his versatility across multiple countries and diverse divisions including supply chain, marketing and product management. However, the pinnacle of his Grainger career was the role of president for the company’s B2B marketplace, Zoro. Given his remarkable track record, it’s no surprise that when FleetPride embarked on its quest for a new CEO, Kevin emerged as an exceptional candidate. Few can boast of extensive experience within a prominent branch-based distribution business coupled with a history of accomplishments in digital commerce, exemplified by his achievements at Zoro, a 100% online company.At Zoro, it wasn’t just about sales growth; the company’s outstanding culture earned it accolades as an exemplary employer.Now CEO of FleetPride, Kevin is committed to replicating this culture success. He is also focused on strategically integrating digital solutions alongside FleetPride’s existing branch and sales strategy and expanding the company’s emerging service channel.All of this is in service to the company’s core purpose: “FleetPride keeps the country running.” Listen to this episode of the Wholesale Change show we talk to Kevin about what he’s learned over his long distribution career, how he’s adapting to a new industry, and how he plans to leverage his experience to achieve big goals at FleetPride.
AI is powering a new wave of applications in supply chain and warehouse, finance, HR, sales, marketing and customer service. These promise to deliver not just greater efficiency, but also greater effectiveness for distributors.The key, according to AI expert Brooks Hamilton, is to “understand where humans act like machines. That’s where the opportunities lie.”At the first-ever event on AI for distributors this month, Hamilton, who helps distributors build and implement AI strategies, gave our attendees the tools to get started with AI. Tapping into his extensive real-world experience, Brooks instructed distributors to embrace, educate and then expand their use of AI – building a solid foundation to reap the rewards of this game-changing technology.Hamilton joined Wholesale Change hosts Ian Heller and Jonathan Bein to share his takeaways from our Applied AI for Distributors event. They also dug into what comes next – after distributors decide to take their first steps.
Supply Chain Equity Partners (SCEP) is “North America’s only committed private equity firm focused exclusively on making investments in the distribution and logistics industry,” says Jay Greyson, the firm’s co-founder and partner. He joined hosts Ian Heller and Jonathan Bein, Ph.D. of Distribution Strategy Group to discuss industry trends in M&A, along with how distributors can prepare for an equity event.Jay, Ian and Jonathan discussed how factors like strategic vs. financial buyers, company size, and many other elements impact valuation. They discussed how a hot second quarter of distribution M&A activity was followed by the “summer doldrums” of fewer deals, as well as how positioning your company to be a “platform” player can help you acquire more effectively and be more valuable when it’s time to sell.Listen now to hear Ian and Jonathan spend time with one of the leading experts in distribution M&A.
Ian Heller and Jonathan Bein, Ph.D. were joined by distribution technology expert, Klaus Werner, on the Wholesale Change Show. Klaus is also preparing to deliver a keynote presentation, “AI Applications and Use Cases for Distribution," at our upcoming Applied AI for Distributors Conference.Klaus discussed how distributors can use AI to improve productivity, quality and profitability in areas like:> Customer service > Supply chain > Sales automation > Personalization > eCommerceDon’t miss this opportunity to learn from an early AI pioneer in distribution by watching now on-demand.
What does the increasing pace of M&A activity mean for distributors, manufacturers and reps? How will this change the ecosystem of the industry?
- Will the role of manufacturers’ reps evolve so they’re more like VARs?
- What happens to associations as distributors consolidate?
- How will manufacturers adapt as M&A activity continues?
In this episode of Wholesale Change our guest was distribution expert David Gordon. Outspoken, candid, expert and industry insider – David is all of these and more. He’s been the President of the Channel Marketing Group for more than 22 years and began publishing the leading independent blog in the electrical distribution industry, ElectricalTrends, 15 years ago. David also publishes US LightingTrends and, with Dorn Group, HVACRTrends.
David joined Ian Heller and Jonathan Bein for another spirited, unscripted conversation.
On this episode we welcomed Ben Hensler, Chief Sales and Marketing Officer of Motion & Control Enterprises (MCE), to the Wholesale Change show. Ben joined MCE in 2021. During that time MCE has seen significant growth, including the acquisition of 10 businesses, enhancing their technical product and service offering.
MCE’s ability to recognize the talents of acquired companies is a key strength of their business model. Beyond the consolidated buying power, optimized pricing and value-added services within MCE's platform, these acquisitions provide an abundance of talented individuals and innovative solutions. By fostering collaboration and synergies, MCE enables these talented teams to flourish, broadening their market reach and expanding their product lines for exciting cross-selling opportunities. This integrated approach not only adds value to MCE but also provides customers with comprehensive solutions throughout every stage of the product lifecycle.
Ben has had executive roles at C.R. Lawrence, Test Equity, FCX Performance and Grainger.
Keller Logistics Group is killing it. The logistics and distribution business is targeting $165 million in sales this year, nearly double the sales of a decade ago. Their Big Hairy Audacious Goal (BHAG)? $1 billion by 2032.
But for CEO Bryan Keller, his work isn’t just about revenue. It’s about how his company can give back to the communities in which they work. That’s what really drives him.
Keller joined us for the June 28 episode of Wholesale Change. In addition to talking about the logistics and warehousing market landscape with our hosts, Keller shared his philosophy of delivering for employees, customers and communities. Keller Logistics Group invested $300,000 in sponsorships to community organizations last year, created a non-profit to help local veterans in crisis and collaborated with a local organization to help at-risk students find their purpose in life while learning skilled trades to prepare them for a successful future.
This episode of Wholesale Change featured Newton Sears, Managing Director at Greenhill & Co., an advisory-focused investment bank dedicated to M&A, restructurings, financings and capital raising.
Newton and his firm work with many distribution firms and publish data about M&A activity within the industry. A frequent advisor to distributors, Greenhill offers expert insight executives can use to make better decisions about acquisition opportunities, recapitalizations, valuations and much more.
In our conversation with Newton, we talked about:
The state of the M&A market in distribution How industrial distribution is perceived in the capital markets What buyers of distribution markets focus on What sellers should be prepared for when they consider putting their companies on the market Whether you’re a buyer or a seller, a current or prospective investor or if you just want to know how an expert investment banker identifies what makes a distribution company great, you don’t want to miss this conversation.
On this episode of the Wholesale Change show, we welcomed Robyn Pollina, CEO of Palmer-Donavin. Robyn ascended to the CEO position in 2020 after 25 years at the building materials wholesale distributor, including serving as the company’s CFO. “I shifted from managing day-to-day tasks to establishing six growth initiatives,” she notes.
As the head of a leading distributor of building materials and an ESOP, Robyn’s job is to meet and manage the expectation of its many employee-owners while adapting the company to succeed in an evolving channel. Some long-term investments can affect short-term profitability but will pay off over time. A key part of Robyn’s job is to enroll the whole company into these strategies to ensure Palmer-Donavin’s success for many years.
Robyn views building a strong culture as fundamental to the success of the company. Her leadership team has distilled 28 “Purpose-Driven Principles” to serve the Palmer-Donavin’s mission “to deliver more and guide our everyday interactions with each other and our business partners.”
As one of a small number of women in a CEO role in distribution, Robyn serves as a great example to others who aspire to leadership roles in what has been a male-dominated industry.
On this episode, we’re joined by Marty Daley, CEO of Marco Rubber. In two years, Marty’s team has tripled the size of the business – organically and through acquisitions. Whether it’s a $400 seal for a critical application or a tri clamp gasket a customer needs quickly, Marco Rubber offers the kind of service that brings in new customers and keeps existing accounts coming back. “Technology is woven into our DNA,” Daley notes. “Not just the front end, which is a source of technical information for serious buyers and engineers. We also aggregate supplier data, have an automated quoting tool for our internal team, interactive toolkits for customers and business intelligence tools to measure what we manage across all departments.” While Marco offers great digital capabilities, they’ll take the order how the customer wants to place it and work closely with customers on specific applications. Business development managers perform a sales engineer role, and a group of technical sales consultants service thousands of customers all over the world. After working for companies like Wesco, Sonepar, Interline Brands and True Value, Marty was ready to drive rapid growth in a smaller company by leveraging leading-edge technology in a technical business. He found that opportunity at Marco Rubber and he’s making the most of it. “All customers should be treated special, just not necessarily the same…” -Marty Daley, CEO, Marco Rubber
Watch the Wholesale Change show on-demand as distribution legend Dirk Beveridge shares talent strategies he has learned in decades of working with the world’s best distributors. You need the best team to surpass competitors – and meet customer expectations, especially in the dynamic world of distribution. As new challenges and opportunities arise, it’s crucial to evolve the way you lead. Dirk has compiled the top 10 human resource strategies for 2023: From solving the talent shortage to building a strong employer brand, adopting these principles will ensure you develop an energized, inspired and customer-focused team that wins in the market through an empowering, collaborative culture.
In this episode of Wholesale Change, host Ian Heller has a frank conversation with Kevin Short, President and CEO of master wholesaler ORS Nasco. He shares his take on the importance of trust in the distribution channel as it relates to better serving the end-customer. He also shares an update on ORS Nasco’s focus from 2023 onward, as they look to refine their value proposition to better support distributors of all types.
ConEquip Parts & Equipment is a rapidly growing B2B marketplace. They offer 500,000 parts, represent 3,000 suppliers and $52B in inventory – but you can’t order a thing online! How is this possible and why do they do it?We talked with Ryan Loos, Chief Financial Officer of ConEquip Parts & Equipment, about the construction equipment parts distributor’s go-to-market strategy – including a decision not to invest in a transactional ecommerce system. ConEquip has seen consistent growth over the past 10 years. Ryan shared their secrets, as well as lessons learned. It’s the perfect conversation to sit in on if you want to hear another point of view on channel strategy.
Watch on-demand as we’re joined by the CEO of COE Distributing, J.D. Ewing. J.D. grew the company to $100M+ in 13 years by building a company that creates terrific customer experiences. Most of this growth has been organic. J.D. described COE’s culture as “inclusive, open door, good at listening and gathering feedback from across the organization,” and “adept at implementing ideas and suggestions in real time.”
In only three years, CEO Eric Chernik has grown Building Controls & Solutions by 700% while retaining the entrepreneurial culture of each company BC&S has acquired.Eric knows that employee engagement drives customer engagement, so he enrolls his team in the company’s goals and strategy with transparency and a healthy culture. He embraces great internal communication and employee recognition.In this episode of Wholesale Change we talked with Eric about his path to becoming a CEO and the leadership principles he has applied to achieve fast growth and strong financial results.
Tony Harris, founder of THINC B2B, brought his energy and passion for growth to the Wholesale Change Show. He held nothing back in his conversation with hosts Ian Heller and Jonathan Bein on how and why distributors need to realign business intelligence, sales and marketing, finance and IT to drive growth in 2023. He’s a highly regarded CEO coach, senior executive mentor and thought leader. He’s also the author of “FADS Marketing: Food, Alcohol, Drugs, Sex and the New Marketing World Order.” His career includes providing executive counsel to some of the most recognized global brands. Harris also advises for private equity firms, investment firms, family offices, and venture capital entities, evaluating and preparing recommendations on the viability of potential acquisitions, divestitures and roll-ups.
Some inside sales programs produce marginal results, while others are veritable home runs. What is different in the execution of these home run programs? The superior performance happens in their day-to-day activities as inside sales reps contact customers and prospects, understand their needs, position your products against those needs, close sales and ultimately build strong long-term customer relationships.Hosts Ian Heller and Jonathan Bein welcome Mark Peck to discuss the following core elements in highly successful inside sales programs.Building and using a structured sales coverage model and plan •Allocate your most valuable asset •Apply the pareto principle•Set expectations with inside sales staffManaging with a systemic inside sales performance model •Manage the elements of sales rep performance that drive revenue performance •Develop an understanding of individual sales staff strengths and weaknesses•Use the performance model to coach to achievement of high sales goalsListen now to learn how these two business models can help drive superior execution in your inside sales program.
When done properly, proactive inside sales should:
Grow midsize accounts 15% to 20% Increase gross profit through revenue in higher margin accounts Reduce sales comp for midsize accounts 30% to 40% Increase retention In our experience creating proactive inside sales programs, we have seen the best – and worst - practices for achieving these results.
In this episode we look at six keys in creating a successful proactive inside sales program including organization design, management support, compensation, account selection, selecting the right people and technology support.
Ed Gerber, CEO of Summit Electric Supply, joins us on this episode of Wholesale Change. Before joining Summit Electric, Ed was the CEO of the Industrial Supply Association (ISA) after holding a number of senior executive roles for industrial distributors.
We ask Ed what it was like to switch from the industrial industry to electrical. During our conversation, we explore topics like sales force optimization, digital transformation, value-added services and what it takes for a regional distributor to compete effectively against global players.
Ed has been highly successful during his tenure at Summit, even though he joined the company less than a year ago. It’s his first CEO role with a distributor, so he’ll tell us what it’s like to be in the top seat compared to other senior executive roles he’s held.
Every distributor does an annual budget – but that’s not the same thing as formulating a strategy. The budget process is very tactical, focused on current operations and does not typically account for broad industry trends, disruptors or major technology changes.
If you don’t want to get blindsided, you need a strategic plan. A strategic planning process will allow you to think about the positioning of your company and how you need to adapt your value proposition over time.
On this episode of Wholesale Change, Ian Heller and Jonathan Bein, Ph.D., talk about the strategic planning process they’ve developed to help distributors formulate long-term plans. This feeds into the short-term budget process but also enables changes that empower a company to thrive in the long term.
In this episode of Wholesale Change we are joined by Alex Tomey, the Senior Vice President of Merchandising for Global Industrial.
Global Industrial is a billion-dollar value-added industrial distributor. Global Industrial offers customers more than a million products — from material handling to packaging and supplies — including its own proprietary brands. Alex was previously the Co-Chief Merchandising Officer at Petco. Before that, he served as Senior Vice President and GMM of Merchandising at DICK'S Sporting Goods and has held merchandising leadership positions at major retailers including Kohl's and Walmart.
We asked Alex about his transition from retail to B2B, how he developed merchandising strategies for industrial and commercial customers, and the role of value-added services in differentiating Global Industrial from competitors.
Most distributors we talk to are disappointed in the ROI of their ecommerce investments. When we dig into their complaints, we find that while they know their expenses, the sales attributed to their websites are way off because they only look at shopping-cart revenue.
But the shopping cart is usually the smallest part of the direct revenue generated by your website. Customers must use purchase orders, so instead of checking out, they shop on your website and then buy through other channels – including “lights out” methods like email, EDI and punchout.
Listen now as Distribution Strategy Group co-founders Ian Heller and Jonathan Bein, Ph.D., reveal how you can build a better website that drives more revenues and how you can do a better job measuring the return on your current investment. Your ROI is probably much better than you think, and we can show you how to increase it even more.
Conventional thinking claims that only distributors larger than a billion dollars can build successful marketplaces. Bay Supply is much smaller than that, but its fastener marketplace is taking off.
Like most wholesalers, Bay Supply is facing new marketplace entrants supported by tech startups, national distributors, manufacturers and even software providers that are fighting to reach the buyer directly through these rapidly evolving platforms. Unlike other distributors, Bay Supply jumped into the marketplace competition itself. And they’re recruiting manufacturers and distributors to join their platform in a friendlier ecosystem than many of the alternatives.
Mike Eichinger, Bay Supply COO, joined us on the Wholesale Change show on Aug. 31 at 9PT/12ET. He shared how Bay Supply is taking a collaborative approach to supporting distributors who want to reach sourcing professionals with an efficient solution while maintaining their brand and positioning as experts in the field.
In nearly 20 years with Specialty Building Products, Jeff has served as CFO, President and COO, and now CEO. Throughout his long career, which has included many acquisitions, a company name change (SBP was formerly known as U.S. LUMBER) and most recently, new ownership, Jeff has focused on building great teams.
Jeff knows this means recruiting great new talent to go along with the experienced veterans. SBP has earned a reputation as a great place to work for Millennials and Generation Z employees – and not just because Jeff plays video games with them. In this episode Ian and Jonathan asked him about the part he has played in building such a successful company.
Eric Hoplin, CEO of the National Association of Wholesaler-Distributors (NAW), joined us on this episode of Wholesale Change. He shared his take on key concerns and trends – including labor, supply chain disruption, digital transformation and more – based on his ongoing conversations with dozens of senior distribution company leaders. He also provided an update on NAW, including the work they are doing to support distributors in Washington D.C.
Alex Moazed shared his unmatched experience working with major distributors, technology startups, venture capital firms and manufacturers as they formulate their marketplace strategies. He updated us on the latest trends in B2B marketplaces and share some key lessons distributors need to know as they choose how to compete in the fast-changing competitive landscape.
Monte Salsman, President of the Winsupply Acquisitions Group shared principles he has used to foster a successful entrepreneurial culture at WinSupply including:
- Take ownership.
- Adopt an expertise habit.
- Become a professional at developing relationships … especially with people who are difficult for you.
- Get paid what you are worth (not more and not less).
- Communication … beginning with mastering listening.
Monte says, “I see those things in every successful business and individual.”
Inflation and supply chain disruption are wreaking havoc on distributors’ ability to drive profitability. But the time has passed for stopgap fixes. Companies need a plan to mitigate the impact. Leaders’ most urgent task is to secure their companies’ long-term profitability by managing the effect of inflation and supply chain disruption on their customers.
In this episode, our hosts spoke with profitability expert Jonathan Byrnes, senior lecturer at MIT and author of Islands of Profit in a Sea of Red Ink and Choose Your Customer: How to Compete Against the Digital Giants and Thrive. They discussed how distributors can take back control in this unpredictable market – slowing the profit drain and bolstering their bottom line with Enterprise Profit Management.
Learn how distributors can evaluate and categorize their customer base – profit peaks, profit drains and profit deserts – and make a plan to act. Treating all customers the same won’t cut it.
Tune in now to hear Erik Gershwind, President and CEO of MSC Industrial Supply Co., talk about how the company has reimagined its value proposition, driven digital transformation and learned to build its culture and retain talent in a virtual world.
In 2021, MSC rolled out a three-year plan called “Mission Critical” to accelerate market-share gains and earn a higher return on invested capital. The company has transformed its sales force from focusing on spot buys to delivering on new, more complex and high-touch solutions that help customers achieve higher levels of productivity, profitability and growth. MSC is adding value deeper in its customers’ organizations while simultaneously expanding the portion of its sales that come through digital channels.
In our conversation with Erik, we walked through MSC’s journey and asked him what he’s learned along the way.
The very nature of leadership has changed because of COVID, supply chain uncertainty and other disruptive forces.
And distributors know this. In his research, Dirk Beveridge, Founder of We Supply America and UnleashWD, found that most distributors recognize that the ground underneath them has shifted – and that leadership must shift their perspective, as well.
In this episode of Wholesale Change, Dirk shared why distributors must adopt new ways of leading their companies to build a sustainable business today. Dirk believes distributors have a unique opportunity to bring deeper meaning and purpose to their organizations to create relevancy in the face of disruption.
He shared some of the research he’s done on the topic of leadership in a post-pandemic world, as well as stories from distributors he has met on the road during his We Supply America tour across the country.
Profitability expert Dr. Al Bates joined us on the Wholesale Change show to talk about why distributors are stuck in a profitability “rut” and how they can escape.
Al identified the three action steps distributors can take to improve profitability and explained why sales compensation practices, supplier “special deals” and ongoing price increases are contributing to the problem.
Unlike some consultants who specialize in profitability, Al believes distributors should fire customers only in very rare cases. “I’m not anti-sales,” Bates likes to say, “I just want profitable sales.”
Al also explained why distributor CFOs are often a key part of the problem and how they can instead contribute to the solution.
Al is one of the most popular speakers in the industry and when you tune into this episode of the Wholesale Change show, you’ll see why. He combines extensive experience, straight talk, an entertaining style and compelling arguments to provide insights and takeaways you can use to improve your company’s profitability immediately and on an ongoing basis.
Randy Eddy, President and CEO of US Electrical Services (USESI), holds his leaders accountable for financial results, of course, but has equally high standards when it comes to building a great culture.
Lots of leaders say that, but at this electrical distributor, it’s not just about a mission statement or company values – the company uses a series of analytical tools to select the right candidates; measure culture success; and hold managers accountable.
Watch this webinar now to learn how Randy’s impressive focus on culture is directly tied to business results.
Dakota Supply Group grew more than 20% in 2021 – not counting inflation. Of this, the biggest driver was organic, same-store sales growth. During the pandemic, the company implemented, “DSG Let’s Grow!” where sales teams proactively helped customers solve problems on the phone when they couldn’t be in shops or jobsites.
Dakota Supply Group differs from many other distributors because they focus on multiple types of contractors (electrical, plumbing, HVAC, waterworks, telecom and utility). The distributor also has an extensive service menu that includes training on how customers can run better businesses, for example, including their P4 Learning Lab.
On this episode of the Wholesale Change Show we talked with Dakota Supply Group CEO Paul Kennedy about how the company’s focus on customer experience has driven profitable growth. Learn:
• Why the company targets multiple segments • How they service such disparate needs • Why they doubled-down on inventory in 2021 – and how that helped them win business • How being an ESOP helps drive their success – and enhances their acquisition strategy
Dakota Supply Group is growing quickly. Listen to Paul talk about how they’re doing it. Come with your own questions for our speakers.
Most distributors know that losing customers costs them money. Despite this, few have specific plans for reducing defection – and even fewer have someone in charge of this important task.
But losing customers costs more than you think for one very important reason: Customers that defect can only drop to zero sales dollars. Customers you retain tend to grow over time. That means when you improve retention, you not only keep the sales you would have lost, but you also add growing accounts over time. The multiplier effect of retaining more accounts means distributors should invest more in retention than they think. The opportunity cost is much greater than the lost sales alone.
In this episode of Wholesale Change hosts Ian Heller and Jonathan Bein share the true costs of customer defection – and the real upside of reducing it.
In a Distribution Strategy Group survey, 88% of distributors’ customers reported buying from at least one B2B marketplace, and 33% bought from five or more. It’s clear many distributors’ customers are making simple purchases regularly from marketplaces, and this trend is likely to accelerate over time.
Our research shows that Zoro is the most common marketplace these companies sell on, with Amazon Business a close second. In this episode Zoro President Kevin Weadick joined hosts Ian Heller and Jonathan Bein for a discussion on the role third-party marketplaces can play in distributors’ strategies today.
Brent Grover is one of the leading experts on mergers and acquisitions in the wholesale distribution industry. One of only four NAW Fellows, Brent has offered insight and expert counsel on hundreds of deals involving distributors. In this episode we had an entertaining and informative discussion with Brent about trends and best practices in M&A in the distribution industry.
Ian and Jonathan reveal the biggest mistakes distributors make that prevent marketing from becoming a driving force for growth and profits. Ian has led marketing for four large distributors and Jonathan has analyzed customer and financial data for dozens. Listen now to hear why distributors often fail at marketing — and how you can succeed.
Two major deals at the end of 2021 ensured the year would end with a bang. Lawson Products, Gexpro Services and Test Equity joined forces, and Motion Industries acquired Kaman Distribution Group.
Do these deals signal a renewed round of mergers and acquisitions in the distribution industry? Our hosts Ian Heller and Jonathan Bein reviewed these big deals and others. They also discussed what may be coming in 2022 and what it means for your business.
Can distributors give customers new reasons to visit physical stores? Mark Dancer thinks so. On this episode of The Wholesale Change Show Dancer joined our hosts Ian Heller and Jonathan Bein to share how he thinks B2B innovators can reimagine physical stores and other real-world spaces to create new value for customers and open a new front in the war against disruptors.
How companies like Amazon Business, Berkshire eSupply & Varis are changing the game. For decades, customers have turned to distributors to meet their everyday needs and source hard-to-find products. Distributors used their own inventories, supplier sourcing and master distributors to give customers access to an endless array of products.
But now, marketplaces have moved that endless assortment right in front of the customer. This has changed the dynamics for distributors and even more for master distributors.
Wholesale Change show hosts Ian Heller and Jonathan Bein discuss what this means, using companies like Amazon Business, Berkshire eSupply and Varis as examples.
ADI, a leading global wholesale distributor of security, AV and low-voltage products with 2020 revenues of $3 billion, embarked on a significant digital transformation over the past several years. This digital transformation included integrated sales effectiveness initiatives that created significant sales efficiencies during a strong growth period. Stu Tisdale, Vice President of Global Strategy and Commercial, has been instrumental in driving ADI’s digital transformation initiatives including touchless ordering, analytics, AI/ML, integration of offline and online, and more. Our Wholesale Change hosts and Tisdale discuss ADI’s remarkable journey.
What keeps Jennifer Murphy, President of NetPlus Alliance, up at night in a time of consolidation and disruption? The independent distributor’s relevance. NetPlus Alliance is a buying group focused on helping its distributor members succeed. To her, it’s critical that NetPlus accomplishes this mission. Join our Wholesale Change hosts and Murphy on Nov. 10 as they talk about the evolution of buying groups and the role they play in supporting distributors in today’s market.
Product shortages, supply-chain delays, hard-to-find labor – what are the best practices in navigating through the current supply chain madness?
On this episode of The Wholesale Change Show we talked with two experts about what you should do to manage these problems.
Our guests are Bruce Strahan, President of operations strategy consultant Argon & Co., and Helgi Leja from Distribution Performance Solutions.
Chuck Cohen, the Managing Director of Benco, the nation’s largest independent dental product distributor, believes that top notch IT and analytics are essential to create competitive advantage in this decade and beyond. Together with his team, he’s putting his money where his mouth is by changing every foundational IT system in the company. The result of this transformation will be a better online and offline customer and employee experience, as well as better efficiencies and effectiveness for Benco. Tune in to hear from this visionary leader about how they came to the decision and how the journey is going.
In this episode we spoke with Barry Litwin, CEO of Global Industrial, a $1B distributor focusing on small and midsize businesses. In less than two years, Barry has rebranded the parent company, grown the share price about 70% and differentiated and developed an exciting strategy to drive future growth.
We asked Barry about his career, what he’s learned along the way and how he’s applying this experience at Global Industrial. He talks about how Global differentiates from other distributors as well as disruptors. Barry also talked about the company’s approach to combining its sales, phone and digital channels to drive success.
The rumors aren’t true. The B2B sales rep still has a long life ahead despite the (not completely true) stories that Millennials and Gen Z don’t want to meet with them. It’s misleading to declare sales reps are over; the value of the sales rep depends on the nature of the relationship and the complexity of the products and services being sold. In this episode of Wholesale Change Ian Heller and Jonathan Bein talked about how conversations around the role of the sale rep today need to go beyond just blaming the next generation.
Julie Copeland, CEO of 75-year-old safety distributor Arbill, joined Ian Heller and Jonathan Bein to take a closer look at how the PPE industry changed overnight when COVID-19 hit last year and the challenges that have come with that, including misinformation and lower-quality product. She shared how Arbill responded to the shifts in the market with education and their own product lines, including one launched for consumers in 2020.
To Andrew Larson, CEO of HVACR distributor Gustave Larson, his business is helping his customers maximize their success. He shared with our hosts Ian Heller and Jonathan Bein how his team helps HVACR contractors run their businesses better through innovative services, including marketing, sales and technical support. He’ll also talked about how the distributor has evolved its sales force to make it as easy as possible for customers to interact with its team, including telesales, service advisors, engineering and design, and more.
Deal-making is off to a strong start in 2021, and private equity continues to play a large part in that equation. Private equity firms have long been attracted to distribution and, for some distributors, selling part or all of their companies to private equity is an attractive exit strategy.
John Schweig, Chairman of the Board at BlackHawk Industrial and Operating Partner at private equity firm Snow Phipps, joined hosts Ian Heller and Jonathan Bein for a peek under the covers of how these firms evaluate distributors, from people and processes to market opportunities. Schweig was previously President of Grainger International and Chief Strategy Officer for Grainger and was the former Chairman of both Board of Kele, Inc. and Service Champ.
In our regular quarterly checkup, Wholesale Change hosts Ian Heller and Jonathan Bein dug into public distributors’ earnings reports from Home Depot, Fastenal, CDW, Beacon and more. Our hosts took a look at how your largest competitors are responding to market pressures in 2021, and how they're planning to grow and adapt through the end of the year.
Standing out in today’s market is more critical than ever. Distributors can’t just lean on product know-how and great customer service to differentiate. They have to go deeper. In this episode of Wholesale Change, Peter Neuberger, President and CEO of United Performance Metals, joined Ian Heller and Jonathan Bein to talk about how the distributor has built a successful value-added services model in the highly commoditized metals service center industry.
Peter Neuberger has been in senior leadership roles over the last 30 years for a variety of manufacturing and distribution companies across industrial supply, building products and metals sectors. He is currently CEO of United Performance Metals, an ONI company. UPM is a global specialty metal service center company headquartered in Cincinnati, OH.
If distributors don’t change their revenue model, they’ll perish. That’s the message from Frank Hurtte, author of The Distributor’s Fee-Based Services Manifesto, who urges distributors to move away from value-added markups on products and start getting paid for the services they provide.
In this episode, Hurtte, of River Heights Consulting, joined Ian Heller and Jonathan Bein to talk about why, if distributors don’t have a plan for recouping the cost of their services, they will make less money, grow more slowly than the competition, and become less resilient.
Distributors need to rethink how they add value to their customer base with a portfolio management strategy. Amazon isn’t designed for such a hands-on approach. In this episode of Wholesale Change, Brent Johnstone, co-founder of ActVantage and former CEO of a pet supply distributor where he successfully orchestrated an analytics-driven turnaround, joined Jonathan Bein and Ian Heller to talk about how distributors can analyze transactional and customer-provided data to generate industry-specific insights, develop robust benchmarks and tailor advice to match customer objectives. The benefits: differentiation in a copycat market, greater wallet share, lower churn rate and a reduced focus on price.
After three generations of family ownership, Miller Industrial found itself in new hands just two years ago. Peter Jackson, the Chicago distributor’s new owner, not only was new to the century-old business – he was new to the distribution industry. That means he hasn’t been held hostage to traditional practices that have held some distributors back. But he’s also had his share of lessons learned. Hosts Ian Heller and Jonathan Bein welcome Peter to the Wholesale Change show to provide his novel perspective on running a distribution company today.
Over the past decade, Michael DeCata has overseen the revitalization of industrial distributor Lawson Products. In this episode, DeCata joined Wholesale Change hosts Ian Heller and Jonathan Bein to talk about how Lawson Products is differentiating in today’s market with an innovative approach to sales, a strong private-label strategy, and value-added services. DeCata has more than 20 years of experience leading industrial and distribution companies, including Grainger, General Electric and United Rentals.
Hosts Ian Heller and Jonathan Bein are back at it, with a look at more public distributors’ quarterly results and what they mean to the market. They go beyond the numbers for Office Depot (ODP), Watsco, Henry Schein, The Home Depot and Genuine Parts Co/Motion Industries to provide a perspective that analysts can’t. They also dive into what the news over at ODP means for the marketplace war. Learn where your largest competitors are going – and how they are positioned as 2021 picks up speed.
The role of associations in the distribution industry has evolved over the past decade as they work to add value for their members in a changing market marked by generational shift and consolidation. In this episode Ed Gerber, CEO of the Industrial Supply Association and distribution industry veteran, joined Distribution Strategy Group’s Ian Heller and Jonathan Bein for a look at how ISA is evolving to meet members’ needs in an unprecedented time.
The Wholesale Change hosts Ian Heller and Jonathan Bein dug into public distributors’ earnings reports from Amazon, Grainger, Applied Industrial and Avnet. Our hosts took a look at how your largest competitors performed in 2020 and their plans for navigating the market in 2021.
We had a frank conversation with Steve Ruane, Vice President of Marketing and Member Services for IMARK Electrical, about the role co-ops and marketing groups play in helping independent distributors compete in today’s fast-changing market. IMARK Group is a multi-vertical member-owned and member-governed group of independent distributors that bills itself as the “most progressive distribution group,” providing rebate income, facilitating enhanced relationships with manufacturers and service providers, employee training, meetings, benchmarking, webstore development support, sales solutions for national accounts and global networking opportunities.
Darren Rawson is the President of AZ Partsmaster, a regional facilities maintenance distributor. He joined Ian Heller and Jonathan Bein for a lively discussion about trends in the multifamily market, as well as the recent Home Depot-HD Supply acquisition.
Without buy-in from your entire team – including that salesperson that complains the most – a strategic pricing project will, simply put, not yield the results you need it to. Join Gregory Smith, Vice President of Strategic Accounts and Partnerships for SPARXiQ, as he shares the secrets to successful strategic pricing implementation with Ian Heller and Jonathan Bein in this episode of Wholesale Change.
They discuss why: • A cross-discipline pricing committee that includes the CEO and VP of sales will result in a better outcome • Incentives must align with strategic margin objectives • Communicating both the current and future states will drive change • To sustain success, you need monthly business-review meetings focused on pricing
Despite the obvious benefits, most distributors aren’t good at cross-selling. In this episode, Debbie Paul joined Ian Heller and Jonathan Bein to talk about what’s in distributors’ way, and how emerging technologies are making it easier to grow wallet share with existing customers.
John Tisera, president/CEO of Johnstone Supply, joined Ian Heller and Jonathan Bein in this episode to talk about how the distributor has built and cultivated its culture through Zoom, including adapting their onboarding process and holding a quarterly Coffee with CEO where he personally meets all new associates.
Distributors that are embracing customer loyalty programs are increasing mindshare and growing revenue with existing customers. In this episode Ian Heller and Jonathan Bein speak with Lincoln Smith, Chief Strategy Officer for HMI Performance Incentives, about why loyalty is a powerful emotion and how to leverage it in B2B, best practices in designing loyalty and incentive programs, and how to manage program success.
Shopping is defined as finding, researching and evaluating products. Buying is the transaction – whether that’s online, through a sales rep or with a CSR on the phone. While offering a transactional website has become a must-have in today’s environment, enhancing your shopping functionality has become even more critical to meeting customer needs. Learn why and hear how distributors are tackling this challenge in this episode of Wholesale Change.
We’ve conducted the research, and everyone agrees: Disruption is real. They recognize the effects of emerging technologies, as well as well-capitalized competitors, on the channel and on their businesses. We review the research and talk about how smart distributors are responding.
Each quarter, the Wholesale Change hosts Ian Heller and Jonathan Bein dig into public distributors’ earnings reports from across segments to bring you insights into how your largest competitors are navigating the market. Join our hosts tomorrow for a look at Grainger, MSC Industrial Supply, Fastenal, Motion and more for their latest results and where they’re going in 2021.
Ian Heller welcomed Alibaba’s John Caplan to the Wholesale Change Show to discuss Alibaba’s capabilities and the marketplace’s long-term plans.
Amazon uses AI to create billions of sales and advertising dollars. In this episode, Jonathan Bein and Ian Heller will be joined by proton.ai Founder Benj Cohen to learn how Amazon does it and how distributors can fend off this B2B juggernaut with their own strategy around product recommendations, search relevancy and audience monetization.
When we talk to distribution employees, we often hear, in hushed tones: Our CEO just doesn’t understand why we should invest in digital! When we talk to distribution CEOs, we hear their frustration when they tell us: We’ve spent millions on our website and haven’t gotten any kind of return on that investment! What’s going on here? In our experience:
Successful ecommerce in B2B is wildly more complex than in retail. Multiple users, workflows, e-procurement, punchout, email-to-order conversion and many more challenges make it tough to succeed. Now, add in the problem where “experts” get the requirements wrong and “once bitten, twice shy” CEOs only provide part of the requested funding and you have a recipe for failure.
How do you get around this dilemma? In this episode Ian Heller and Jonathan Bein haggle over the source of the problem and how to solve it so you can taste digital success, too.
In this episode we explain why the old assumption that distributors can be “High Tech” or “High Touch” is a destructive myth. Distributors that will thrive in the future must be both! Join Jonathan Bein, Ph.D., and Ian Heller for a lively discussion on the disruption sweeping through the industry and how distributors should respond.
Do you feel like your ecommerce platform is broken – not delivering the ROI you expected? You’re not alone. Join hosts Ian Heller and Jonathan Bein as they talk with Jason Capshaw and Dean Mueller about how to uncover what’s really wrong (it could be you’re measuring the wrong thing!) and 6 steps to take to seize success from the jaws of defeat.
Some distribution verticals are much more vulnerable to disruptors than others. Why was office supplies hit so hard by marketplaces but building products has hardly been affected?
In this episode, Jonathan Bein and Ian Heller will talk about how different product verticals – and business models – drive varying levels of disruption vulnerability. We promise a lively give and take where the hosts argue and the audience weighs in with questions and comments.
There is a way to get over the widely recognized “small-order” issue in distribution in a truly actionable way. Establishing and monitoring Minimum Order Quantities requires just small changes once the right building blocks are in place. The real challenge is upfront, in assessing the true cost-to-serve at the line level for every transaction. But taking action has an immediate impact on profitability, reducing operating costs, moving slow-turning inventory and boosting cash. Jonathan Bein and Ian Heller will talk with Randy MacLean of WayPoint Analytics about how distributors can defeat the profit drag of small orders.
Many distributors have spent time creating a value proposition their companies rally around, but salespeople often stumble when it comes time to sell that value to prospects. Your company’s value is more than “better pricing” or “great customer service.” Instead, selling value involves a focus on the benefits for the customer. What’s in it for them? Join Wholesale Change hosts Ian Heller and Jonathan Bein as they talk with Debbie Paul about how to help your sales reps put themselves in your customers’ shoes and adapt their messaging in a world where they can no longer just stop by.
Returned goods can hurt productivity, reduce profitability, and damage customer and supplier relationships. No wonder most distributors focus on reducing them – but they do it the wrong way! Often, distributors try to lower the rate of returned goods primarily by tightening up policies or by finding an efficient way of disposing of the merchandise, such as through liquidators.
In a recent episode of our weekly live show, Wholesale Change, we posed a better solution for handling returns: Prevent as many returns as possible in the first place.
Don’t just “accept” returns, solve them
A return in the B2B industry has greater consequences than one in the B2C realm. If a customer returns a T-shirt to Target, it doesn’t keep her from going about her daily life. If a B2B customer returns a part for a vital piece of equipment, it could stop production and cost the company money. If that return is linked to a poor customer experience issue, that customer will be less motivated to buy from you again.
Don’t place blame, own the problemManufacturers and distributors get tangled up in debates over who owns the return — in essence, who takes the loss. That’s missing the point. You as the distributor must own the problem if you want to reduce future returns.
Implement a process to analyze returns and identify primary causes. This will direct your efforts to reduce returns long-term.
You’ll likely find returns are more often attributed to user error than a fault with the product.
The growth in online purchasing has also likely contributed to an increase in returns for distributors, and a portion of that increase is owed to buyers not having all of the information he needs.
Remember: Every credit memo you write represents something that went wrong for the customer. There’s no end to the benefits of getting the return process right, one of which is an overall improvement in customer experience.
Every distributor should try hard to expand its customer base but if you really want to supercharge your sales, look no further than your largest customers. They know you the best and you likely have the best relationships with them. And you often have less of their wallet share than you think. Let the Wholesale Change crew help you strategize on how to get even more from your whale.
Distributors know that any digital initiative requires a great product database. Even after all these years, defining the requirements, nailing down the process, choosing the right technology and maintaining a product database is a daunting task. Ian and Jonathan will share their experiences in how some distributors do it right and how you can, too.
Where B2C brands are based on emotion and driven by advertising, B2B brands are built on rational, functional attributes that add value. B2B customers develop brand loyalty based on analytics and factors like:
- Quality of assortment
- Staff knowledge
- Support
- Customer service
- Reliability
- Delivery speed
To determine if you’re stuck in a holding pattern, first look at the characteristics of your average transactions with customers:
- Do they only buy a small number of product categories?
- Do they buy big products from you but not their accessories?
- Do they buy infrequently?
Next, look more closely at your customer research. It’s easy to be fooled into thinking customers know what you offer and you’re capturing as much as you can from them when customers think they’re bigger than they are. They’re buying everything they can within the paradigm of what they think you sell. Your customers may love you, but again, when you look at the numbers, they’re probably buying a small number of product categories or infrequently.
You must get customers’ attention if you want out of the brand graveyard. Strategize to put your products in front of customers in bold ways that break the mold of what they think they know about your brand.
CD&R is buying HD Supply Construction & Industrial – once and now again known as “White Cap.” The firm is combining White Cap with Sterling’s Construction Supply Group (CSG), which is made up of 17 regional distributors across the US and Canada. CD&R will own 65% of the combined entity, and Sterling will own the rest. According to press releases, the combined transaction is worth about $4 billion, which roughly breaks out as $2.9 billion for White Cap and $1.1 billion for CSG.
These two companies are, by far, the largest distributors in the concrete construction supplies industry. Together, they enjoy more than $4 billion in annual sales through 400 branches to 265,000 customers and employ about 7,500 people. White Cap’s John Stegeman and Alan Sollenberger will serve as CEO and president, respectively, of the combined company, which no doubt means its headquarters will be in Atlanta instead of Denver, where CSG is located today. I expect the combined entity to be called White Cap.
In my writing, keynotes and webinars, I’ve been forecasting increased consolidation as outside disruptors continue to invade wholesale distribution. The industry has been spared the waves of disruption that have rolled through retail, but now the barbarians are at the gates.
If you’re a distributor, keep an eye on White Cap, which – thanks to the help of CD&R and The Sterling Group – is modeling one of the only viable paths to a successful future. If you’re an investor, pay attention to the distributors who have a plan to lead through the disruption instead of following. If you’re a regulator, look at the challengers distributors are trying to fend off instead of smaller competitors, many of which won’t make it anyway if they don’t develop their own plans for consolidation.
Consolidation is coming. You can lead, follow or get out of the way but you cannot stop it. This merger reveals how aggressive companies plan to build the scale necessary to compete in the future, and I suggest you watch it closely to understand as you build your own long-term plans.
Independent alternatives to popular third-party marketplaces like Amazon are emerging, and some distributors have found meaningful success selling through them. This has many wondering if they should build their own marketplaces.
What makes great independent marketplaces work? And could you achieve similar results if you built a marketplace of your own?
As defined so well on Wikipedia, a marketplace is an ecommerce site where products or services are provided by third parties and transactions are processed by marketplace operators. Instead of a classic retailor/distributor model, where you have one seller managing the inventory and the fulfillment, you instead have many sellers transacting in one location. Outside of Amazon, a few popular marketplaces include:
- Craigslist
- Etsy
- Airbnb
- Uber
- Upwork
- eBay
A few examples of emerging successful B2B marketplaces include:
- Digi-Key has built an electronic components industry marketplace on Mirakl software. They’ve become a destination for people looking for electronics, even just as an informational resource.
- Culitrade is a marketplace for the food equipment buying group SEFA (Supply and Equipment Foodservice Alliance). They offer a broad selection of products and services that couldn’t be offered by an individual company.
- Zoro, an online division of Grainger, and its Zoro supplier partner program for industrial supplies is up-and-coming, touting a collaborative relationship “to reach new customers and increase sales.”
Not every distributor can build its own marketplace – nor should they. This would take us back to everyone running their own ecommerce websites and wouldn’t make much of a difference. Here are a few options for entering into or building a marketplace with others in the industry:
- Multiple distributors can collaborate to build a marketplace.
- Marketplaces require collaboration.
- Marketplaces with the widest assortment may be the best candidates.
- Buying groups are perfect for marketplaces.
Put relevant offers in front of the right customers.
While you segment customers, customers also segment you. They have an opinion about what you do and what they can get from you, and it’s hard to change that perspective once it’s established.
When you frequently send relevant messages to targeted customers, you’ll see:
- More frequent purchases
- More first-time buyers
- Better customer retention
- Improved customer lifetime value
Your customers want to hear from you more than you know, especially if you’ve captured a niche and positioned yourself as a helpful, problem-solving resource. It’s all about relevance. If you understand them and send them things they’re interested in, you won’t oversaturate them.
Frequent, targeted sends capture more first-time buyers. And broadening your identity with current customers will encourage them to buy from more categories, which makes the relationship stickier. You’ll see better retention and improved customer lifetime value.
Having a strategy around marketing co-op will help you to optimize your product mix, supplier relationships, and develop a strong sales and marketing game that will make you invaluable to the channel.
Know where the co-op is coming from.Identifying the source of your funds is essential to an effective strategy.
Optimize your product mix.Optimizing which products and suppliers you’ll carry is the first step toward concentrating your spend.
Conduct line reviews to leverage spend.Find the most optimal supplier relationship, affecting everything from pricing to rebates and co-op. Then, do regular line reviews. But be careful. Know your channel power.
Have three tiers of suppliers.Divide your suppliers into three tiers: strategic, secondary and tertiary.
Use strategic purchasing agreements (SPAs).You should have SPAs with all your key vendors to maximize price, rebates and co-op funds.
Build annual plans with strategic vendors.When you have annual planning sessions with your strategic vendors, you get to lay out your separate objectives and align your efforts to be more successful.
Develop a marketing plan with company-wide buy-in.A company-wide buy-in to your marketing plan will reach your suppliers and instill confidence in you for them.
Conduct an annual supplier summit.Host all strategic and most secondary suppliers for an annual summit and deliver your plans for the next year in terms of events, merchandising, sales collateral and support, online training, ecommerce and more.
Involve suppliers in promotions and discounts.When you involve your suppliers in promotions, you’ll:
- Get reimbursed by the supplier.
- Get special pricing vs. your competitors.
- Show the supplier you’re effective with promotions and marketing.
- Learn which suppliers will come to the table with you.
Use supplier resources.
Suppliers offer many resources apart from co-op funding, such as training, technical support, marketing support and joint calls. These are valuable to distributors.
Distributors worry that Fulfillment by Amazon (FBA) is assuming key distributor roles and erasing them from the equation. The service picks, packs, ships and even manages returns for retailers and distributors, as well as holds inventory in Amazon fulfillment centers.
More manufacturers are also leveraging ecommerce to go direct to the end-user, rather than through the distributor.
How concerned should distributors be? And how can you avoid being eclipsed?
Distributors add a great deal of value in the supply chain between suppliers and customers.
With these functions in mind, let’s take a look at why distributors’ traditional roles in the channel may be at risk of being replaced entirely.
Distributors selling through marketplaces. In this scenario, distributors surrender much of their value-add and openly share data that Amazon could use to replace them. This is an especially significant risk if the marketplace is also a merchant.
Manufacturers selling through marketplaces. Many manufacturers are prepared for this because distributors have demanded more drop-shipping over the years.
Manufacturers selling direct. Many manufacturers are selling directly through their own websites.
Fulfillment by Amazon. In this scenario, it would easy for Amazon to go directly to your supplier and cut you out entirely.
By outsourcing distribution functions to marketplaces, distributors are heading down a slippery slope toward extinction.
Ian Heller and Jonathan Bein discuss their favorite profit-driving hacks for distributors:
Learn the power of 1%.
A McKinsey study from a number of years ago showed the power of 1% price adjustments. According to their analysis, a 1% increase in price, assuming volume remains steady, would generate an 8% increase or more in operating profits. What’s more, the authors point out that an increase in revenues at the expense of a price cut does not have nearly the same impact: Volumes would have to rise by 18.7% to offset the profit impact of a 5% price cut.
Push up prices on C and D items to small customers.
One powerful technique to gain margin is to increase prices on low-frequency C and D class inventory items for small customers. The premise of this technique is that small customers who purchase these items may not pay much attention to the price increase since they purchase them infrequently and do not have much buying power with the distributor.
Avoid round markups or discounts.
So if you can do a 3.75% discount, instead of 5%, you just got another point and a quarter for your company.
Centralize purchasing to buy better.
Centralizing purchasing improves your margin opportunity. Start by understanding what you’re buying and from whom, and build a plan to minimize one-off purchases from your team.
Make web pricing consistent with contract pricing.
The key here is to avoid a situation where the price your customers see online is better than their contract pricing, which could result in losing the customer. You can’t eliminate channel conflict, but you can minimize situations where your web pricing is better than your contract pricing.
Put strategic purchasing agreements (SPA) in place with all suppliers.
Be sure to have professional purchasers in your organization who understand how to negotiate SPAs, a joint agreement between a distributor and manufacturing that includes rebates, marketing co-op and pricing terms.
Learn how to get and take advantage of marketing co-op.
Consider having a category manager in charge of putting together a plan for co-op. Promotions that can be supported by co-op can be planned out months in advance.
Tie sales rep comp to gross margin percentage growth.
This is a powerful way to get alignment between what the company wants and what the reps are doing on the street.
Limit pricing authority.
Another best practice is for companies to centralize pricing authority; any movement in this direction is usually a win. Take pricing authority away from field sales reps as much as you can.
When most distributors talk about inside sales, they are usually referring to customer service agents. Yet, customer service personnel are generally more reactive than sales agents, because their goals are to make customers happy and solve problems. They are, like their titles, providing support and services to customers.
Proactive inside salespeople, on the other hand, are set apart from customer service reps. These are trained sales agents who love to take a more active, leading role in customer interactions. They are all about managing accounts, finding opportunities and building relationships in a proactive way. They’re just like field sales reps, but instead of working behind the wheel and physically visiting their customers, they work from behind a desk and use the phone to connect.
Having the right people in the right positions is critical. For inside sales, you want a sales-oriented skill set — someone who is going to pick up the phone day after day, create relationships and look for opportunities.
Assign inside sales reps to accounts that have opportunity to grow and may not be getting touched by field salespeople. These accounts will typically be the B and C accounts within the organization. An additional strategy is to take the bottom few accounts from field sales rep bases as they are probably not being contacted anyway.
As with any program, it’s important for leaders to define goals and benchmarks for success.
For a proactive inside sales program to be successful, it’s critical to devote the right resources to it. Make sure that all reps have the proper training, background and support to be successful at an inside sales job. Don’t try to split inside sales reps’ responsibilities between customer service and sales, because these are different skill sets.
As we mentioned in the recent Distribution Strategy Group article How to Build a Doomed Website, the future is now and digital capabilities are essential. Yet many distributors still don’t see the value of investing in a high-quality website. This episode delves into why and how distributors build the wrong websites.
Distributors are looking for the payoff in an ecommerce investment and, if they don’t see one, they count it as unsuccessful. The problem with this way of thinking is that if distributors make plans based on forecasts that show limited ROI, they might decide to spend less and limit the site’s functionality and integration, dooming themselves from the start.
If you let potential ROI determine how much you’ll invest in your website and how you’ll measure its success, you’re going about it all wrong and you will not succeed.
A proposed website budget shouldn’t be treated like other capital expenditures because most ROI models can’t measure the effects of eroded long-term competitiveness from a failure to invest. This equation doesn’t account for the fact that digital capabilities are simply a survival requirement.
And since the COVID-19 crisis, it’s increased even more as customers have moved online out of necessity. This risk is not worth taking.
ROI models also typically don’t account for revenue results outside of shopping cart revenue. If you have a great e-commerce site with lots of information and customers are using it to research before ordering via a different mechanism, the e-commerce initiative isn’t getting proper credit for the potential revenue it’s bringing in. Customers may search online and then call in or talk to their account manager. Or they may be getting product data from your website to put together bids. None of that potential revenue is credited to the website in a standard ROI model.
Sometimes your capability requirements are defined by what competitors offer – not based on whether an ROI model can prove closing gaps is a profitable decision for your firm.
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Just as the distribution industry is reaching a tipping point where most companies can sell online, it looks like having a company-specific website isn’t good enough anymore – no matter how good it is. You also need a marketplace strategy.
Marketplaces offer enormous product range from many suppliers while allowing customers to process transactions in one place. In B2B, Amazon Business is growing at a ferocious rate, with close to 350 million active SKUs, and some analysts think that Amazon Business is going to hit more than $200 billion in gross merchandise revenue by 2029. Amazon is the most obvious example of marketplaces that carry B2B SKUs, but you can find them on Google Shopping, Walmart.com, Alibaba, eBay Business & Industrial, Zoro and other websites, too.
These are some of the largest, most well-capitalized, aggressive and sophisticated companies in the world — and they’re coming after distributors’ customers.
We’re not predicting that distributors are going to go out of business as a result, but these new rivals are going to take major market share. We discussed why distributors need a marketplace strategy now to stay competitive.
With this encroachment into their back yards, distributors must figure out how to compete. Here are three ways to do that:
You must go digital. Distributors need a world-class digital presence, period.
Produce an outstanding services menu. Consider the value you can add as a distributor outside the items you sell.
Build a marketplace strategy. You can’t not respond to what’s going on with marketplaces today. Take some time to consider how you want to respond, then form a plan and execute it.
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If you’re like most distributors, you already provide several value-added services at no cost to your customers. But have you analyzed the cost and value of those services? Chances are, you need to get more intentional about delivering, marketing and monetizing them.
Understanding and monetizing value-added services in distribution is becoming more important because:
- What were differentiators in distribution have become commoditized, such as getting products to customers quickly and conveniently, and offering a wide assortment of inventory.
- Simpler transactions with high margins and low service costs are increasingly moving to marketplaces.
- More manufacturers are distributing directly via e-commerce because delivery is more affordable and accessible.
- Local manufacturers, and even customers, can increasingly make items themselves using 3D printing, bypassing the supply chain.
If you want to differentiate in this market, you must look at what you can offer that others cannot or will not. We believe value-added services are a perfect solution.
What distributors get wrong about value-added servicesMost distributors don’t understand the actual cost and value of their services. Their offerings are the result of ad hoc, structureless aggregation according to need. Therefore, they can’t establish, prove, communicate or monetize the value their services provide.
How to choose, monetize and sell your value-added servicesThe number of services distributors currently provide hardly scratches the surface of what they could. This means there’s great opportunity for growth. However, with hundreds of potential services, how do you identify the right ones for your business? We cover this in this episode.
We divide services into three categories: logistics, informational and value-added processing. Logistics services are often related to the supply chain, as in bin replenishment and kitting. Information services include such offerings as design, configuration, technical support and training. Value-added processing services are hands-on, such as product setup, software setup and repairs.
To identify the most useful services and build your service offerings, perform quantitative and qualitative research to find out what your customers need. This could include focus groups and/or surveys. It could also include research on your competition and suppliers.
Once you’ve established which services to offer, estimate the actual cost to deliver them and the potential value for the customer. This will help you monetize your services and prove their worth.
In estimating the potential value for the customer, draw from those customer surveys, interviews and focus groups. How are the services you currently offer helping your customers? Are they saving on cost, efficiency, labor or materials? Quantify the economic value, even if it’s imprecise.
Now that you’ve built and monetized your offerings, make them easy to find and understand, and make their value known.
As you build and promote your services, it’s important that you’re thoughtful about your offerings. There’s a big opportunity here. Use it to choose the right services, communicate them, understand their value and turn them into a profitable part of your business.
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