Increase revenue through Sales Excellence
Wholesale business, a low margin but high volume sector has been experiencing a downward trend in profitability for the last years.
Inflation which is wholesalers' best friend has been in record low levels.
New competitors like Amazon Supply *Today Amazon Business), grew in 2016 to a $1B sales from 2012 when launched, stealing from a market with anemic growth of 3%.
Manufacturers bypass wholesalers to supply directly the increasing number of Group Purchasing Organizations (GPO), a phenomenon known as disintermediation.
Costs increase as wholesalers invest to provide incremental services like wider SKU offerings and e-commerce or increase their F2F sales force headcount.
Wholesalers operate in various models: Broad line, offering the ultimate concept of a “one-stop-shop” distributor, i.e., everything you need on one truck Specialty, offering a set of specific categories of products like dairy, produce, meats or beverage and Alternative which are most often “Cash & Carry-like” distributors or wholesalers, including club format outlets, classic cash & carries and the new breed of Restaurant Depot.
Various studies indicate that in the next 3-5 years’ the following disruptions will put further pressure on wholesalers:
Accelerating digitization
Not only companies have more data which allows for analytics to identify trends and opportunities but digitalization bring along other changes. The internet of things (IoT) capabilities are one example: real time remote inventory sensors allow create virtual small warehouses to deliver building material on the 5th floor of a building in construction, automatically deliver the cooking oil to refill the tank of a restaurant when the level drops under a safety level or ensure that the shelves of a minimarket are optimally stocked.
Product innovations
New technologies like the LED technology business or the non-GMO food and specifically produce and 3D printing have allowed for new supply for these markets which disrupt the standard model of wholesaling. New entrants specializing in any of these new product categories can steal sales from wholesalers who are slow in identifying and catering for them.
Consumerization of expectations of B2B customers
Increasingly, B2B buyers are from the generation which grew up as consumers with e-commerce experience: price comparison, therefore transparency, omnichannel purchasing therefore demand for seamless consistent experience across channels (see my article on omnichannel: Omnichannel strategy (do you know what it is?)), communities and social connections with ratings and reviews and finally a rich, tailor usage experience.
Even more alarming is the fact that 59% of B2B customers state that they do not want to even talk to a sales rep and 75% prefer to be educated without human contact!!
Wholesalers are notorious for the slow pace of adopting new technologies and new processes and tend to resort to adding new SKUs and product categories, competitive pricing, superior fulfillment with rapid deliveries and responsive customer care. On a strategy level, the preferred action is to acquire other smaller distributors.
However, the rate of disruption is such that these moves are not enough. To respond to this environment wholesalers must consider three directions.
Consider all the new ways of boosting the value they offer
An example is offering the customer complementary products based on apps: offer to an electrician all the products and materials they would need, specific for each room, for a house they build. This value is offered to customers as well as to suppliers: data and insights about the customers and segment preferences facilitating their route to market. Offering to customers better service and training based on Internet of Things is also another way to boost value like identifying in foodservice business facts on cold chain integrity and humidity conditions which potential reduce spoilage of meat, fruits or vegetables.
Often this pursue of added value is associated with drones but there is more to gain if they investigate the opportunities technology offers to add more service dimensions to the mere delivery of products.
Upgrade their ERP system and create the foundation to plug in new add ons
Modern ERPs offer the option to cover more channels and options like consignment, vending or digital. They offer the option of a modular expansion and scalability. Help CFOs close the books in hours, monitor the performance in real time and conduct “what-if” scenarios. Calculate the cost to serve of sales reps. Effectively move costs from Capex to Opex.
Get familiar with big data and analytics.
Aim is to move from meeting the needs of customers to anticipating them. A user-friendly web site is the first move which will make the experience easier and provide the basic data of how customers think and act. Here a marketing function based on the combination of quantitative facts like conversion rates or abandoned cart rates or first call issue resolution will help sharpen the segmentation and the tailoring of a value proposition.
These data will allow for better SKU management, more tailor-made pricing decisions and rebate management, or sales force routing, targeting and incentives.
These three pillars will require a change in mindset and the willingness to experiment, try new structures and way of working which is particularly difficult for traditional wholesalers who tend to be very cautious with everything new. But the wholesalers of the future have no other option but navigate in the new environment which moves with incredible speed.
Where to start?
If you are a supplier, audit the wholesaler you consider as strategic and identify he areas where they need to grow. Offer a workshop with their leadership team to share the findings and explore concrete action plans to move forward in exchange of data on your products and a preferential handling of your products and services and concrete ways of adding services to your products. Your partners will need your leadership to be encouraged to move forward in times of disruption. However, it will be your company which will equally benefit in exploring these new avenues. Start from there!
Back to the Future: it was in 1995 when Spanish Dia was the first discounter which entered the Greek market. Local supermarket chains did not know what the trend was all about and were skeptical of how to respond.
After a 4-month study of the phenomenon in the German market based on industry trade magazines and input from the German colleagues, as General Manager of Wella Consumer Products in Greece, I developed a presentation of the characteristics of the new channel.
The study appeared as a central spread in the main Sunday newspaper.
Individual presentations were made to the leadership teams of the main retailers.
A special visit to Germany was organized with the owners and key buyers showing the actual stores and explaining the concept.
The results were extraordinary: Wella, a small player in the consumer products acquired preferential status in the retail industry and was rewarded with additional promotions and activities!
An interesting read: Amazon Business Is Coming For You, Distributors
http://www.cmswire.com/digital-experience/amazon-business-is-coming-for-you-distributors/#comments