Delivering for Best-in-Class Wholesaler-Distributors
November 1, 2018  |  ByMark Dancer, NAW Institute for Distribution Excellence Fellow

When it comes to getting compensated for value, there is a massive elephant in the room — distributors are in the wrong business. Or, more accurately, they have the wrong business model. Distributors are service companies built around a business model designed to sell products. Customers buy products and reap value created by distributor services for free. Granted, distributors attempt to align prices and margins with the value created for customers, but competition and negotiations deal away price to capture sales. Everyone knows this.

In particular, distributor advice around technical service and product applications often go far beyond helping customers confirm purchase decisions. Distributors help customers solve problems, optimize product use and plan future purchases. All for free provided on the hope of future purchases. Long-term customers are aware of this arrangement and access distributor expertise without direct compensation through well-established behaviors. All customer-facing positions at a distributor reinforce these behaviors as part of a “we’re here to help” business culture. Years of customer and distributor behaviors lock current precedents in place.

The generational turnover of customers may unlock the door to a solution as users, decision makers and buyers bring new shopping and work habits to their organization. First, virtual interactions are often favored over human contact. Information is gathered through social media, text messages and online searches, and preferred over visits and calls unless the latter is necessary. Second, as consumers, the next generation of customers is very familiar and comfortable with access (or gig) economy services including Uber, Lyft, Airbnb, Zipcar and more.

All of this adds up to an innovative idea for distributors to explore. Can distributors offer and sell technical capabilities and product knowledge as easy-to-buy services through a digital interface. A quick internet search reveals several B2B services provided through access economy models, including Axiom (legal support), Flexe (warehousing), SpareHire (talent on demand) and Getable (equipment rental). Can distributors follow suit? Perhaps, but only if offerings cover emerging best practices.

From the customer perspective, access economy services must provide businesses with capabilities that they are unable or unwilling to create in their own business.  Services can only charge for what the customer needs, and thereby develop efficiencies and profits. These financial metrics may be situational, helping the customer to overcome an urgent and temporary issue. Or, they may be ongoing, enabling a customer to achieve flexible resourcing and while developing core or essential capabilities worthy of permanent investment. From the distributor’s perspectives as a provider of access economy services, the goal is to unlock the pent-up value of the company’s knowledge and skills, and to improve utilization of underused assets.

To get started, we recommend that distributor innovation teams evaluate four scenarios to unearth potential opportunities:

  • New customers that don’t buy from distributors. This is a free market test as a distributor’s technical and application knowledge is offered to businesses that might have a need for independent sources from other service organizations, which might include engineering firms, consultants or academic organizations.
  • Traditional customers that are not current accounts. Distributors may be able to poach customers from competitors by offering carefully crafted services. This approach assumes that “for free” services are not fully developed as those provided for a price.
  • Unbundled support for existing customers. This approach is about giving customers a choice by offering services for free through usual buying methods, and for a fee through a new virtual interface. It is essential that the offers are kept apart — sales and customer service people cannot give away for-fee services for free.
  • If you can’t beat them, join them. Are disruptive start-ups offering technical services to customers? If so, can distributors use emerging access economy models to sell their employee knowledge and skills?

From a planning perspective, working through these scenarios can test an innovation team’s ability to imagine and evaluate game-changing concepts. If there is a hint of success, distributors can work on testing concept services with customers, much as a manufacturer examines early-stage product concepts.

Finally, by working through the scenarios internally and in the market, distributors will strengthen their ability to monitor shifting customer expectations and avoid being broadsided by a disruptive surprise.

The Gig Technician concept is one of 25 innovation ideas that we have collected through our ongoing research for the next Facing the Forces of Change® wholesale distribution trends study to be published by NAW in late 2019. In the meantime, you can read about all 25 innovation ideas in NAW’s new challenge paper, Creating Innovations and Shaping the Future of Business: A Look at Commerce, Technology and Human Forces in Distribution. Each innovation idea is identified through brainstorming with distributor leaders and by bringing new ideas to bear from outside the distribution industry. All of our innovation ideas are a work in progress. We need your help. If you have comments on this post, or if you have relevant examples or expertise to share, please reach out to me at mark.dancer@network4channelinnovation.com.

And, if you’d like to receive updates related to the next Facing the Forces of Change® study, complete and submit this form and we’ll keep you in the loop.

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Mark Dancer, NAW Institute for Distribution Excellence Fellow

Mark Dancer, NAW Institute for Distribution Excellence Fellow

Mark Dancer founded the Network for Channel Innovation to drive awareness, advocacy and excellence for channel innovation, and to enable an exchange of ideas between channel leaders on business transformation, technology adoption, social impact and community engagement. For more than 30 years, Mark has worked with leading companies to achieve channel excellence across a wide range of industries in developed and emerging markets.

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