The National Association of Wholesale-Distributors Executive Summit was held this week in Washington D.C. Jan 31- Feb 2nd and this event has a wide mix of distribution leaders from industrial, MRO, construction, food, re-distributors, and more.
It’s one to the few events where you will see an Electrical leader sitting next to an MRO leader at a roundtable talking about the challenges they face and the opportunities to grow their business. It’s a unique event for distributors, as they can share ideas more freely with non-competitors who are also in the distribution industry than they might be able to at their primary association event.
As a lifelong distributor veteran, I find it is different to go to an event and not have to meet with all the manufacturer partners and instead get to meet with other distributors whom I don’t compete with in my channel. That irrigation supply distributor had a lot more in common with an MRO distributor than you might think, and both probably have good ideas that they can share with each other that could be helpful.
The sessions were interesting and valuable for the attendees. NAW is the chief voice of distribution in Washington and lobbies on behalf of all distributors on Capitol Hill. This event had some big name political speakers including – Mike Pompeo Former Secretary of State, and Former Vice President Mike Pence.
There were sessions on leadership, profitable growth strategies, marketing, supply chain, and an economic update from ITR’s Alan Beaulieu.
I was interested in the trends and what I was hearing. There were the usual conversations about what is the economy doing (when/if is the R word going happen and what is the anticipated length) and what a distributor should do when that occurs.
It’s an interesting time as many distributors I talked to have record backlogs, inflation that is still driving price higher, and supply chain issues that are still persisting. It’s still an uncertain time where you have all these tailwinds for the business with a possible recessionary headwind on the horizon.
It seems like the distribution channel is thinking in late 2023 and 2024 they need to enter one of the two traditional recessionary distributor camps.
- The Build a Wall Distributor – I’ve been in this camp many times in my career as a distributor (2001 and 2008 stand out) where you build walls around your customers, tighten the belt and manage expenses, and wait the siege out. You may strategically sally out of camp and try to steal share from a competitor, but for the most part you bunker down. This was distribution 101 before the digital age (which really started in 2013 when the majority of people got a smart phone in the US), and it made sense at the time. In my opinion just walling off and waiting for the siege to end is not a long term winning strategy in 2023 for a distributor.
- The Lets Take Share Distributor – The vast majority of the NAW attendees fall firmly into this camp. They are investing in their sales channels – all three of them (outside, inside, and digital). These distributors realize that marketing/digital is a channel now, and are developing programs that drive sales with self service online ordering but also programs that drive online interactions into standard distributor sales. For example- everyone now has orders that start online where a customer looks at a spec sheet, checks stock, etc. and then the customer calls, texts, or emails their inside and outside sales staff to place the order. For most distributors this partial online to traditional order path is becoming the new normal and they are using marketing programs to create more of those orders. It is a sales channel that increases both 100% online and traditional orders. Your distribution associates are still very important and will remain the foundation of your business, but the ability to allow your end customers to digitally self service parts or all of the order process in now table stakes to driving above market growth. These distributors understand that the best time to take share is when the competition who thinks the only way to grow sales is too hire more outside salespeople pulls back even further.
It was refreshing to hang out with a group of distributors who are going to invest smartly over the next year to take share. The distributors who are just planning building walls and tightening their belts will probably be hearing their outside salespeople complain – that their customers don’t value the relationship like they used to, and it’s so hard to get an appointments now. When they go back out to try and win back that lost share in a year, I think they will find that their end customer is not willing to leave their new favorite distributor and return.
2023 might be shaping up a perfect storm for the Take Share distributor with strong sales programs (outside, inside, and marketing/digital) to take share at record levels. My prediction is those distributors tend to never give that share back to the competition. If your playbook for a possible recession is too dust off the 2008 plan and hit the repeat button, I think you are in for rude awakening.
As always, we would love to get your feedback, so please feel free to comment below or reach out to me directly at john.gunderson@dorngroup.com
