“Cut out the middle-man” is the last phrase wholesale distribution companies want to hear. The growing threat of the D2C model, however, is putting the relevance of distributors into question.
Manufacturers are constantly looking for ways to increase profit margins. However, the age-old model of manufacturers selling in bulk to wholesale and distribution companies who sell to retailers puts customers through a few rounds of mark-ups. These increases add to the end purchase price and can eat into manufacturer margins.
eCommerce saw massive acceleration due to COVID-19. Consumers around the globe took up digital shopping amidst lockdowns and physical restrictions. Online retail sales accounted for 19% of total retail sales in 2020, up from 16% the year prior, according to a recent UNCTAD report.
These shoppers aren’t looking back, either. Global eCommerce is expected to reach USD 1 trillion for the first time in 2022, as reported in the Adobe Digital Economy Index.
A hyper-competitive environment for wholesalers
The increase in online activity has made a more competitive environment than ever for wholesale distributors and sellers. For example, 53% of regular shoppers bought from more than 9 sources in 2020 (compared to 36% in 2019). As consumers become accustomed to buying from online-only businesses, marketplaces, and retailers offering exciting new eCommerce experiences, the stores you supply to are now fighting for customers’ attention.
D2C (Direct to Consumer) is also a growing threat to wholesale distributors. Manufacturers are building distribution capabilities to cut out the middle-man and boost profits. Facing ongoing supply chain issues, brands uncovered new ways to reach customers, and in 2020, the US experienced 46% D2C growth.
One example of the D2C manufacturer model seeing colossal success is Nike. In just 10 years, the company’s D2C model has grown from contributing 13.5% to 33.1%, nearly a third of its total revenue.
Wholesale distributors need to be more competitive than ever and create points of difference to stand out from competing channels. The delivery of first-class fulfilment, better customer experiences, and exceeding customer expectations can help distributors stay relevant and create sustained competitive advantage.
Fulfilment is the new differentiator
Fulfilment is a significant challenge for which many manufacturers aren’t yet ready. If not managed correctly, the distribution of products can quickly pull down a brand’s reputation. Wholesalers that create fast, class-leading fulfilment processes can demonstrate real value within the supply chain and truly stand out. By enabling faster replenishment, wholesalers can help sellers increase their position while decreasing their required stock on hand. To better support sellers, wholesalers need to minimise receipting, processing, and transportation times. Uninterrupted supply flowing from sellers to consumers leaves a positive impression on both retailers and brands.
Demand fluctuations and unexpected changes have created additional fulfilment challenges. This was illustrated by the impacts of lockdowns in Victoria, Australia. The usual peak for online purchases starts around October. In 2020, however, 36% of the year’s online retail purchases happened between July to October due to state lockdowns. React quickly to changes, and you’ll be a critical link for sellers to keep fulfilling consumers orders with limited delays.
While ongoing supply chain issues and rapid changes have impacted fulfilment, it also represents an opportunity for wholesale distributors. Those who lead the way with fast, reliable order fulfilment can make a lasting impression on customers.
Reduce stock turn-around through accuracy and efficiency
To increase warehouse efficiency, review the systems and processes you have in place. You need to ensure the accuracy of inventory and streamline processes to reduce stock turn-around time. Key considerations include:
- Optimised replenishment to set preferred stock levels and reorder points
- Multi-location planning to balance supply and demand across geographies
- Cycle counting for regular checks that maintain inventory accuracy
- Traceability that includes full tracking by lot or serial numbers
- Tracking of related information of products and assembly items and related transactions
When customers know they’re getting the best pricing the first time, they have confidence in you as a wholesaler and in your relationship with them. Personalised pricing can include:
Quantity price breaks
Offer lower price breaks based on set product quantities. Price breaks incentive customers to order in larger amounts and help protect your margin on smaller orders.
Pricing that rewards customers
Set special pricing for strategic customer relationships. You may want to reward loyal customers with lower pricing the longer they’ve been with you or for those who order more regularly.
Limited promotional pricing
If you want specific customers to sell more of particular product lines, try running a time-bound promotion. Let customers maximise their margin on product lines while selling more of those lines.
Report and optimise
It’s crucial to optimise stock based on trends and changes. The last thing you want is over-ordered stock taking up valuable warehouse space and becoming a cost to the business. Conversely, under-ordered stock creates bottlenecks, fulfilment delays, and lost opportunities.
Regular reporting will keep you across changing demand trends. Compare trends to previous years to identify peak periods across different product lines. Also, note short-term trends emerging where lockdowns, or eased restrictions, affect the usual product demands. Inventory and supply chain management systems bring live visibility of your stock position, backorders and commitments with real-time dashboards that keep you informed.
Demand planning and forecasting, included in some cloud ERP inventory systems, lets you estimate stock requirements with far greater accuracy. These systems also bring minimum and maximum reorder levels that can be set and triggered automatically, keeping your inventory at optimum levels.
Experiences that make you remarkable.
Store visits to sellers were one more aspect of the wholesale distribution model interrupted when COVID-19 hit. Physically meeting with customers isn’t the only way to build strong relationships, however. Whether customers are working from home or back in physical stores, relationships are about value and experience.
You can add more value to every conversation by starting from a place of information. Customer purchase history, account history, and records of past interactions give you a solid baseline to frame more valuable conversations. A proactive approach to addressing any past issues or suggesting new product lines based on purchase history will make you stand out. ERP systems bring data together from across the business, including finance, warehousing, sales and CRM, and more. Learn more here about how ERP is helping wholesalers deliver better experiences and amplify their success.
Your expertise is another value-add that customers appreciate. Information about product trends and upcoming releases can keep customers at the forefront. Your experiences with product quality, popularity, and competition will also get you remembered as the wholesaler with which customers want to interact.
In the eCommerce boom era, customers are now expecting consumer-like experiences. A modern eCommerce portal for sellers to view live product, pricing, and stock information whenever they need to can leave a lasting impression of you as a preferred wholesaler.
The foundations to stand out from competition
The rapid adoption of online shopping by consumers and D2C models being explored by manufacturers were existing trends that accelerated in 2020.
Wholesale distributors need to be more competitive than ever, offer better customer experiences, and examine where they can gain a competitive advantage.
Every wholesale distributor should be equipped to amplify their success; this starts with the right foundations. An inventory management and fulfilment system can be a good place to start. A cloud ERP system, however, takes things a step further to future-proof operations. ERP (Enterprise Resource Planning) is a consolidated system that includes inventory, warehousing, supply chain, procurement, sales and CRM, marketing, and more.
The right technology partner for an ERP implementation will take the time to understand your current systems and processes and create an individual plan for your business needs.
If your current systems are creating bottlenecks, slowing down fulfilment, or leaving you with doubts over your inventory accuracy, it’s time to build a better foundation.
DWR delivers the tools to amplify success; by bringing the right ERP technology, process framework, and team of business experts together. Talk to an ERP expert about what your ideal wholesale distribution operations look like.
Start standing out from the competition, and take the next step to leap ahead.