Wholesale distribution trends

Strategic inflection points

The wholesale distribution industry is experiencing rapid change, where new business fundamentals are key to capitalizing on evolving challenges and opportunities. Many wholesale distributors are looking for insights into distribution disruption and the myriad forces that are shaping the industry. Some distributors are responding to disruptive wholesale distribution trends by exploring incremental growth and cost-reduction opportunities. They wrestle with such tactical questions as:

• Which tuck-in acquisitions will contribute to growth?
• What products and/or brands can I add to augment my line card?
• How can I stem margin erosion?
• How can I better streamline SG&A?

However, only a select few are assessing the forces of distribution disruption and considering more strategic questions, including:

• How should I be leveraging digital innovations?
• How can I energize my wholesale distribution business with information technology?
• What new business models can I enable with digital?
• How are leaders from other industries harnessing digital for competitive advantage?

Reaching an inflection point is not inherently a negative event, but rather a disruption in the current state. Wholesale distribution disruption can bring with it either positive or negative consequences. How effectively distributors evaluate their options around the factors affecting distribution, and how decisively they move forward, will largely determine which path they follow beyond the inflection point.

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Distribution disruptions and inflection

The sheer number and magnitude of the factors affecting the industry present a shifting landscape for distributors to navigate, while change has long been a core component in wholesale distribution trends, historically these advancements have been evolutionary and not transformational.

Among the more compelling factors influencing this tumultuous landscape are accelerating digitization, expanding competition, emerging customer demand, product innovation, continuing disintermediation, and consumerization of expectations.

Traditional wholesale distribution is characterized by cautious, geographic expansion into contiguous markets, extension of product offerings into complementary categories, and acquisitions centered on tuck-in strategies. But distributors are often less accustomed to seeing the emergence of new competitors leveraging completely new business models, rapid advances in and adoption of new technologies, or seismic shifts in how customers want to interact and transact. These are the hallmarks of distribution disruption at the inflection point.

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Wholesale distribution disrupted: A framework for the future

Success for distributors of the future should center, much as it does today, with the customer. Indeed, despite the disruptive forces impacting distribution and many of its long held orthodoxies, this “customer first” belief holds true for the current inflection point.

However, wholesale distributors of the future should transform their thinking from simply meeting customer needs to anticipating and shaping them, and proactively delivering solutions to problems that customers may not even know they have.

Distributors of the future should also understand that effectively engaging customers demands true innovation in executing the value chain. Traditional approaches to inventory, logistics, pricing, rebates, and network can be reimagined through the application of advanced analytics and technology innovations.

Given the importance of data, analytics, and technology to both engaging customers and executing the value chain, wholesale distribution organizations should also leverage IT to truly energize not just enable the business.

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