Embracing Wholesale Distribution's Potential

 Embracing Wholesale Distribution's Potential

A confluence of dynamic change agents is affecting the wholesale distribution sector. Businesses are undergoing transformations, and distributors are no exception. The National Association of Wholesalers and Distributors' latest report, Facing the Forces of Change: The Road to Opportunity, which includes this gloomy conclusion, is accessible at www.nawpubs.org.
Looking ahead, wholesalers and distributors will encounter new and difficult realities in the business climate that are different from the past. Innovative wholesaler-distributors will strategically respond to external forces of change, rewriting the old ways distributors generate money and grow.

Our research conveys a message of hope for the future of the distribution business despite the difficulties executives in this field face. We are ardent believers that wholesaler-distributors can find numerous new options to reestablish their relevance and boost their revenues both now and in the future.
The foundation upon which our sector stands is a powerful and financially secure sector of the American economy. Gross sales for wholesalers and distributors were $2.9 trillion in 2003. This sector accounts for 7% of the private GDP in the US and employs 20% of the labor force. Moreover, wholesale distribution is a key engine of economic growth in the United States, accounting for 25% of the overall productivity improvements in the economy over the last decade.
Powers that Shift
Future obstacles for businesses will originate from suppliers, new competitors, and consumers. Although you may be already aware with some of these factors, others may be making their debut in your industry. All distributors, according to our analysis, will be affected when these factors reach a critical mass in the wholesale distribution industry.
Prevalence 1: Self-Service by Customers
The way you interact with clients and the effectiveness of your sales team will be revolutionized by self-service choices. Consumers will increasingly rely on the internet for research and to conduct more of the pre- and post-sale tasks normally performed by wholesalers and distributors. Since manufacturers and internet sources will make such information easily accessible, distributors will not hold sway over what consumers need to know to make sourcing and purchasing decisions.
As a result, businesses of all sizes in the wholesale distribution industry will use internet technologies into their conventional sales strategies. By 2008, wholesalers and distributors anticipate that online orders would account for one-third of their total revenue. As today's technology become less complicated and expensive, smaller wholesaler-distributors will overtake larger corporations by 2008.
Customers' faith in the wholesale distribution salesforce's ability to inform them about new products will be severely damaged by the rise of self-service options. When asked if they could rely on the Internet instead of their salesforce to provide product knowledge, most executives in wholesale distribution said yes. The distributor's salesforce will be strongly questioned by manufacturers moving forward. That being said, over the next five years, wholesale distribution sales roles are projected to rise at a rate that is half of the overall job growth in the United States.
Strategic Sourcing is the second trend.
Customers might strengthen their negotiating position with distributors by reviewing their own expenditure data. Strategic sourcing allows clients to make better-informed sourcing decisions through a three-step approach that reduces purchasing expenses.
Buyers will respond to distributors' field-level sales strategies by become more aggressive, depending on more complex sourcing initiatives, and utilizing new technology. Online reverse auctions, which reward the lowest bidder, are aggressive tools that will not go away.
Additionally, according to Pembroke Consulting's research, consumers will demand that end-users within their organization improve their compliance with internal contracts. Local price matching by small wholesaler-distributors, the abolition of regional pricing for major clients, and new restrictions on local buyers' rights to choose brand and supplier are all things to expect. By 2008, contracts would account for over half of the revenue for wholesaler-distributors with a revenue of more than $1 billion.
Thirdly, the Price and Service Model Based on Fees
There will be substantial obstacles to the rapid expansion of fee-based services and pricing models based on such models. According to our statistics, more than 80% of wholesaler-distributors intend to implement fees that are distinct from product expenses. Customers will gradually come around to paying fees. Instead than paying for service, some will just switch distributors.
If distributors can provide customers with innovative services that really benefit them, fee-based services offer a great opportunity for increased revenue. If distributors can provide new services that help customers save money and increase revenues, customers will think about paying for them. We want to warn you that trying to charge for services that are already free will not succeed. Maintaining relevance over time will also necessitate ongoing innovation in fee-based services.
The distributor-customer dynamic shifts when services are no longer free. Distributors will be held to a higher standard of excellence in their core activities and will be required to provide precise, measurable results.
Imports and domestic competition have put pressure on product prices, therefore manufacturers are looking to services as a potential new revenue stream. Indeed, the majority of manufacturers surveyed intend to expand their current focus on research and design in order to provide end customers with fee-based services, either directly or through distributors.
Logistics and fulfillment are the fourth trend.
The supply chain is heading for a showdown between distributors and third-party logistics providers. In the future, there will be a lot more competition for the essential logistics and fulfillment tasks in wholesale distribution. In a move that goes against wholesale distribution, 80% of the top 200 logistics companies now provide pick-pack-ship services. The majority of the Fortune 500 corporations rely on logistics providers for assistance with their supply chains.
As an alternative to wholesale distribution, suppliers will choose logistics companies. Logistics providers are expected by most suppliers to distributors to compete with wholesaler-distributors in processing and fulfilling customer orders. When it comes to service and support after the sale, though, wholesalers and distributors will continue to have the upper hand.
Additional material purchase alternatives and service levels not offered by traditional distributors are now available through alternative channels. Customers use these channels for a variety of purchases, reducing the long-established percentage of channel sales held by wholesalers and distributors.
THE WAY TO SUCCESS
When faced with new obstacles, astute distributors can seize new opportunities. The real differentiation will be customer service as items become more and more commodity. Distributors can go beyond just supplying items reliably and become providers of personalized and distinctive partnerships throughout the supply chain.
One way wholesale distribution has managed to stay afloat is by consistently reimagining its role. Executives in wholesale distribution can find a wealth of useful methods and approaches in Facing the Forces of Change: The Road to Opportunity. Reconnect with your clientele. Distributors' unrivaled familiarity with client needs and expectations is the result of years of day-to-day account service. Get some outside, unbiased customer data to see how well you and your management team comprehend the situation. Have a sit-down with both satisfied and dissatisfied consumers and go through their purchase process to learn about their actual service needs. Introduce innovative, charged services that boost the customer's bottom line and streamline their operations. Distributors have the opportunity to take advantage of preexisting connections, expand upon established strengths, bring something new, and be fairly compensated for their efforts. Encourage self-service by customers to keep expenses down and enhance internal productivity, allowing the channel to remain cost-effective. Customers whose spending does not warrant time-consuming interactions should be automatically redirected to self-service. When consumers start entering their own orders, many distributors notice a decrease in internal costs. Prepare your sales team for the problems of tomorrow. In order to be competitive in the ever-changing world of services and solutions, salespeople who typically focus on pricing will require training. Assess your sales staff individually to see whether any of them might benefit from training in customer qualification, issue identification, solution sourcing, or coordinating the company's resources to address difficulties. Rather than basing pay on performance reviews, make sure it's customer-centric. Change the way you interact with your suppliers right now. The essential distribution role that manufacturers desire will be undermined by online auctions, which will drive distributors to reduce salespeople and ask for more drop shipments to clients. Without proactive action from distributors, manufacturers will increase their direct sales. Provide suppliers and customers with supply chain solutions that are not bundled. Without engaging in sales and marketing, distributors of all sizes are turning to technology, warehouse infrastructure, and logistics as a service for a price.

If your business follows these and other tactics, it will be able to take advantage of the opportunities presented in Facing the Forces of Change: The Road to Profitability.
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