Here We Go Again...
Some topics never really go away. Like "the wave" in a stadium, an issue comes around... there is a lot of standing up, screaming, arm waving, then it passes by just as quickly as it came.
But like the wave, it doesn't mean the arm waving and conversation on a hot topic isn't important to have once in a while. I know this has been addressed before, but based on the fervor over this in multiple discussion forums, it seems worth revisiting again.
The topic making the rounds is the current challenge to the longstanding supplier-distributor relationship model our industry is accustomed to. Yes, this IS a tired topic. Business strategies are always changing, which is expected, and the longstanding supplier/distributor/end-user model most of us are comfortable with is also changing.
We are in a competitive industry. Each of us, suppliers and distributors, are doing what we can to create business. When you have a supplier that sells direct to the end-buyer at pricing at, or below, a distributor's cost, it's frustrating. Conversely, many distributors will bypass suppliers on larger orders, going direct to the manufacturer. That's frustrating for the suppliers.
There are pros and cons for both. Going direct increases margins for each side, but is not without risks. Distributors need to deliver quality, safe products, which many of our domestic industry suppliers are able to provide. Established industry suppliers are better prepared to be in compliance with product safety requirements. Distributors are not in a position to control this part of the production process. Suppliers need to deal with the challenges of working with end-user buyers.
We can't ignore that price is important to our clients. I continue to believe that a good distributor with quality relationships can overcome many price issues with creativity and other value added benefits. But price is a factor. Some suppliers have direct sourcing programs that offer competitive pricing, making the margin argument for going direct less valid. Distributors and suppliers are experts at what they do. When any of us cross the lines of the supplier/distributor/end-user model, the results are often not what we hoped.
In recent news it was announced that supplier BEL Promo acquired an online distributor company, Branders.com. It is public knowledge that BEL Promo also operates Discount Mugs, a "distributor" company that sells mugs and all kinds of promotional products to end-users at very low net pricing.
The reality is that prospects and our customers look online for stuff. Discount Mugs and their lowball pricing rise to the top of many search engines. I've encountered Discount Mugs' aggressive prices, but for the most part have been able to navigate around them. It's a challenge and I understand why distributors are frustrated.
BEL Promo is upfront about their business model and distributors can choose to do business with them or not. There are many supplier companies that do the same thing, they just are not as well known.
I'm not as troubled with supplier companies who operate two distinct operations. One as a supplier selling at net pricing to distributors and another business selling at higher retail type pricing. A supplier selling direct clearly has a price advantage. In addition, there is a concern that suppliers who have a distributor side will take information provided by other distributors to their supplier side and steal the client. That's happened.
A while ago one frustrated person created a website dedicate to exposing these suppliers. The promotion for this site went like this: We're exposing the crappy suppliers in the industry and giving mad props to the ethical ones. Be sure to visit ShadySuppliers.com to stay in the loop! We covered in this our article: Do We Need a Website Like This?
The website landing page stated: Some suppliers are cutting your throat by selling direct, and even contacting your customers after you send in an order! Find out who they are! The Shady Suppliers tag line is: "Taking your customers, like a thief in the night." The site never gained any traction.
With the renewed interest in this discussion, a new website has been launched. This site has a straightforward, civil tone: www.safesupplierinfo.com. This goal is simply to provide useful information. You have the opportunity to list companies in these categories: Selling Direct: Another Name, Selling Direct: Same Name, Only Sells with Distributors. Feel free to contribute content to this site if you like.
In some discussion forums people are calling for full disclosure on the distribution methods of suppliers. That seems like a reasonable request, but who polices that? Some are calling for action on the part of the key organizations in our industry. Are they able to do that and is it their responsibility?
The reality is that businesses employ people and support families. Those who invest in companies are entitled to do what they feel they to do to succeed. Like it or not, how any business goes to market is their choice. You can't fault a supplier for searching for new markets to generate sales they need to survive. You can choose to do business with those suppliers or not, depending on your feelings on how they run their business.
Ultimately, savvy, ethical distributors and suppliers will have the best opportunity to succeed regardless of changing market conditions. Focus on being the best you can be. Don't get distracted by what others are doing. Take advantage of education opportunities; attend industry events and stay aware of emerging trends.
Oddly it seems appropriate to close this piece with the Serenity Prayer that is used in a variety of situations: God, grant me the serenity to accept the things I cannot change, the courage to change the things I can, and wisdom to know the difference.
Jeff Solomon, MAS is a distributor affiliated with a Top 10 distributor company. The FreePromoTips.com website and twice a month e-newsletters he publishes are packed with beneficial information. On the website, you can opt in to receive these informative e-newsletters! Check out what's new in the GP2: Good Products-Good Prices section of the site. LIKE their page on Facebook follow them on twitter and connect with Jeff on LinkedIn.