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Why distribution is broken

Why distribution is broken

Published in E-Commerce on by

Distributors that own the rights to a brand/s and have a network of distributors (retailers) whom they stock are finding themselves with some challenging times ahead. We all know the B2C and B2B models and the thinking in and around these models.

I'd suggest these models are fast becoming less then ideal in a fast moving digital landscape and replaced with B2E Business to everyone.

Some will have their heads down working hard to keep the models working as best as possible which is understandable. The challenge as I see it for these types of business is getting to a view where they can truly see what's happening as the product leaves the warehouse. Some may not even care however some very much do care about not only their wholesale customer but the actual person that buys your product. If you don't care then stop reading now.

I have family who have some great brands that they distribute across NZ and AU, recently we were talking about the business and how things were going I got talking to them about my recent experience with a very big distributor whom I was working for and the efforts they are going to make this integrated transition work in a very competitive marketplace. My family’s business have been in this space for decades and when I asked them why I couldn't access their brands on there website the answer was we are a distributor and you have to have a login to buy from us!

Which made some sense, I said so what happens if I am an actual what to buy it customer? and I found your item / brand and I wanted to buy it? I wouldn't even be able to see where it was stocked let alone just purchase it now via the website. I reminded them that most items are researched before a decision is made, so it’s important to support this thinking via good content as most of us know. Given they have two types of customers one being the retailer looking to stock a new range/brand at a wholesale rate and the other is the end user customer. Obviously the advice was to open up the site to all users and target both accordingly, that being push the end user customer to the retail outlet that they can purchase from and placing a call to action on the site for new retailers looking to stock their retail shops.

This promotes the products and the retailers shop or online store, fantastic and unlike my family's business you are most likely in this space. The challenge then lies in the balance between Marketing and promotion for the brand and the products you distribute, not all are in this space and there are many different models. Some distributors will market and promote the brand and the products under that brand as part of the function as a distributor. Some distribution companies are spending big budgets achieving digital and below the line marketing without any true measure of what success looks like. If the distributor does this in the hope that sales will increase that’s solid thinking and is a positive push in that direction for all involved.

So what's the Problem

Distributors should be selling direct to the end user with the retail outlet as a facilitator of the sale! big call and hard to swallow for some but guess what, don't you need to be in control ?

If distributors don't have accountability all the way to the retail out let then they most likely don't know where things are going wrong in the sales funnel.

An example might be a outboard motor the distributor has invested in all types of marketing and promotion to lift the brand (eyes on brand) to encourage sales. Fantastic I find the brand's website and I'm sold! This is the engine for me I am now ready to purchase I have spoken to enough people my researching is over I’m committed to purchase. Right how do I do that?  (is now my thinking), I can't see a buy now button, oh but I see a list of places I can purchase that fantastic I'll go see them tomorrow or send them an email I guess (no other option) time passes and so does my commitment to buy, I’m starting to have doubts maybe it's back to the research stage. No reply to my email that’s strange this is a big money why haven't they come back to me? Maybe they are too busy and maybe I’m not that important to them. (eroding of trust) Well I came down here to this marine dealer from the brand's website as they said I should. Cool I’m very interested in this engine brand. We start talking about this and low and behold the salesperson suggest another brand motor (as they stock more than one brand of motor) I’m feeling lead by a professional who know’s his stuff maybe I should take his advice.

Because the distributor has no measure on qualified leads sent to that dealer not to mention no contracted obligation or ability to be accountable One outboard motor distributor as just help (really helped) sell  the oppositions product. I like to refer to this as the last mile. The customer is lost by the distributor and given to the opposition for future up sell  and the marine dealer has a new relationship/customer he can fit a motor for and service over a long period of time.

Is this what the distributors marketing budget is meant to do? No it's not, that last mile is critical, not having integrated systems that not only binds the dealer to be accountable but reaches to the customer to give feedback on the experience. {Distributor} I sent you 6 leads? what happen to them I don't see any sales? The dealer says well they where tire kickers… Now a smart operator knows that talking to the customer after they make a purchase is where the last mile meets the end of the full circle of the marketing KPI. (Client gets promoted and answers) Oh thanks for your email I actually bought a X Motor based on the recommendation of the dealer who was awesome….

You would like to think that those in the distribution game might want to consider using (very cost effectively these days) there branded website to sell the motor and align that person and motor with the closest dealer and funnel the sale through to them.

Part of this integrated approach obviously involves the retailer and without the buy in and support things break down, if the distributor builds the KPI’s into the contractual arrangement the problem for most this will involve re looking at those relationships. With this model comes the ability also to expect a marketing contribution from the retailers / dealers giving even more ability to achieve measurable sales.

The dealer has little or no marketing budget or knowledge let alone time so he is stocked. They are happy to do local marketing at there own cost but realise that the brand distributor is responsible for national marketing and driving sales in the door, they are happy to pay for that as part of the arrangement in the form of national marketing budget allocated to the distributor.

  • The dealer has made a potential lifetime customer, they will need the engine fitted and serviced at a minimum all for doing very little.
  • The dealer has made money on the sale via a relationship agreement with the distributor (keeps a high standard of fitting and services as required by the distributor supporting warranty
  • The distributor has made a sale gained a client to up sell in the future (more sales for the dealer)
  • The distributor has more budget to drive brand awareness and database population campaigns.
  • The distributor has supported a positive brand experience through to sale
  • The distributor has a complete view of what is happening in the market place
  • The distributor can now report on where the marketing budget was most effective and apply the rinse and repeat methodology. All helping to increase sales and market share supporting growth in a measurable and sustainable way.

Why should we change the traditional model? don't change it if it's not broken is most likely the response, and its a yes, if you want to see your distributorship fade away as a business and or be taken over by the smart distributors who are looking forward not back.

Marc van der Putten