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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Are You Getting the Most Out of Your Trade Association Meetings?

With the NAED show coming up in May and the ISA show coming up the first part of June, it got me to thinking about trade associations and how they try to get the distributors and manufacturers together so it’s a win-win for everyone.

Most associations are stuck doing things the way they have for years. I wonder if it’s because they’re afraid of change or don’t know how or why to try something different.

Two models that I think work well are the National Association of Electrical Distributors (NAED) and the Industrial Supply Association (ISA). They both have tried different things that seem to be working.

naed_logoThe NAED for years now at their regional meetings have a dance card format that Manufacturers need to get on to get, I believe, 20 minutes with key folks from the distributors they want to talk to. Most manufacturers like this as they know who they’re going to see and can prepare accordingly.

iSA logo

The ISA, a few years back, initiated the FastMatch program in which the manufacturers are in the booth, but set up their dance card with the distributors they want to see. They like to have 20 minute intervals in which to have one-on-one meetings. This year, they are trying, “Take an exhibitor to lunch,” in which the distributors set up a lunch in the hall and invite select manufacturers to lunch. I’ll be curious to see how that works out.

I guess the point I’m trying to make is these associations are trying different things to bring more value to the table.

I’ve put together a quick poll to see what your thoughts are on this. Please take a minute to take and see the results.

For those going to San Diego, I’ll see you there.

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