Are Distributors in Trouble?

by Tom Reilly     ©Copyright 2000

Yes!   No!   How’s that for ambivalence? I recently read an article in USA Today that said e-commerce is the death knell for salespeople. Is this a harbinger for distributors too? I’m reminded of something Mark Twain said years ago. “The rumors of my death have been greatly exaggerated.” I’m also energized by an article I read by a psychiatrist who has studied the impact of technology on humans. We have little to fear about technology replacing salespeople or distributors.

Distributors are nervous these days. Not all distributors, but some. Who? Those who fail to add value. This is especially true for the MRO types that are nothing more than a conduit. If your company is little more than a rest stop for the product on its journey from manufacturer to customer, begin thinking about your next business venture. Your days are numbered. This is reality not cynicism.

I’m writing this article at 39,000 feet on a return flight from speaking at a national sales meeting for a manufacturer. They sell MRO-type products one hundred percent through industrial distributors. This manufacturer has an informational website that receives one thousand hits per day from industrial buyers globally. This manufacturer is loyal to and committed to its distribution network. Even to the weak ones.

If your company sells someone else’s products and you do little to add value, your company is in trouble. Read the tea leaves. If you’re nothing more than a satellite warehouse for a manufacturer, beware.

If your company resells someone else’s product and you wrap it in layers of value, you’ll continue to grow and get stronger. Value added has less to do with your company’s size than your attitude and commitment.

MRO distributors who solve problems on plant floors, manage the supply chain efficiently, support their products technically, hold their customers’ hands, anticipate needs, deliver proactive service, educate their customers, and add value with their people are on solid footing.

Seventy-six percent of the value added in North America comes from knowledge-based activities. Why? Because there is no commodity in creativity. And there’s no traffic jam on the extra mile.

Even better news is a recent study of plant engineers. Seventy-two percent said they would not shop price if they were convinced that value added services were in place with the supplier.

It’s commonly accepted that there is thirty percent fat in the distribution channel. I believe we can extrapolate that thirty percent of distributors fit that profile. That’s the bad news.

The good news is that those who are committed to the value added philosophy will not just survive in the new millennium. They will thrive. And they will do it with and in spite of and because of e-commerce.

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Tom Reilly is president of Tom Reilly Training, a St. Louis based firm specializing in training salespeople and sales managers. He is author of eleven books including: Value-Added Selling,  Coaching for Sales Success , Customer Service Is More Than a Department,  Crush Price Objections, How to Sell and Manage in Tough Times and Tough Markets, and Get Out of the Wagon and Help Me Pull This Thing. For more information contact: Tom Reilly Training, 171 Chesterfield Industrial Boulevard, Chesterfield, MO 63005    (636) 537-3360 or visit our website                www.TomReillyTraining.com