At the heart of every wholesaler or distributor’s success lies the need to put more product in more places — maximizing distribution so that customers have access to as much of the organization’s portfolio as possible. It is of such singular importance that many companies adopt it as their one and only strategic objective. But as easy as this rule might be to communicate, and used to focus the efforts of a sales group, it puts blinders on the organization, preventing management from seeing what is possible.

And just the act of seeing what is possible will itself help provide the momentum necessary to drive the organization forward after all of the easy-to-sell products have been put in all of the obvious places.

Walk into your warehouse and imagine more than 40 percent of the SKUs within it contributing less than 5 percent to your organization’s overall revenue – and even less to your margin. Unfortunately, this is true for a majority of companies and probably applies to your own organization. Combine this with the number of SKUs in the average distribution company’s product portfolio tripling over the past 10 years and the problem has a far bigger impact than the average executive realizes.

Some impacts are obvious: warehouse and inventory space, handling costs and their usage of the most valuable real estate in the entire supply chain, shelf space. However, it is the less obvious impacts of excess SKUs that do the most damage: they diffuse focus across a larger number of products, eat up limited promotion dollars, distract sales organizations as they push distribution, use up the creative effort of marketing, sign shops and merchandisers and prevent the effective launch of new products. 

The distribution and wholesale industry ranks lowest in terms of margin improvements. Simon-Kucher’s Global Pricing Study, conducted in 2014 with more than 1,600 respondents across a wide spectrum of industries, revealed that more companies from other industries have been able to improve their margins.

The reason? Sixty-two percent of distributors stated that “no price increases” is by far the most important factor. However, when examined a bit deeper, it’s clear that the main challenge is in fact actively implementing price increases in the field. It has become increasingly difficult for distributors to execute any planned price increases. Two years ago, distributors were able to achieve 51 percent of their planned price increases (still not a great achievement), but this has now fallen to 38 percent. For example, a distributor planning to increase prices by 1 percent actually achieves a net price increase of just 0.38 percent. 

When AmazonSupply went live in April 2012, it was an event that would completely redefine the wholesale distribution industry. It meant the other 35,000 wholesale distributors in the United States had to step up their e-commerce game fast or risk losing out on massive amounts of business.

AmazonSupply sparked a new way of buying and selling industrial products online, a message that was reinforced two years later when Alibaba entered the U.S. market. This $248 billion enterprise and the world’s fastest-growing global marketplace for wholesale trade would further infringe on U.S. wholesalers’ market share.

Despite this disruption, though, the B2B market has been curiously slow to respond to e-commerce innovation than its B2C counterpart. This is in part because of the lack of marketing resources and expertise that exist in most wholesale business operations as well as the fact that there are very few e-commerce platforms that exist which specifically address their unique integration requirements.

What are your company’s biggest IT challenges: Decreasing labor costs? Streamlining inventory management? Entering new markets? All of those are common challenges distributors face, but none of them can be achieved without an integrated, flexible IT platform. With computers automating and managing most of the distribution processes today, the most important challenge for any distributor is acquiring the right enterprise platform.

According to Steve Ems, principal at McGladrey’s Technology and Management Consulting, distributors often encounter three major IT problems that can hinder their growth. Those are: lack of access to information, inefficient processes, and unique requirements for their business applications. In a recent webcast, Ems discussed these three challenges and the solutions that new types of applications have to offer.

All successful wholesale distribution companies want to increase their gross sales and distribution, and at some point the current marketplace becomes oversaturated and distributors have to think about expanding overseas. Whether your business is already selling globally or just getting started, you may need to find new countries (or continents) to reach. During the globalization process, there are many challenges and factors to consider. Some of these include:

Wholesalers aren’t like other businesses such as retail stores or restaurants, in that they don’t have customers constantly walking in and out of their doors. Wholesalers are unique and have attributes that set themselves apart from more traditional businesses and, as a result, they require financing to take care of things that are specific to wholesalers. Because you’re in the business of providing inventory to other companies, you not only need to keep a steady supply, you also need extra labor, equipment and vehicles to keep your business running smoothly. But with limited options for capital available to businesses these days, what options does your wholesaler have for financing? 

As the supply chain continues to evolve from a one-way product mover into a fluid, networked highway of in-store and online commerce, businesses’ information and logistics needs have changed and shifted to keep up. Supply chain (software) solutions vendors can no longer fulfill their customers’ demands with “one-size fits all” applications. The technology that these providers deliver must meet supply chain companies’ pain points, addressing their most pressing challenges. To do that, these solution vendors must step out of their own worlds and into the worlds of their customers and their customer’s customers.

Current Issue

Check out our latest Edition!


jim editor wdi

Contact Us

Wholesale and Distribution International

150 N. Michigan Ave., Suite 900
Chicago, IL 60601
312.676.1100  312.676.1101

Click here for a full list of contacts.

Latest Edition

Spread The Love

Back To Top