With everything that has been going on in the past year, companies working in the wholesale distribution industry are facing serious pressures. In fact, Deloitte claims that the wholesale distribution industry is navigating an “inflection point.“
In many ways, this disruption in the industry is understandable. As a wholesale distributor, you are feeling the stress from all sides. Wholesalers and distributors are a central link between the economy and the supply chain, working behind the scenes to supply and deliver goods to customers around the world.
Wholesale distributors are working within the supply chains of manufacturers with automated systems, as well as alongside large retailers like Amazon and Wal-Mart with their sophisticated logistical systems. Anyone can see how being in the middle of that can be stressful!
However, wholesale distributors need not worry. There are tools and tactics you can use to stay innovative and keep up with the pack.
In fact, many experts are identifying some key innovative practices that are keeping the wholesale distribution industry healthy and competitive.
Today we will talk about how the wholesale distribution sector works, and look at the trends and innovations that are currently changing the industry.
Let’s start off by discussing each component of the wholesale distribution industry.
Wholesaling industry 101
Simply put, a wholesaler fulfills orders from retailers by reselling goods in large quantities for manufacturers.
A wholesaler sells their products in bulk to retailers, which allows the retailer to purchase at a lower price than if they were to buy single items or smaller quantities.
Wholesalers buy goods from either the manufacturer or a reseller, and in return get a large discount for the items. Wholesalers are rarely involved with the manufacturing process. Instead, they focus on the distribution.
What is the distribution industry?
A distributor works closely with a manufacturer to sell more goods. The distributor is the middleman between the producer of the product and the retailer. Distributors can buy from manufacturers and sell to retailers, or, less commonly, they can sell directly to the consumer or business.
Distributors provide many benefits to manufacturers, like decreasing inventory and service costs. They provide inventory management and process optimization strategies to create a total solution for their customers.
Distributors often represent multiple products or companies, and can therefore bundle them together. This results in a streamlined buying process and a decrease in costs for retailers who need products from multiple companies.
What is the difference between a wholesaler and a distributor?
At this point, it may seem difficult to differentiate between distributors and wholesalers. A distributor does perform some of the same functions as a wholesaler, but they have a more active role in the process.
However, unlike distributors, wholesalers are not responsible for having the product sold to the customer and are not concerned with whether the retailer sells the product at all.
Despite the small differences, wholesalers and distributors currently face similar challenges when it comes to maintaining their role in the supply chain.
In fact, many companies operate as both wholesalers and distributors. When you combine these two components of the supply chain, you have the wholesale distribution industry.
How to increase sales in wholesale distribution
The wholesale distribution industry is a key link between manufacturers and retailers, and therefore plays an important role in increasing the sales of a product.
According to Deloitte, there are a few key ways for wholesalers, distributors, and retailers to fight the growing challenges facing the industry today.
- Invest in technology that supports delivery: wholesale distributors need to keep up with the newest trends, which means adopting flexible, connected technologies that help drive an effective delivery system.
- Build processes that streamline data-driven decision-making: you want to drive processes that allow you to draw insights from data collected from your delivery systems.
- Develop people capabilities to support strategic delivery sourcing: data-driven insights mean nothing if you don’t have anyone to implement what this data means. Bring on people who understand and can act on the collected data.
Now that you have an idea of what you need to increase sales, let’s take a look at the current trends in the wholesale distribution industry.
Top wholesale distribution trends and how technology is impacting the industry
As with many industries, wholesale distribution is moving fast. Thanks to technology, trends in this industry evolve quickly, and it could be difficult to keep up with what’s new.
If you’re struggling to figure out how to keep your business up-to-date, we’ve got you covered. We’ve put together some of the top trends in the wholesale distribution industry to help you keep up and implement changes in your business.
1. Process automation
Some parts of the distribution industry are lagging behind the workflow automation curve.
When it comes to record-keeping, for example, industries from medicine to e-commerce are moving ahead quickly with digital solutions.
Yet many people in the distribution industry are still working in an era where all shipping requires a paper trail. It’s an antiquated system that costs valuable time and efficiency.
The good news is that wholesalers and distributors are already embracing technology when it comes to inventory control. Individual items are tagged in the warehouse and wireless technologies are used to track their movements. These systems leverage the power of:
- Radio Frequency Identification (RFID) and GPS Internet of Things Mobile technologies.
- The Internet of Things (IoT).
- Mobile technologies for inventory, shipping, and receiving.
With computers keeping track of the basic movements of supplies, executives now have more time to examine analytics and insights to make better business decisions for their companies and for the stakeholders who depend on them.
As the costs of digitization decrease, distribution companies can take advantage of many of the same technologies that are used in other industries.
2. B2B customers expect B2C-level personalization and responsiveness
In a digital environment, it’s easy to imagine customers as nothing but data in your database. Don’t get caught in that trap. Remember: your customers are people.
Retail marketplace Amazon and media content provider Netflix have changed customers’ expectations for business-to-consumer (B2C) interactions. Those B2C expectations have transferred into the B2B (business-to-business) realm as people want what other industries give them more personalization and responsiveness in service, along with superior product presentation and delivery.
Fortunately, e-commerce has made this level of customer service possible. In fact, the B2B e-commerce market is expected to reach the US $20.9 trillion by 2027.
The following developments in wholesale distribution show how the demands of the industry are changing:
- Product presentation: An increase in digital databases means that businesses are now asking for resources such as high-quality product images in 3D, or better search options to find what they desire.
- More channels: Customers are also asking for more consistency across channels and platforms. For example, it’s now easy to track how many customers are using iPads to use an e-commerce site. Companies should monitor these trends and make the necessary changes on their sites to better serve those customers’ needs.
- Immediate feedback: Just like B2C customers use Yelp or TripAdvisor to give feedback on their customer experiences, a handful of leading distributors are surveying customers about their willingness to recommend them to peers. Wholesale distributors are also leveraging social platforms such as Twitter, YouTube, Instagram, and Facebook to connect with customers and influencers.
3. The effects of global dynamics on the supply chain
Wholesale distributors play a vital role in the supply chain. However, the Covid-19 pandemic demonstrated how quickly that role could change.
During the pandemic, many distributors ended up in one of two positions: either their demand spiked to a point where they couldn’t keep up, or it drastically fell.
This change forced distributors to ask themselves important questions, such as “how am I going to manage my current inventory?” or “how do I find new channels to sell it?”
This situation has created an emphasis on the need to anticipate future supply chain disruptions differently. The focus is now on demand, inventory, and supply planning processes.
According to McKinsey, organizations can maintain their position in the supply chain by:
- Creating transparency.
- Estimating available inventory
- Assessing realistic demands.
- Managing working capital.
4. Increased competitiveness due to expanding markets
The wholesale distribution sector is also facing serious competition as large retailers look for ways to expand their markets and innovate.
For instance, Ace Hardware is now targeting commercial property owners, while Home Depot now has a line of products for the building sector. Their name brands already carry weight in the distribution industry, despite only entering these markets in the last five years.
Traditional distributors must respond by reducing margins in segments such as building supplies and lighting, as well as investing time into additional innovation distribution.
This increased competition is paving the way for new business models, challenging wholesale distributors to find new revenue sources through project management and value-added services.
What does this all mean for wholesale distributors?
The wholesale distribution industry is rapidly evolving and we’re excited to see the innovation of distribution and manufacturing companies in the coming years.
For now, working in supply chains with innovative manufacturers and retailers means that wholesale distributors must elevate their game to stay competitive. This means doing things faster, with better systems for collaboration and integration, and with greater attention to customers’ needs.
Luckily, Method CRM has got you covered. With its real-time QuickBooks sync, easy-to-use lead and customer management features, and integrations with popular apps, Method is the perfect tool to help wholesalers and distributors keep up with the changes around them.
Start your free trial and see how Method can help your business thrive!
