SMArketing Blog

“Navigating the Seas of Disruption” Insights from SMA's Dick McGann

Written By: Dick McGann |

Friday, February 24, 2017

Every three years, the National Association of Wholesale Distributors has sponsored the acclaimed industry study “The Forces of Change.”  An in-depth study of future trends forecasted to impact multi-channel wholesale distribution, Forces of Change is the only major analytical research of its kind.  In my opinion, the ten previous editions have proven to be an accurate prognosticator of things to come.  This year’s edition, “Navigating the Seas of Disruption," released in early January gives me confidence to report that the initiatives being undertaken by SMA are completely aligned with responses distribution must consider in response to the disruptive forces outlined in this study.

The six primary “disruptors,” referenced in the Forces of Change research are predicted to have profound influence on our affairs, and serve as a catalyst for change:

  • The entry of new competitors into the channel.
  • The internal and external functional changes required to differentiate oneself from the competition.
  • The shift in buying behaviors and expectations created by Millennials and “GenXers” in the workplace.
  • The increasing influence of technology on shopping and buying decisions.
  • The effect mergers & acquisitions is having on our industry and traditional business practices.
  • The creeping influence government regulation is having on our affairs.

A question often asked is, “Who would have thought that nationally successful hardware, MRO, or office supply companies would be interested in expanding their base of business by launching into the sanitary maintenance space?”  Answer: publicly traded companies experiencing margin compression, shrinking same store sales, and a bleak future are pressured by investors to grow their top line. These pressures have led to an explosion of competitors seeking to expand business into a space historically reserved for traditional brick and mortar distribution. Unfortunately, it is predicted that this trend will not end soon.

The Forces of Change study further suggests that distributors who have successfully dealt with these unwelcome intruders relied more on insightful leadership than operational management.

Additional key ingredients that enabled these companies to succeed while keeping up with the pace of change were:

  • The ability to connect all internal support activity with a clearly communicated strategic plan.
  • The capacity to quantify and report to the customer the value of services provided.
  • The use of customer intimacy/relationships to determine how the distributor could serve as a free employee in the customer’s business, performing services that brought surpassing value to the client enterprise.
  • The adoption of a consultative, solution based selling mentality.
  • The implementation of sales analytics to better understand the customers and their buying behaviors.
  • A commitment to continuous improvement of the service component of the relationship.

Additionally, industry consolidation has increased 30% over the past two years.  Regardless of where consolidation took place, these newly formed and larger organizations are rewriting the rules of engagement. Distribution enterprises with national service capabilities and/or technical supremacy, are targeting multi-unit end user customers, are aggressively promoting broad based cost reduction options.

Compounding the issue, Millennials and GenXers, who outnumber baby boomers, are highly dependent on technology in forming opinions and conducting research. These groups are ascending to roles where they determine selection of sourcing partners, and equally certain is that they will deploy technology as a rule of engagement.

These are challenging times that will test the mettle of our traditional operating model. SMA is comprised of some of the most resilient and successful business partners in the industry, firms that poses the creativity and foresight to contend with these challenges.  For those reasons, we have the utmost confidence that our future remains bright and that SMA is positioned for stability and greatness during these turbulent times. 

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