By Bridget McCrea
Being the middleman ain’t always easy, particularly in a sluggish economy where customers want everything yesterday and for the cheapest possible price. Add to the scenario a vendor whose support structure is lacking—or one that refuses to flex on pricing and terms—and the end result is a pool of extremely frustrated distributors that must continue to deliver top-notch products and services at affable price points.
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The current dearth of proactive, knowledgeable manufacturer sales reps is one of distribution’s biggest gripes right now. Experienced reps have retired, moved onto other jobs, or fallen prey to economic-related cutbacks, leaving voids that distributors often must fill themselves.
“Since moving into this position 10 years ago I’ve noticed a definite lack of knowledgeable people working and selling the products,” says Brad Van De Sompele, president at Frontier Electric Supply in Chicago. “So while there are reps out there working, their knowledge levels have definitely waned.”
Van De Sompele is also disappointed in vendors’ slow communication and logistics processes and says logjams and delays—often caused by offshoring—put Frontier Electric in a tight spot with its own customers. “The farther away the products are made, the more difficult the communication and logistics become,” says Van De Sompele. “We all think that just because we can send email quickly that things will go faster, but that’s not always the case.”
The Profit Margin Squeeze
Jim Pender, Jr., has a few complaints when it comes to vendor pricing and profit margins. For starters, this president of Newington, N.H., Rockingham Electrical Supply Co., Inc., says many vendors overlook the need to “police” prices. As a result, his distributorship gets pinched between customers that find better prices online or from a local big box retailer and manufacturers that refuse to dole out price breaks.
“We are really feeling profit margin shrinkage right now due to a number of factors that vendors could help alleviate,” says Pender. “We don’t lose all of the orders, but we’re definitely getting squeezed.” Manufacturers could do their part by putting locks on prices in an “MSRP”-type fashion, says Pender, and by closely monitoring online price points being offered by the myriad different wholesalers that are doing business on the web.
“The lighting side of our business seems to have a handle on the price locks, but the industrial side is literally all over the place,” Pender laments. “These manufacturers really need to get more control over what’s going on.”
As distributors like Rockingham Electrical struggle with end user price points they are also facing another challenge: the rising cost of doing business. Pender says vendors’ current pricing structures and rebate programs are exacerbating the problem. Everyone is jumping into the rebate agreement game, says Pender, and very few manufacturers are offering good pricing upfront.
“We’re buying products on special pricing agreements, putting them on our shelves, waiting for them to sell, and then waiting for the rebates,” says Pender. “Getting a return on our investment takes 60 to 90 days. That really drags things down for us and makes it hard to make any headway on the profit margin issue.”
Think Like a Distributor
As vice president of sales for Holder Electric Supply, Inc., in Greenville, S.C., Jeff Rogers encourages his outside and inside sales reps to keep in close contact with their customers, knowing that those clients will keep Holder Electric in mind the next time they need to replenish stock, order a new product, or ask a question about electrical supplies and services.
Rogers would like to see more manufacturers adopting that mindset. “As distributors, we still control a ton of discretionary business from our location,” says Rogers. “The manufacturers that don’t come in and spend time with our sales force definitely lose mind share with our guys.”
Vendors could also be doing a better job at delivering materials on or before promised dates, says Rogers. “We have a lot of stock material but at the end of the day if we can’t provide what the customer wants when he or she wants it, we lose that business,” he says. That complaint ties in closely with the on-site visits, which—if partaken in frequently—would help alleviate delivery bottlenecks and related issues, says Rogers.
“The manufacturers that continue to grow their businesses with us year after year are the ones that take the time to build relationships with us,” says Rogers. “The ones that pop their heads in every once in a while are completely missing the boat.”
Vendors that don’t take the time to develop new markets and demand for their products are also missing out on substantial opportunities, says Charlie Silva, president of Tacoma, Wash-based Tacoma Electric Supply. “Vendors could definitely do a better job of figuring out where the demand is before releasing new products and lines,” says Silva, whose team is often left to figure out such intricacies on its own. “Instead of putting the burden on distribution the manufacturers need to take a proactive stance when it comes to market identification and penetration.”
Better attention to detail on the manufacturers’ parts would also help distributors positions themselves more effectively in today’s competitive market, says Rosalee Dyer, branch manager at Stokes Electric & Lighting in Knoxville, Tenn. She says market trend spotting is one area where today’s vendors are lacking.
“As large as some of these manufacturers are, you would think they’d have people in place who would anticipate the market,” says Dyer. “It’s pretty bad when you’re based in Tennessee and you see a trend coming that your large vendors completely miss.”
Like Pender, Silva says vendors need to revisit sales figures and programs to come up with win-win scenarios for distributors and vendors alike.
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McCrea is a Florida-based writer who covers business, industrial, and educational topics for a variety of magazines and journals. You can reach her at bridgetmc@earthlink.net or visit her website at www.expertghostwriter.net.
Tagged with distribution, Exclusive Feature, lighting, tED