Distributor Strategy: What’s Yours?

In the B-to-B world that I live in, manufacturers have to balance their time and efforts when dealing with distribution, between the big boys like Grainger ($9.4 billion), Fastenal ($3.3 billion) and MSC ($678 million), and the independently owned small local distributors.

Here are a few facts about the independent distributors (ISA) that you might not have known:

They collectively represent about $153 billion in sales.

AD (Affiliated Distributors) members do about $25 billion and NetPlus Alliance more than 5 billion in sales.

Now I realize they need to sell both. The strategy and support for a big player is much different from that of the local independent distributor. Let’s look at the different personas of both.

Big Boys.

  • Sell lots of stuff.
  • Beat you up on price and delivery.
  • Are more order takers than problem solvers.
  • Most are high maintenance from a customer service perspective.
  • Sales staff turnover high – most use sales as a stepping stone either inside that organization or for a position elsewhere.
  • Because of the high turnover, it’s hard to train and build a relationship with them.

Independent Distributors.

  • Collectively they sell more than the big boys.
  • Usually you can make more margin.
  • Are usually problem solvers not order takers (that’s their value proposition).
  • Lower maintenance from a customer service perspective.
  • More stable sales staff.
  • Have actual relationships with local customers
  • Able to train and build relationships with sales staff.

Logic and sometimes management says that we need to focus more time on the big boys as that’s where the biggest potential is.

Here’s a challenge for you.

Let’s take Fastenal for example. They have over 2,000 branches in North America. Besides calling on corporate, how many of the branches are stocking your product? What’s the average sale per year per branch?

Now look at the number of independents you sell to and what is the average annual sales for those that stock your product?

I think what you might find is that the independents will be outselling the big boys.

Now the next question is, what percentage of your sales teams times are being spent on both groups.

For those of you who do the exercise, I’d be interested if your results are similar to what I’m suggesting.

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