Companies working in the wholesale and distribution sector are increasingly facing serious pressures.
In many ways, they’re feeling the stress from all sides. They’re working within the supply chains of manufacturers with automated technological systems, and at the same time, alongside large retail marketplaces like Amazon and Wal-Mart with their sophisticated logistical systems.
However, wholesalers and distributors need not worry. There are tools and tactics you can use to stay innovative and keep up with the pack. The key is to stay focused on what your customers are doing, then give them what they need.
In fact, Deloitte’s research paper — Wholesale Distribution Disrupted — identifies some key innovative practices that are keeping the distribution industry healthy and competitive. Here’s a summary of the paper’s top-level trends for wholesale and distribution.
1. Digitizing and automating processes
Some parts of the distribution industry are lagging behind the automation curve. When it comes to record-keeping, for example, industries ranging from medicine to online shopping are moving ahead quickly with digital solutions. Yet many people in the distribution industry are still working in an era where all shipping requires a paper trail. It’s an antiquated system that costs valuable time and efficiency.
The time is right to digitize those processes. A 2018 Harvard Business Review study surveyed 250 executives and found that three-quarters of them believe artificial intelligence will substantially transform their companies within three years.
The good news is that wholesalers are already embracing digitization when it comes to inventory control. Individual items are tagged in the warehouse and wireless technologies are used to track their movements. These systems leverage the power of:
- Radio Frequency Identification (RFID) and GPS
- The Internet of Things (IoT)
- Mobile technologies for inventory, shipping, and receiving
With computers keeping track of the basic movements of supplies, executives now have more time to examine analytics and insights to make better business decisions for their companies — and for the stakeholders who depend on them.
As the costs of digitization diminish, distribution companies can take advantage of many of the same technologies that are used in other industries.
2. B2B customers expect B2C-level personalization and responsiveness
In a digital environment, it’s easy to imagine customers as vast swaths of data in your database. Don’t get caught in that trap. Remember: your customers are people.
Leading companies like retail marketplace Amazon or media content provider Netflix have changed customers’ expectations for business-to-consumer (B2C) interactions. Those B2C expectations have transferred into the B2B realm as people increasingly want what other industries give them — more personalization and responsiveness in service, along with superior product presentation and delivery.
Consider the following developments:
- Product presentation: Increasing digitalization of databases means that businesses are now asking for resources such as high-quality product images in 3D, or better search options to find what they desire.
- More channels: Customers are also asking for more consistency across channels and platforms. For example, it’s now easy to track how many customers are using iPads to use an e-commerce site. Companies should monitor these trends and make the necessary changes on their sites to better serve those customers’ needs.
- Immediate feedback: Just like B2C customers use Yelp or TripAdvisor to give feedback on their customer experiences, a handful of leading distributors are surveying customers about their willingness to recommend them to peers. Distributors are also leveraging social platforms such as Twitter, YouTube, Instagram and Facebook to connect with customers and influencers.
3. Buying directly from the manufacturer
Some of the earliest TV commercials touting the benefits of the Internet showed management teams in a boardroom using the Internet to seek out lower-cost providers. This usually meant buying materials directly from the manufacturer.
In many ways, those TV commercials have become reality, and companies do leverage the Internet to find the lowest price.
The Deloitte report confirms that this practice puts significant pressure on distributors, and gross margins are already eroding because of this trend. Medical suppliers, for example, are innovating so their buyers in integrated health networks can distribute the products themselves.
Distributors must get innovative in the face of this pressure. The entire industry must consider the long-term implications while striving to find solutions that leverage the unique expertise of their sector.
4. Increased competitiveness due to expanding markets
The distribution sector is also facing serious competition as large retailers look for ways to expand their markets.
For instance, Ace Hardware is now targeting commercial property owners, while the Home Depot now has a line of products for the building sector. Their name brands already carry weight in the distribution industry, despite only entering these markets in the last five years. Traditional distributors must respond by reducing margins in segments such as building supplies and lighting.
Distributors can also find advantages by focusing on niche markets. For example, grocery wholesaler Jetro Holdings expanded its market reach through a large investment in Restaurant Depot, a supplier to restaurants and independent food stores. Jetro’s pivot has already boosted the company’s revenues.
Implications for wholesalers and distributors
The distribution industry is rapidly evolving. Working in supply chains with innovative manufacturers and retailers means that wholesalers and distributors must elevate their game in order to stay competitive. This means doing things faster, with better systems for collaboration and integration, and with greater attention to customers’ needs.
Luckily, Method:CRM has got you covered. With its real-time QuickBooks sync, easy-to-use lead and customer management features, and integrations with popular apps, Method is the perfect tool to help wholesalers and distributors keep up with the changes around them. Start your free trial and see how Method can help your business thrive!