Independent Wholesalers Are Under Attack
By Bob Boyles, Principal
Smarter Distribution

Independent Wholesale distributors are under attack. The assault is coming from several different directions at the same time.

First the distributors' customer base is being chipped away by new competitors from outside the traditional supply chain. Big Box Retailers such as Home Depot that have been selling to small contractors for a decade on a cash basis. Their longer store hours have made them attractive to the single person shops. Now Home Depot is opening the first of a chain of "Home Depot Supply" stores. Their first of the chain are in Dallas, Phoenix & Colma, California. This supply chain is aimed directly at the traditional middle of the market wholesale customer.

Also an interesting parallel development is rapidly taking place. Where a whole new segment of the industry is evolving as "Logistics Suppliers" are targeting the needs of large customers with services directly aimed at taking the fat out of the supply chain. Second the distributors' product base is being chipped away by new competitors.

The Internet is breeding a whole genre of suppliers that specialize in selling only one thing. These specialty suppliers are popping up in those areas where the Internet model makes sense. That would be items that share two traits, smallish items where freight is not too large a hindrance and specialty items where the Internet's large customer base can make stocking the items a worthwhile venture. Looking for an example look no further than the plumbing business and the growth of on-line faucet sales. For the past decade a new breed of wholesaler has been emerging in the "specialty vendor". Whether it's wire, lamps or control the electrical industry has been breeding these vendors.

The traditional formula to justify the existence for wholesaler has been a four-pronged approach consisting of local stock, available credit, product knowledge and a close customer relationship. All of these are being weakened by the new competition. With a customer base that is being courted by new competitors or a product base that is being under pressure what's a midsize independent wholesaler to do?

1. A good offense is a good defense: Pick your market specialty and grow it.

2. Continue to cut the cost: For the past two decades wholesalers have invested in computer technology and received extraordinary returns in terms of automated procedures and better inventory control. Now the returns may not be a large but the need for investment is just a critical.

3. Get closer to your customer.

These suggestions are only a beginning. These skirmishes are the daily battles in a war of who will control the supply chain in the future!

About Bob Boyles and Smarter Distribution:

Bob Boyles started his strategic consulting business in 2001 and has focused on the change that technology is forcing in the supply chain and how independent distributors can not only respond to that change but also maximize the return they are seeing on their investment. Bob has spent a significant amount of time as an Installation Consultant for several of the big name software companies in the distribution market. Working with hundreds of distributors across the country on installing, upgrading and utilizing their software.  Bob also worked as Corporate Systems Manager for one of the largest electrical wholesalers in the country as that company moved from a completely manual operation to an on-line real-time system. 

Bob is a graduate of Appalachian State University (BS - 1981)and University of North Carolina at Greensboro Graduate School of Business (MBA - 1985).

© Copyright 2002, Robert S Boyles, Jr. All rights reserved. This article cannot be reprinted or reproduced in whole or in part, without the express written permission of Robert S Boyles, Jr.