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
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 IT/E-commerce hires Threats, opportunities, strategies
Relationships aren’t what they used to be Disruptive technologies increasing Strengthen core differentiated value Embrace multichannel strategically Redesign service & business models 13 Takeaways today If you don't know where you're going, you might not get there. Yogi Berra
14 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 Business models have to evolve with shifting channels & customer behavior Sell Stock Credit Expertise Service Product
Thomas P. Gale President Gale Media/Industrial Market Information Publisher, Modern Distribution Management Thank you
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 decision- making 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
The Amazon Effect: A Perspective from Up North – Canadian Institute of Plumbing & Heating Presenter: Ralph Suppa, President & General Manager NAW AEC Summer Meeting NAW Association Executives Council (AEC) Summer Meeting July 14-16, 2014, Omni La Costa Resort and Spa, Carlsbad, California
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? NAW AEC Summer Meeting CIPH is a not-for-profit trade association founded in Montreal in 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.
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 The Way we Were/Are CIPH President’s Address, Annual General Meeting, October, 1934
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. NAW AEC Summer Meeting The Way we Were/Are CIPH President’s Address, Annual General Meeting, October, 1934
NAW AEC Summer Meeting Bricks & Mortar
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 Current Realities Challenges (Amazon.ca) Online
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 Strengths/Opportunities
NAW AEC Summer Meeting “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 s became the norm. I can't wait to see what's next.” - Past Chairman, Mechanical Contractors Association of Canada What does this mean?