Improved supply chain efficiencies are having a significant positive impact for many manufacturers and retailers. However, they can pose a challenge for independent distributors and wholesalers, who are increasingly being bypassed by their former partners in the name of efficiency. Research shows that manufacturers account for nearly 30 percent of wholesale trade in the United States today. In addition, large retailers like Wal-Mart operate their own distribution systems, taking products directly from producers.
However, this emerging reality does not have to be all bad news for distributors. This shift in the market can also be seen as an opportunity to embrace new approaches to business and discover new revenue streams.
Through our work with prospering distribution companies, we have seen a number of business opportunities and approaches emerge. Here are some worth considering for distributors and wholesalers looking for new ways to make money:
In-House Digital Signage – Gamifying the workplace is a way to motivate employees and enhance productivity. Information relayed via digital signs can include real-time progress toward company or team goals, safety reminders, and company and community announcements. These boards can help create a game-type atmosphere for workers who are motivated to improve their progress.
Product Processing Services for Customers – In some industry segments, processing services have become common. For example, food distributors may assemble meals into sales-ready portions that are packaged and priced according to customer specifications.
Spin-Offs of Fee-Based Services – Some distributors are spinning off certain services into their own segments or separate companies. Health and safety training, once provided as an in-house service, is one area distributors have found profitable as companies need more training to meet stiffer government regulations.
Logistics Services for Customers – Distributors can provide inventory management, just-in-time delivery, and order fulfillment services to customers. Using dedicated space in your own or a customer's warehouse especially appeals to customers in retail or service businesses that require stocking inventory for many items.
Internet Sales – Because they already stock a large inventory of products, distributors are in a strong position to sell products beyond their traditional markets. Although many distributors use their websites for marketing, most present only a limited ability for customers to order online.
Building Better Customer Relationships – Improving relationships with existing customers is a smart approach to undertake. Distributors have to work harder to retain their existing customer base as competition increases and more customers buy directly from manufacturers. In the face of this, many distributors are implementing formal measurements of delivery performance and customer satisfaction through surveys and customer councils.
Improving Operational Systems – Between 2003 and 2013, industrywide labor productivity increased 20 percent; it is important to keep pace. Advances in technology promise further gains in productivity and improved customer service. Radio frequency identification (RFID) improves inventory tracking from suppliers to customers, while GPS in delivery vehicles improves fleet management.
Training Employees on Products – Distributors selling more complex products, or products that change frequently, such as medical devices or electronics, must invest in product training to keep employees abreast of the latest innovations. As competition increases, the product knowledge of sales and support personnel becomes critical for customer satisfaction and retention.
We strongly recommend that distributors consider these types of strategic initiatives to capture business and remain competitive. Be accountable, measure the tangible results, and celebrate success along the way!
Robert S. Olszewski can be reached at Email or 215.441.4600.
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