Independent distributors face stiff competition from large national distributors, which often have the advantages of multiple locations, greater capital for investments, and significant purchasing power. These factors allow larger distributors to offer a broader range of products at lower prices, making them appealing to business customers. Even long-term customers may be tempted to switch to a distributor with better pricing or a more extensive product range.
However, independent distributors have unique strengths, particularly in terms of specialized expertise and personalized services. By focusing on operational efficiency and building strategic partnerships, they can remain competitive against large-scale discount providers.
This was the key message shared during a recent expert panel discussion titled “The Future of the Independent,” where industry leaders explored the challenges facing distributors and the strategies they can use to thrive.
Jennifer Murphy, president of NetPlus Alliance, a buying group for distributors of industrial and contractor supplies, noted that independent distributors must keep pace with changes in technology, workforce dynamics, customer demands, pricing models, and broader economic trends. These challenges are more difficult to address when distributors lack the resources and expansive networks of their larger competitors.
Common weaknesses among independents include inefficient inventory management, outdated technology, limited financial resources, insufficient strategic planning, poor pricing strategies, and resistance to change.
Despite these challenges, many independent distributors are led by savvy business owners who capitalize on their unique market opportunities.
One such example is Prestige Fine Foods, a distributor that saw substantial gains after modernizing its business management software and streamlining operations. This company, which imports, manufactures, and distributes a variety of high end food and wine products, has achieved an average annual growth rate of 50% since upgrading from QuickBooks to an ERP system in 2007.
With a client-server ERP solution, Prestige Fine Foods gained full visibility into key areas such as financials, inventory, packaging, and distribution. The system’s manufacturing capabilities support custom packaging in their warehouse, while lot tracking ensures compliance with the food administration and other regulations, eliminating the need for manual processes. By effectively managing over 800 SKUs, many of which are imported, Prestige Fine Foods optimised its inventory and purchasing processes, enabling it to expand its wholesale distribution to major food industry manufacturers.
Independent distributors can also leverage their relationships with suppliers to negotiate better pricing or join a buying group to pool purchasing power with other small businesses. Additionally, knowledgeable employees can provide a level of customer service and expertise that larger discount distributors often lack, offering a key point of differentiation.
Murphy encouraged independent distributors to diversify their product offerings by attending industry trade shows and adding one or two products at a time.
Steve Short, president and CEO of Updike Supply, emphasized the importance of adding services that provide high value to customers and educating them about these new offerings.
Networking plays a critical role in staying competitive. Short advised independent distributors to build relationships with partners, customers, and even competitors, leveraging these connections for referrals, discounts, and other benefits from suppliers. He also recommended sharing expertise and joining trade organizations and local business groups to expand their influence and opportunities.
In summary, independents can compete by becoming experts in their field, being dependable, and actively networking within their industry. By embracing these strategies, independent distributors can effectively differentiate themselves from larger competitors and succeed in today’s competitive market.
