It’s called creative destruction, and it has triggered a wave of unprecedented change across the wholesale distribution industry. New technology is reshaping customer expectations, and with the internet providing immediate access to goods and services, the role of wholesalers in the distribution chain is shrinking.
It’s no longer enough to have the best price, service and product line. To evolve with the times, companies need to re-evaluate almost every aspect of their business model, and that starts with better understanding their unique value proposition, advises Andrew Horvath of the Alexander Group.
Understand Today’s Customer
Just-in-time delivery doesn’t cut it anymore. Customers want what they want when they want it, and they are increasingly demanding in how they want it. They want smaller orders delivered more frequently. That means split pallets, less-than-truckload deliveries, special orders — oh, and they don’t want to pay extra for any of this.
Until now, distributors have kept up with these demands through operational improvements, but that’s not going to be enough going forward. There’s only so much efficiency that you can squeeze into any system. With profits shrinking, investing in operations provides a diminishing point of return.
That means distributors need to re-evaluate their customer relationships. It’s time to take a deep dive into your customers’ needs and pain points. Identify your most important clients — not just by size, but also by profitability. Meet with them and get to know their industry, their competition and their business plan. Then help them execute that plan. It’s easy to change suppliers; strategic partners are in it for the long haul.
Add Value for Your Suppliers
Wholesalers are being squeezed from both ends. Customer needs are changing, and the internet has made it easier for suppliers to connect directly to the end user. As more manufacturers move to direct-sales models, their distributors are starting to feel the pain. With razor-thin margins already cutting into the industry, losing one or two key suppliers can put a small or mid-size distributor out of business.
The good news is that even when customers order directly from a manufacturer, the products still need to be delivered, and suppliers are discovering that’s an expensive proposition. Manufacturers without the expertise or resources to build out their own systems need outside contractors to manage that piece of the business.
Smart distributors are getting in front of this trend by focusing on their strengths: deep customer relationships, efficient systems and existing distribution channels. Wholesalers that can demonstrate their value by partnering with their suppliers to help build their direct-sales business will continue to thrive.
In our increasingly connected, increasingly global economy, the future belongs to those businesses willing to work with both their customers and their suppliers to help them grow. The right partnerships will generate enough growth for everyone.
Start Your Cash Flow Conversation
Give us a call at 1-855-PNC-CFO5 (1-855-762-2365) or fill out our simple form and a PNC Business Banking representative will get in touch with you.
Request a Contact »
The article(s) you are reading were prepared for general information purposes by Manifest, LLC. These articles are for general information purposes only and are not intended to provide legal, tax, accounting or financial advice. PNC urges its customers to do independent research and to consult with financial and legal professionals before making any financial decisions. These articles may provide reference to Internet sites as a convenience to our readers. While PNC endeavors to provide resources that are reputable and safe, we cannot be held responsible for the information, products, or services obtained on such sites and will not be liable for any damages arising from your access to such sites. The content, accuracy, opinions expressed, and links provided by these resources are not investigated, verified, monitored or endorsed by PNC.