Transcript Top 10 Distribution Trends

2014 NAW AEC Meeting
July 16, 2014
The Amazon Effect
How e-commerce is transforming the distribution industry
Thomas P. Gale
President
Gale Media
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Market research in wholesale distribution
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Agenda
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Real agenda
• E-commerce channel transformation
• Threats, opportunities, strategies
• How members can adapt & thrive
– Ann Arnott
– Ralph Suppa
© 2014 Gale Media, Inc. All Rights Reserved.
E-commerce transformation
Google, Amazon
are accelerating,
not creating
competitive trends
Pricing visibility,
alternate channels
have been around
for more than 100
years!
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E-commerce transformation
• More complex channel competition
–
–
–
–
Global
Cross-industry
E-commerce
Multi-channel
•
•
•
•
Branch
Catalog
Relationships
Digital platforms
– Integrated functions: Market, sell, service, order
– Convergence: Industrial > Retail > E-tail
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E-commerce transformation
Type of Site
Common Functions
Corporate website
Public corporate information
Online catalog
Browse products - Attract new customers
Online store B2C
New customers – Purchase products
Online store B2B
Existing customers – Purchase products
Customer portal
Existing customers – Order, check status
Sales rep portal
Quote, order, check status, configure
Customer Svc portal
Order management, place order, check status
Marketing portal
Manage & distribute product content
Punchout portal
Enable customers to export orders to us
Source: Insite Software
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E-commerce transformation
Source: Forrester Research - May 2013 Global eBusiness And Channel Strategy Professional Online Survey
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Threats, opportunities, strategies
• Aggressive SKU/category growth
September 2013
January 2014
• Partner, competitor, co-opetitor
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June 2014
Threats, opportunities, strategies
“Amazonization” of customer expectations
– Convenience, transparency, loyalty
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E-commerce functionality
Ease of ordering
Fulfillment infrastructure
Speed of delivery
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Threats, opportunities, strategies
•
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Slow build-out: smallparts.com in 2005
Revenues = $150 million?
Not multi-channel service
Targeted segment of spot buys
Emerging product technical expertise
Evolving supplier relationships
Deep, deep pockets
Threats, opportunities, strategies
•
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Online sales = $3B (30%)
Spanish site
More mobile – traffic more than doubled
30% of mobile orders picked up at branch
Closed 70 branches
Print catalogs reduced 20% in 2014
300 IT/E-commerce hires
Takeaways today
If you don't know where you're going,
you might not get there.
Yogi Berra
• Relationships aren’t what they used to be
• Disruptive technologies increasing
• Strengthen core differentiated value
• Embrace multichannel strategically
• Redesign service & business models
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Takeaways today
“Any distributor still in business stays in
business by providing a lot of intellectual
capital along with the tangible products.”
Todd Youngblood
CEO, The YPS Group
Sell
Expertise
Stock
Service
Credit
Product
Business models have to evolve with
shifting channels & customer behavior
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Thank you
Thomas P. Gale
President
Gale Media/Industrial Market Information
Publisher, Modern Distribution Management
303-440-3857
[email protected]
www.mdm.com
@mdmnews
www.imidata.com
https://www.youtube.com/user/jenatmdm
Seeing Beyond the Threat to the Opportunity
In order for distributors to thrive in the new
ecosystem, they need the support from the
manufacturer community. Typically, the
B2B market is much more profitable for a
manufacturer than the retail market. The
manufacturer needs to help level the playing
field…
Denise Keating in
“AmazonSupply and the Great Data Divide”
on TedMag.com
The Role of the Association
We can support our members
by doing what we’ve always done
• Provide networking opportunities to foster partnerships
and strengthen relationships with manufacturers
Seeing Beyond the Threat to the Opportunity
These companies [e.g., e-commerce giants] cannot
replicate what we do for our customers. They can’t
demonstrate how a product or system can reduce the
total cost of operations. They aren’t recommending
solutions to a process problem. We can provide the
same product in the same way a company like Amazon
does. It’s up to us to offer the right solution.”
Distributor member panelist
at 2014 PTDA Canadian Conference
The Role of the Association
We can support our members
by doing what we’ve always done
• Provide networking opportunities to foster partnerships
and strengthen relationships with manufacturers
• Offer research and information about their customers
to help them be the expert in the customer’s business
Seeing Beyond the Threat to the Opportunity
Avoid competing where you just can’t
compete…Use [your size] to your
advantage. Being personable, forming strong
relationships, focusing on above-par service
and responding to requests quickly are all very
good starting points.
Bill Burnett in
“Going up against the Web’s 800-Pound Gorilla”
on TedMag.com
The Role of the Association
We can support our members
by doing what we’ve always done
• Provide networking opportunities to foster partnerships and
strengthen relationships with manufacturers
• Offer research and information about their customers to
help them be the expert in the customer’s business
• Develop resources for members to use in demonstrating
their nimbleness, deep product knowledge and ability to
add to the customer’s bottom line
Strategic Implications
What should we anticipate in the future?
• Changing the rules about membership
• Fostering co-opetition—partnering with your
competitors.
• For our members, the reliance on ecommerce will only
accelerate as the digital natives move into decisionmaking positions. So to will it change the way we as
associations do business.
Seeing Beyond the Threat to the Opportunity
Distributors must continue to
adapt, innovate and increase
their relevancy and value to the
customer whether Amazon is in
the marketplace or not.
Dirk Van Dongen
as quoted in TedMag.com
NAW Association
Executives
Council (AEC)
Summer Meeting
July 14-16, 2014,
Omni La Costa Resort and Spa,
Carlsbad, California
NAW AEC Summer Meeting
The Amazon Effect: A Perspective
from Up North – Canadian Institute
of Plumbing & Heating
Presenter: Ralph Suppa,
President & General Manager
Agenda
1. What is CIPH?
2. The Way we Were/Are
3. Current Realities & Challenges
4. Strengths/Opportunities
5. What does this mean?
6. Closing Remarks
NAW AEC Summer Meeting
What is CIPH?
CIPH is a not-for-profit trade association founded in Montreal in 1933. The
Institute provides members with the tools for success in today's competitive
environment. Over 260 companies are members.
Members are the Manufacturers, Wholesaler Distributors, Master Distributors,
Manufacturers' Agents and Allied Companies who manufacture and distribute
plumbing, hydronic heating, industrial, waterworks and other mechanical
products. CIPH wholesalers operate more than 700 warehouses and showrooms
across Canada. Total industry sales exceed $6 billion annually.
NAW AEC Summer Meeting
The Way we Were/Are
The problems which Wholesaler Distributors have to deal with are:
a.) Lack of Volume
b.) Cost of Distribution
c.) Rebates
d.) Cash Discounts
e.) Returns
f.) Credits
g.) Classification of Contractors
h.) Faulty Trade Practices.
NAW AEC Summer Meeting
CIPH President’s Address,
Annual General Meeting,
October, 1934
The Way we Were/Are
In dealing with these problems, Wholesaler Distributors should set up
standards:
1.) To handle high-class products only and to discourage the manufacture of
inferior materials.
2.) To carry sufficient stocks and not to pose as Wholesaler Distributors
expecting the profit of a Wholesaler Distributor when they are in fact only
agents in certain lines.
3.) To decide on a fair trade policy of selling as well as buying and outline
this policy:
a.) To have a fair selling price.
b.) To protect in price the contractor, having due respect
for the consumer and not restricting markets.
NAW AEC Summer Meeting
The Way we Were/Are
c.) To decide that where protection is given, the installer must accept
responsibility for the merchandise.
d.) To sell direct to the industries having their own installing staff.
e.) To not sell to other Wholesaler Distributor, except as an
accommodation.
f.) To do a fair amount of independent advertising to sell more and
better products.
g.) To discourage mail order and direct selling.
4.) To agree on a uniform, fair and complete credit policy.
CIPH President’s Address, Annual General Meeting,
October, 1934
NAW AEC Summer Meeting
Bricks &
Mortar
NAW AEC Summer Meeting
Current Realities
Challenges (Amazon.ca)
1. Amazon will not go away.
2.
Internet sales in plumbing is about 1.5% of
Wholesaler Distributor volume.
3.
Impact on certain categories.
4.
Internet minimum advertised price.
5.
Geographical complications to distribution rights.
6.
Retail vs. Wholesaler Distributor impact.
NAW AEC Summer Meeting
Online
Strengths/Opportunities
•
Relationship of CIPH Wholesaler Distributors with professional
contractors will continue to be key.
•
Amazon has forced Wholesaler Distributors to be more technologically
innovative and be more readily able to adapt.
•
Manufacturers are now more involved in the Wholesaler Distributors’
plans.
•
Wholesaler Distributors continue to use the internet as a sales and
marketing tool.
•
Wholesaler Distributors continue to embrace showroom sales.
•
Data synchronization to help match Wholesaler Distributor
and Manufacturer data to provide customers
with the most robust sales data available.
NAW AEC Summer Meeting
What does this mean?
“To date I've never bought anything from them, and in truth wouldn't know
how they could benefit my company. But if they sold the same materials, had
great delivery service, could take back the overage materials ordered without
a restocking charge on the normal day-to-day materials that our industry
uses, they stood behind the products they sold, any warranties were the
same or better, they were knowledgeable about the product used, and they
didn't finance my competition, then maybe we would look to them as a
possible supplier. I seriously doubt they could ever do all of that, but again I
wouldn't rule out what they can and can't do. Its certainly a ever-changing
society.
In truth there was a time I wouldn't have ever believed you could send
a document through a machine and have it replicated elsewhere, and
then I bought a fax machine. Lol. And now they are not used nearly as
much as they were a few short years ago, since the Internet and e-mails
became the norm. I can't wait to see what's next.”
- Past Chairman, Mechanical Contractors Association of Canada
NAW AEC Summer Meeting
Questions?
NAW AEC Summer Meeting