Distributors Need to Evolve from Being Product Companies

 

Sepember 18, 2017

By David Gordon

Distributors traditionally fought for market share via relationship, service and price. The companies with the best people, best service and competitive pricing, and which could provide their customers with access to credit, typically won more business. Since a customer couldn’t buy everything from one company (due to product lines or credit reasons), they shared business with multiple distributors. For many, the products they carried (or carry) defined their company. Much on the product side is changing this, as customer purchasing dynamics evolve… and the competition.

Aside from other brick and mortar companies diversifying into the electrical industry, one of the most talked about threats has been Amazon (or, if we go back over time, we can group Amazon into the topic of “technology-enabled companies.” Think VerticalNet, Build.com, Buildpoint, and many more.

Many distributors may be preparing to come to “tomorrow’s” gunfight with a knife while the competition has tomorrow’s laser-powered Gatling gun. The point: the game is changing as customer dynamics are changing.

But distribution can win by merging solutions and offering what “technology enabled” companies cannot… an omni-channel experience powered by product, service, and knowledge, and supported by technology.

The “eCommerce” discussion, for distributors that look to be in business beyond three years, has been settled. If you don’t believe this, consider the phone in your hand, the tablet in your briefcase, the computer on your desk. Usage of the Internet for a purchasing activity is all around us. Now add in societal change and next generation dynamics. Will the eCommerce “genie” be put back into the bottle?

You need a commerce-enabled website. Not because of the threat of Amazon (which is still there), but more importantly because customers are beginning to seek it… and many times for reasons that are more important than buying online. For manufacturers, this trend is important as it impacts the role of sales, but what can you provide distributors for their websites beyond product content, and how is your site a sales tool?

Mark Farr, President of XOLogic, offers an eCommerce solution for electrical distributors that can utilize multiple data sources. He also provides a robust catalogue and purchasing engine. The company works in the residential lighting, electrical, plumbing and industrial supply markets so has broad exposure to industry trends. Additionally, its scale (powering over 700 showrooms) makes it affordable for small- to mid-sized distributors.

From Mark’s viewpoint, the distribution game is changing, from one of products to one of utilizing technology, especially as society changes. Understanding this dynamic can provide distributors with a competitive advantage as they offer “products” they way their customers want to view and purchase them:

I have spoken with many distributors in the residential lighting, electrical, industrial, and plumbing industries, and all of them have one thing in common, they are product experts. They not only understand how the products are used, but they also understand their customers and what their customers need. Often times they understand the products and their applications even better than the manufacturers understand them.

This differs greatly from Amazon who has no product expertise and does not claim to. This is because Amazon is NOT a product company; they are a technology company. In 2011 Amazon’s CTO stated, “Amazon is a technology company. We just happen to do retail.”

I believe we could add B2B in that statement today. Understanding this can help make a difference as you compete for customers today and into the future. Sears is not losing because their products are inferior. Taxicab drivers are not losing because Uber has nicer cars. Sears and taxicabs are losing because of their inability to adapt to, and with, technology.

Amazon is changing the game. Your most important sales tools are your products. Your ability to have your customer, and even more important, your sales staff easily find the products you sell in your store, warehouse, or online catalogue is critical for your business. You can think of your products as a new sales funnel. The more products your sales team and customers can find, the wider the sales funnel and the more likely you are to attract new customers and increase sales of existing customers.

Amazon has over 300,000 employees with thousands of web designers and code developers working to provide one of the best online experiences in the industry. Not many product companies would want to compete with this massive tech company, but what we can do is learn from them and augment that with what you already do.

When competing in today’s marketplace, there are a few things you must understand:

• product coverage matters
• convenience matters
• and your online experience matters

If “my” website has 100 commonly sold items, what makes me stand out? If my sales team must rely on memory and paper catalogues, how efficient am I? Remember, your brick and mortar sets you apart, and getting help from someone you trust is still critical, but alone this is not enough to compete for today’s customer.

Today your goal should be to be omni-channel… providing your customers with the channel(s) they both need and prefer. One customer might prefer to always call and come in, others might order online and pick up in-store, still others might order online and have it delivered. The key is being able to provide your customer with multiple channels to review, plan, buy, and get the product they need through the channel that works best for them at the time. That’s the key… what works best for them.

Omni-channel will continue to evolve and the electrical distributor space will continue to be disrupted. Product companies (distributors) can be leery of technology, but they shouldn’t ignore it. Prioritize your needs, and build it in phases with clear milestones. It will never be just like you imagine it (and remember, customer expectations change also), but learn as you go and don’t be afraid to make a mistake.

Mark Farr is President of XOLogic. Share your thoughts / reach out to him:  (mark@xologic.com) or call him at 1 (866) 684-4134.

Unless you ask your customers “the right questions” as well as asking a broad array of your customers, you may not hear that they are using the web more to make electrical product business decisions. While they may not order much, the purpose of an online catalogue is much more than buying (consider, did the paper catalogue you always used have the ability for your customers to place an order?). Being accessible to your customer when and where they want you (or access to information with you) becomes today an additional reason to do business with you. Tomorrow it will be a customer expectation. You cannot be a technology company à la Amazon but you can do better. You can fuse the best of product, service, knowledge and technology to serve your customers through an omni-channel environment (and it doesn’t have to take a year or two to implement the solution).

Where are you on integrating an omni-channel approach to your business? Are your customers asking for more access? Is it part of your sales, marketing and company culture?

And once you evolve from a product company, it also opens up other opportunities that can power growth.

David Gordon is President of Channel Marketing Group. Channel Marketing Group develops market share and growth strategies for manufacturers and distributors and develops market research. CMG’s specialty is the electrical industry. He also authors an electrical industry blog, www.electricaltrends.com. He can be reached at 919-488-8635 or dgordon@channelmkt.com.