Gut Check: A Distribution Point of View on Disruption and Change, Episode 5

Ian Heller is a voice for all of distribution. He has led digital transformations at five publicly held distributors. Today, he is at the forefront of interpreting disruptive trends and offering in-depth analysis from the distributor’s perspective. In this podcast, Ian offers his point of view on the insights shared by his fellow panelists — John Caplan and Alex Moazed — at the NAW 2020 NAW Executive Summit, as well as his original ideas and recommendations for the distribution industry. Among many influential observations, he argues that every distributor must have a strategy for virtual marketplaces, and that the industry may need to create its distribution-centric platform. Ian’s insights are essential for every distributor’s plans for surviving the COVID-19 crisis and emerging stronger than before.

Featuring: Mark Dancer, Author of NAW’s Innovate to Dominate: The 12th Edition in the Facing the Forces of Change Series; Richard Blatcher, Director of Industry Marketing and Business Intelligence at PROS; and Ian Heller, Founder and Senior Partner of Distribution Strategy, Inc.

To listen to the full episode, press play below: 👇


Like this episode? Make sure to subscribe here! By subscribing, you automatically enter for a chance to win a free copy of the National Association of Wholesaler-Distributors' publication: #InnovateToDominate (normally $335).

You can connect with Ian Heller by visiting www.distributionstrategy.com. You can also attend the workshops on AI as Ian mentioned in this episode, by attending PROS Outperform.

For more information on this podcast series and the book, visit www.naw.com/I2D or www.pros.com/NAW.

Key Points:

  • Amazon does not want to include human interactions with customers. That creates the possibility for distributors to compete with Amazon Business.
  • Distributors must have a marketplace strategy AND an AI strategy. Amazon will be a factor. Distributors need to know how to compete platforms or offer a platform of their own. AI is not new. Applying it for each distributors business and goals might be.
  • AI should be in place now; it can help with practical recommendations. There is an immediate value for that for customers.
  • Service development is a huge priority for distributors. Always have. Doing it right this time is about becoming an expert at services. Hiring is important. Pricing is important. Processes are important. Go all in if you want to be successful. Do services that are important to customer but might be destructive to the distributors traditional business model. Make an inventory of services offered by like distributors, all around the world.
  • Value proposition — what you want, when you want it, where you want it is OLD. Value propositions will be more variable. Services will be a commonality.
  • Do leaders need new skills and mindsets? Don’t point fingers. Start with what customer need. Build that. Pull the expertise in. It’s not always digital. Listen, personalize, and engage.
  • Trust and loyally — 70% of what a salesperson says is accurate. The 30% can kill you. NPS is essential.

In this Episode:

[02:06]: Customers want you to make their jobs easier
[05:30]: How to price services
[08:50]: How to decide what services to offer
[12:48]: How to differentiate yourself from the competition
[15:00]: What to do when digital transformation doesn’t give the results you expected
[19:50] How to build a strategy for marketplaces
[21:59]: How to know if you’re really getting sold AI
[25:00]: Measuring trust and loyalty in the digital age
[30:00]: The evolving manufacturer-distributor relationship

Full Transcript:

Richard Blatcher: Hello everybody. This is another in our podcast series with NAW, We’re very excited because we’re here in Washington DC at the NAW Executive Summit, and I’m with my regular partner, Mark Dancer, NAW Institute Fellow and author of Innovate to Dominate. And we're both excited to welcome Ian Heller. Ian, we've been working together for many years and thank you so much for, for joining us. And for our listeners you could just introduce yourself and your extensive background in the distribution industry...

Ian Heller: Sure. You bet. Well first of all, thanks for the opportunity to be here. I'm delighted. Really enjoy working with PROS and with you Mark as well. Thank you. So my background is all in distribution. I was a truck unloader at a Granger branch when I was in college and 15 years later I was the VP of marketing there and I've done that job for three other large publicly held distributors. Along the way I started a consulting practice called Real Results Marketing. I worked over at the MDM for a period of time and now I'm back to consulting and writing and speaking.

Richard Blatcher [2:06]: So you made a very, very passionate, exciting and interesting presentation this morning. So I just wondered if it'd be okay to ask you a couple of questions again for some of the views and the listeners, that weren't I'm able to consume that information. But I think for me one of the most interesting start point was your question of "Raise your hands in the room" and it wasn't "Raise your hands in the room if you bought something or you're a prime member. It was raise your hand in the room if you've ever had to call Amazon." And I thought that was a really interesting kind of take. So, what did you mean by that? Because That was a really fascinating moment.

Ian Heller: A lot of people have been to these conferences where a speaker says, "How many of you are Prime members?" Everybody raises their hands. And I think that kind of misses the point if you're trying to differentiate from Amazon, because obviously just about everybody or a lot of people are Prime members. So what I ask is "How many of you have ever called Amazon to place an order?" And nobody raises their hands, which I think reinforces the point that they do not want to include people in the delivery of value. They want to have surface-free transactions that are just about products. So when you sell on the Amazon business platform, it's a product and a price and that is all. And so that leaves a lot of white space for distributors to compete because distributors are all about, or at least many of them are all about services. So if you're doing important services for your customers, then you're doing things that they're not likely to get on of these big marketplace platforms.

Richard Blatcher: And you gave some pretty exciting, worrying, concerning opportunistic, what it called it, what you will, the numbers with Amazon and being 20, 23, 35, 36 billion a few years after that. So anywhere between 135 and $230 billion. And that's just Amazon business-to-business, let alone a lot of the other people that we've been speaking to. I mean Alibaba and these other companies. So they're both a threat and an opportunity, which is something that you've talked about a lot.

Ian Heller: Yeah. Look, I think the fundamental question I'm asking is, "Are marketplaces just going to displace one company websites as the primary means of executing simple transactions?" So is it just going to be that in the future, unless there's some value add or something special, most people are just going to buy on marketplaces because they're more convenient. I mean, if I were to take 30 years of B2B customer research and boil it down to one statement, it would be "Make my job easier." That's probably where Staples got their easy button at one point in time. And that's really why Granger did so well for such a long period of time is because they had such an extraordinary assortment. Well now a Granger has a couple million skews, but Amazon's got 3 million third party sellers, active sellers. So who's winning the assortment game? Well, if you're a buyer and you can go one place and get it all, then that's very convenient. Saves you time. It's a fewer number of POs.

So if marketplaces are going to prevail as the place where you execute simple transactions that everybody who's got a website today is going to have to have a marketplace strategy of some kind tomorrow.

Richard Blatcher: [5:30]: Now, this is a very disruptive time, but it is one of opportunity. And you talk a lot about services, and one of the things I found fascinating was some of the research that you do when you're giving these talks of when you're engaging with these companies is you go and have a look what services that they offer, let alone, what do they actually communicate that they offer? And you showed us this morning a list of 250 of these, whereby the majority of distributors A, probably don't know how to offer those services, don't know way to offer those services, how do they even price those services, so I thought that was very interesting.

Ian Heller: Yeah. I think distributors have offered services for a long time, but they've bundled them in with the product and that really creates two problems. One is generally distributors are more expensive online because the product price assumes you're going to be consuming services with it, whereas the marketplaces explicitly are not providing services. So you get this pricing disadvantage. And then the second thing is, if you're just giving them away, you're probably not bringing a lot of rigor to standardizing them and delivering them at low cost and working out how you're going to price them and market them. I mean the way that manufacturers add a lot of rigor or bring a lot of rigor to product development, distributors should do the same with service development. If you force yourself to charge for at least some of them as a means of ensuring that you're managing them professionally and with the proper rigor, I think you're going to come out with a lot more valuable services to your customers than if you just say, "Oh, we'll just throw that in there with the product."

Mark Dancer: So, distributors have tried to work on services for years, right. And some have had success, some haven't had success. Sometimes that's because the customers don't think they buy services from distributor. They might buy it somewhere else. Sometimes it's other things. If you were talking to a distributor leader or his leadership team and they understood what you just said, sure. And they said, "We really want to do services right this time." What are the things you would have them do to go down the right path and end up with services they can hang their hat on.

Ian Heller: So I met a person last night who works for a distributor, has been there three weeks and he used to work for a manufacturing company and he was in product development. So this very enlightened distributor, progressive distributor has hired a product development person to come in and learn how to do service development in a distribution environment. So they're going to bring stage gate processes and all the product development stuff and figure out how you do it right. And I don't think that distributors are unsuccessful selling services because some of them haven't tried hard. I just don't think they're experts at it.

Mark Dancer: Right. It's not in their makeup.

It's not in their experience to sell services like that.

Ian Heller: Right. My guidance to him was go figure out one.

Start building the muscles of the organization, which is probably a service that that organization already does well that you could charge for. Or in some cases maybe you only offer for customers above a certain customer size which still actually adds value to the people at the top because they feel like they're getting something extra for being a big customer. Right?

Go develop one. And there are some whether it's rentals or repairs or kitting or special kinds of delivery like vending or whatever, that you do expect some kind of economic exchange for. Right.

Mark Dancer: [8:50]: Do you think that they... If they're going to offer a new service and they might get started and do something easy and move down that... And build it over time, but do you think eventually that data and AI and analytics should be the core of most services or enable it somehow? What's the relationship?

Ian Heller:I think services that differentiate and keep you protected from big marketplaces are going to include human involvement in most cases… Simply because you can digitize it. So I think you have to be smart with AI, but I would look at... I would at least I would... I've never thought about that question Mark, so it's a good thing to ponder for me. But I think my starting point would be "I want to do services that are important to my customers that big, pure digital players are not likely to do because it screws up the economics of their financial model."

Mark Dancer: Your feedback on that is really interesting because I think the question comes from tech startups I've talked to who say "Whatever I'm doing, I'm building a data platform." Because they want to gather that data because then they can monetize the data, which is a strategy for distributors. But your pushback and your observation is more about, I call it human-centric innovation. What can we do together when we're with somebody in a physical space, two people working together and I think when I've asked that question for distributors, I don't phrase it very well, but then the conversation stops really soon and when it goes a little further, I hear things about training around emotional intelligence so they can be more empathetic. Distributors are kind of street-level people in a way, practical people. So if a distributor is going to go down the path of "My differentiation, my value proposition" is going to have a strong human element. Same question. Why would you tell the distributor leaders to go out to look for that opportunity?

Ian Heller: Well, the way I tell people to get started, or I suggest that people get started, is to do what I did, which is to go look at all the websites of your competitors and then companies like yours around the world and make an inventory of all the services that they offer. Because that's already out there in the marketplace. I mean, when I started doing this last year, a couple of years ago, I was in Europe and I was like, "Well, I'm presenting to this audience of European power transmission distributors. I'm going to make sure the stuff that I'm talking about is relevant." So I started looking at their websites and I was like, "Well, we're doing a lot of things I see in the U.S. and then some things are different, a lot of the same strengths and weaknesses." So I started compiling a list then, but it quickly became apparent that there are these lists of services embedded in these websites and these distributors around the world.

Ian Heller: But a lot of times, in fact, most of the time they're not under the services tab on the homepage, which is a big mistake. If you have a friend and say "Take credit for them." But somewhere in there, a lot of times it's in the about us or somewhere had embedded in their other services. I would make a list and take it out to my customers and say, "Yeah", I work with my management team and say, "Hey, we've identified 50 services that we think are attractive. Let's narrow it down to 10 and go ask our customers which ones they would be most interested in buying from us." I don't think you need to start from scratch. You could always go and start with customer research. But the reality is if a whole bunch of distributors are offering these, that's sort of crowdsourced research anyway because a bunch of customers have spoken, and these distributors are responding by putting these services together. So, I would say, "Hey, that's crowdsourced research. I'm going to go ask my customers if they would be interested in buying these from me."

Richard Blatcher: And we've heard from other distributors, we've heard from our customers that apply that logic and they listened to those customers, they tailor, they personalize that offering service, product, whatever it is, and then they engage through the correct channel in the correct way with the correct optimized price and they found that that helps grow that revenue and profitably, I might add, improving the margin.

Mark Dancer: [12:48]: I did a project years ago for a manufacturer who asked me to, this is 10 or 15 years ago, maybe pre-internet, who asked me to talk to the distributors and find out what their different value propositions were and the beginning of it, the idea was I've probably talked to 30 or 40 distributors and we stopped the project after five because they all almost use the same identical words. I'm interested in as distributors do AI and as they do services and as they maybe they do some platform business models, things like that, do you think that distribution will move kind of in the same direction in mass to offering new value to customers or will there be significant differences between distributors and the value proposition that they offer?

Ian Heller: Yeah, it's funny you should say that. I just finished a branding project for a distribution company and so I got interested in this term "What you want, when you want it, where you want it." Because I kept running into it and the earliest reference I found was in 1920 in a distributor to the lumber industry. And I printed out the ad and showed it to the distributor and said, "We're not going to say what you want, where you want it... But when you want it because it's just so ubiquitous and it sort of, has kind of lost all meaning."

But if you think about it, that really is sort of the core of what a distributor offers, right? "I got a lot of different products and I make them rapidly available to you when you need them and I'll deliver them if you want them." So my guess is as distributors get more sophisticated at offering services, the common thing will be "We are a service provider as well as a product provider", but it's not a panacea, you're still going to need to be good digitally. You still do need to have a marketplace strategy. But I think that unlike that core value proposition around product, the service proposition is going to be pretty variable based on the industry that you're in. I mean, as I look at those, like the services that I showed you today, they vary a lot based on whether you're looking atan electrical distributor or an HVAC distributor or power transmission distributor and some of them are very interesting because they, all they sell is something like fire extinguishers, but they go and inspect them and audit them and replace them. And so their list of services is straight different than an HVAC distributor. So I think the commonality will be services. Some of the language may be the same as they described them, but the services themselves will vary by industry. So they'll be pretty homogenous within vertical, but heterogeneous between verticals.

Mark Dancer: [15:00] I wonder if you help distributors understand because you've held senior positions in a number of publicly distributorships, so, you know distribution. A lot of distributors, the leaders they know that as the leader of the organization or on the senior leadership team, they don't necessarily have the skills that are required because there's new skills required to compete in the new age and they don't even have the right mindset. Right. And I'm wondering if you run across that and how you helped distributor leaders and their leadership teams think more proactively and appropriately about the opportunities in the marketplace.

Ian Heller: Well, I think that a lot of distributors anyway have gotten into this really unhealthy loop where they're hearing from their own teams and they're hearing from gurus that "Senior management is the problem, you're not committing to digital." But when you talk to the senior leaders, they say, "I spent millions of millions of dollars on digital and I don't have any demonstrated return. Whereas when I go and hire salespeople, I'm pretty sure I'm growing the business." So there's kind of this unhealthy debate that really needs to stop and I think what's happened in, maybe the way to approach that, is "Let's quit pointing fingers at each other and just realize maybe we're building the wrong things digitally", right? I mean, this notion that "We're going to build a big commerce site and we're going to put 50,000 skews on the end and we're going to make it look like granger.com or amazon.com" I just don't think that's really the value add for most distributors.

I mean, I've worked with distributors who have very specific websites that are... They're tailored account by account or they have... They're very information rich to facilitate the whole relationship. Or, you can configure products on the side, but you're not transacting on them. And what you're really looking for is engagement electronically. You need to quit measuring your success by what comes to the shopping cart.

Mark Dancer: Love it.

Ian Heller: So I think we're out there building the wrong thing and then beating each other up for it. And the reality is we should just start with, "Okay, what is it that our customers need that we can deliver digitally better than through other methods and let's build that." Right? And so, I think there's a change in focus and expertise that needs to happen and that's going to resolve some of this finger pointing.

Richard Blatcher: And I think it's not a case of it's digital and nothing else. It's not an always an end, because a thread of with... I love the interviews and love the discussions we've had.

But this series here has been that... It's part of how you engage, and you summed it up beautifully, your way of understand the customer, you personalize, you tailor and then you engage. But you engage through those different channels consistently in the right way at the right time. It's not just an online catalog and there's a cart and "I'm done." Right? And that's what a lot of companies who've done. So we would agree. When we've looked to that and it's refocusing where a lot of distributors have already invested heavily in digital transformation and frankly just hasn't given the results the were hoping.

Ian Heller: Well the example I started with this morning was Staples and no one can say "Staples wasn't a world-class digital company in 2011." I mean they were right and no one could say that "They weren't omni channel" because they had over 2000 stores and they did almost $25 billion in revenue that year and made $1 billion in net income. And they grew right through the great recession, five years after that, during the economic boom time in the U.S. they declined 26% in revenues and then in 2016 lost a billion and a half and then got taken private by big PE group. Well that's not because they didn't spend enough on digital or they weren't omni channel, which are the two big thing... Sort of types of advice that the current gurus keep giving distributors. Well so, it didn't work for them.

Richard Blatcher: Because it wasn't consistent.

Mark Dancer: Yeah.

Ian Heller: And ultimately Their customers moved to marketplaces for their stuff. And so now they're trying to become a service company and they're engaging in some other things. I think that's really smart for them. I think they've figured it out. But the reality is that if marketplaces are the substitute for transactions of simple items, then you would expect office supplies to be hit first long before construction supplies.

Mark Dancer: So, this marketplace needs to be a part of everyone's solution. But you don't want your business to be as simple as a bunch of office supplies you need engineering products and configurations and add value or added services.

Mark Dancer: [19:50]: I think our panel today was, was very powerful and then we had Alex and John talking about things from the virtual world on the platform perspective. And then you mentioned several times that distributors need to have a strategy for marketplaces, which can be "Do you participate, do you build, do you partner?" Things like that. But I don't want to answer that question. And if you were talking to a distributor leader right now who says, "Yes, I need to have a strategy for marketplaces" what would you advise them to do? How do they build their strategy?

Ian Heller: Well they, first of all, they needed a strategy for AI and a strategy for marketplaces. And the two were inseparable. And, the example I used this morning was PROS has their, Do you call it a bootcamp or certificate, AI certificate,

Richard Blatcher: Yeah, I mean we do various things, the most popular is coming to our annual Outperform event.

Ian Heller: Right. That's the one that I saw.

Richard Blatcher: That's right. You were there last year and this year it's going to be in Orlando early October. But you can engage with us at any time and learn about what AI is and most importantly, how do you apply it. And frankly, one of the messages, "This is not new", I mean PROS is the 35 year old company in the airline and the travel industry who faced these challenges 15, 20 years ago. So a lot of that logic and that methodology is now being transferred. And we have to thank you Ian, because you very eloquently tell the story about what is AI... What is AI, how important is it, which... With your time with the Dr. Michael Wu

Ian Heller: I learned from Dr. Michael Wu.

Richard Blatcher: Well, yeah. And thank you on his behalf because you really told it eloquently.

Mark Dancer: Well and you add some relevance, when you say it too...

Richard Blatcher: Exactly.

Mark Dancer: Because you're a distribution leader, yeah.

Richard Blatcher: You applied to yourself self, a distributor.

Ian Heller: When I said "If he can make me understand it, anybody can understand it." I was being sincere.

Richard Blatcher: I'm the same. If I can understand it then anyone can.

Ian Heller: But I think... Look. I mean PROS has a great AI course from what I've heard. I didn't attend it but I talked to people at your conference that did and why would you not take advantage of that? You don't even have to be a PROS customer I don't think to attend the course.

Richard Blatcher: No, of course not.

Ian Heller[21:59]: And, when you have other vendors, if you're a distributor as well, you should bring them in. I mean, one of the things I really like about getting grounded in AI in a course like a PROS is it's going to help you understand whether your tech vendors are really selling you AI or they're selling you a bill of goods. Because a lot of people who sell AI, don't really have it. Right. And so once you start learning that, "Oh well if there's machine learning involved then it's a learning system and it gets better on its own", your ability to understand whether tech vendors have something real or whether it's paper, gets a lot better. And so I would say get grounded in some stuff from your vendors or prospective vendors like PROS and get educated. It's not that hard and there are a lot of good resources online, but you need to understand that to understand the potential of marketplaces in my opinion, because they're connected.

And I think in terms of marketplace development, I think Alex's book, Modern Monopolies is a really important read for distributors. I think they should absolutely read that. I think, all these big marketplace players would be more than happy to give you their sales pitch. By all means, listen to what Amazon Business has to say. Listen to Alibaba has to say, talk to walmart.com go in with a very skeptical eye because they are trying to build their businesses, not yours. Right? And they may not always... They're selling it, right? So be careful. Don't sign on the dot... On the dotted line while you’re with them, but listen to what they have to say. And then I would say, engage with people like Alex or me or whomever, and ask for help thinking through what your marketplace strategy is going to be because I think this is a really critical time, and also be willing to participate in industry-centered marketplaces if we develop them.

Richard Blatcher: And Just to give a practical example, Mark, Ian, is that and we've been talking with John from Alibaba and Alex, so you both mentioned them, one of the threads that came through when we talking about opportunity and growth was they just use both exactly the same example of well wouldn't it be great if the sales force of a distributor could be making intelligent recommendations because they don't know what they don't know.

Now we have distributor customers that are doing that now and again, that's a practical application of AI, in that example. So this isn't a nice-to-have. This isn't a five years, 10 years hope. This is "Here it's available today" in whichever strategy you have. If you're working with the right partners and breaking it down to those practical applications of the technology and the processes and a lot of the work that Mark has... And the NAW say in the Innovate Dominate series, If you apply it practically a lot of it is there. The tough thing is finding the right people to work with to then apply it.

Mark Dancer: [25:00]: A question about... Related to this, but about distributors and their customers and trust and loyalty and those sorts of things. Distributors have a longstanding relationship with customers, and we've heard today several times that the marketplaces and the startup…they see there's value in that, right? They have to build it themselves and they can leverage that if they work with distributors. I'm curious as to whether or not does the customers of distributors see businesses, have seen more options to buy, right, whether they are going to rethink their relationship with distributors consciously or subconsciously, and whether distributors should be doing anything proactively to think about how they measure trust and loyalty in the digital age? Right. A lot of distributors when I ask them that question, they'll say "Repeat purchases or churn or a little bit of margin if they recognize the value I offer," those kinds of answers. Is that enough?

measure trust and loyalty in the digital age No. I mean, I think every distributor should track their net promoter score. That's a well established... Of course there are some people who don't like it, but it is a consistent way that allows you to benchmark versus other people's performance. And I think, you need to... Net promoter score by itself is not enough because you need to understand what's underlying it and how it can be disrupted by a competitor going forward. But, it's a pretty well established way of understanding how sticky you are with your customers. And I think the problem is if you don't do that then a lot of what you get is anecdotal. And Mike... I'm a big fan of salespeople, I spend a lot of time with them, but like anybody else, they're subject to their own biases. And I think about 70% of what you hear from salespeople is accurate, but that 30% that's not could, kill you. So you're... Get another data point. And I think a really well run NPS, not the way the automotive industry does it, where they completely bias the system because the salesperson says, "I'll fill that out for you." "Please give me a score." Right.

Ian Heller: Yeah. Right. So, but I think if you administer it correctly and then particularly over time it tells you directly... How you're doing in terms of keeping customers loyal to you.

Mark Dancer: I think innovation happens in small steps and it's hard work and then occasionally sometime after a long time it's adds up to something big and business is done completely differently. How do you, if you look sort of five to 10 year... Or whatever the right timeframe is somewhere down the road, do you think distributor business models are going to be dramatically different than they are today in some way?

Ian Heller: I think if I was running a distribution company, I would say, "What's working in our own firm. And then we're going to add two components. We're going to add a services strategy and we're going to add a marketplace strategy and we're going to just follow the Jim Collins model of bullets before cannonballs." Right? "So we're going to find a service that we can be successful with", right? "And then we're going to dabble in some marketplaces to figure out a strategy, but we're going to have meetings about how well we're doing every two to four weeks and we're going to have general managers who are in charge of those initiatives and they're going to have goals and they're going to report to the executive team or they're going to be on the executive team reporting to the board. And we're going to make relentless progress and we're going to make mistakes, fail fast, learn and recover and try again." And by the end of five years, your company will look different in many ways, but it will look enhanced.

You'll still recognize the core of who you are today, what will have been added is a robust marketplace strategy and a set of services that, whatever the revenue is that they produce, they have a multiplier impact because they preserve a lot of your product revenues because your customers aren't consuming services too.

Mark Dancer: [30:00]: Yep. Excellent. And we talked about this a little bit this morning, but as distributors do that... Actually I had a side conversation with another distributor after our panel this morning and we were talking about the manufacturer-distributor relationship, which we brought up a little bit.

And this distributor thought that the person I was just chatting with thought that distributors need to take the lead in redefining that relationship. And it's a hard thing to do because manufacturers, they write the authorizations, they create the pricing structure. They have the inherent... The business relationship kind of defaults to the leading for that. But I think that there's a challenge and response thing that will happen with the traditional value chain in the marketplaces. Right? The value chain.

Ian Heller: Yes, I agree.

Mark Dancer: Right. So if you're a distributor and you want to revitalize the chapter... Revitalize the value chain. It's a chapter in Innovate to Dominate. How would you tell them to get started on that and what to do about it? What the possibilities are?

Ian Heller:

Yeah. I think... Look, when industries consolidate it creates margin compression on producers, right? So when Home Depot entered the hardware industry and put a lot of local hardware stores and staffed thehouses out of business, then margins got... We're putting under a lot of pressure. And so if you work with any of the hardware co-ops or distributors in that industry, the manufacturers are working hard and legally to try to level the playing field a little bit because it's problem for them to have so of much their sales concentrated, they're going to customer concentration problem. Well, that can happen here as well. And I think the story that distributors need to start with is, "Look, we have a joint interest in Amazon Business not becoming a $200 billion company or 20 billion within my vertical or whatever." And I think that's... A lot of these manufacturers have been through this before with other consolidators and that just makes sense. I don't want to have any customer concentrations.

Ian Heller: But I think the other thing is you need to... Manufacturers are responsible for growing their business, not yours. And so you don't go to them just with, "Hey, we need to survive." You also go to them with ideas about how you can sell more together. In a lot of cases there are services that manufacturers can add to their products. We talked about Rockwell Automation and what a robust set of services that they have and how that's really good for them and their distributors and it's differentiating all the way up the channel. But how many other manufacturers are thinking in those terms and partnering with their distributors in that way? Not a lot.

Mark Dancer: Excellent.

Richard Blatcher: And distributors own the relationship. They have the transactional history. They have a lot of the data. So with that insight they can go to the manufacturer and make much better, stronger, more optimized recommendations.

It might be on price, it might be our service, whatever it would be, on offerings, bundling, how to deal with tariffs and a lot of the volatility there. That's something that a distributor should really take the lead on. As long as they leverage the information that's in the business that they have.

Mark Dancer: And just taking the long view. There's sort of a, to me, an interesting observation about that. Probably 15, 20, 25 years ago I was working with some manufacturers who were trying to get distributors to give them their point of sale data and part of the pitch was, "We'll pay you for it, we'll give you a discount for it." But really what they were saying was, "You should give me that data because I'll do more than you will and then I'll give it back to you." That sort of attitude should not be there anymore. Right. Distributors using AI and analytics they should be the masters of that data and how to leverage it and how to squeeze every little thing out of it. Right.

Richard Blatcher: Agreed.

Well, Ian, thank you so much for your insights and your expertise. And Mark, as always, thank you for facilitating the conversation. And what we will do is to share your contact details cause you've got a website distributionstrategy.com, right?

Ian Heller: Yep.

Richard Blatcher: So we'll share your contact details to our listeners and our viewers to make sure that they can engage with you. And I'm sure we'll talk again and thank you again so much for your time.

Ian Heller: Thank you. I really enjoyed it. It was good to talk to you both.

Richard Blatcher: Thank you Ian. Thank you, Mark.

Mark Dancer: Very good. Thank you.

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