Electrical distributors – That vital link

The current realities of the market put great pressure on all operators in the electrical market. As both manufacturers and retailers are fighting hard not only for market share but also for survival, the distributors feel the pinch at both ends. “Wholesaling is probably one of the toughest markets to enter into, being squeezed both by the customer and the supplier. Only the strongest and most resolute can succeed and now this is tougher than ever.
Retailers demand quality products (as they do not want faulty goods coming back); just-in-time deliveries and a service and after sales service second to none; prices that enable them to compete with the multiples and an enormous range of products to give one-stop shopping, as most independent retailers are owner/managers and cannot spend time dealing with 20 or so different distributors,” comments Martin Gibbons, managing director of Jegs.
Highest efficiency
So what is, in a nutshell, the role of the electrical distributor at present? “With the market under such extreme pressure, electrical distributors today need to offer the widest range of products, have them in stock at all times and offer them to the trade on a just-in-time basis. Today’s electrical distributor needs to offer an unrivalled portfolio of products and supply them as efficiently as if the retailer had them in their own warehouse,” says Neil Drain, managing director of Lawton.
In the market where everyone expects instant results “this means tighter and more efficient working practises, high-speed order processing and fulfilment, and very low minimum order quantities to ensure retailers can have exactly what they need when they need it. In addition, the service and support levels expected by the retailer have increased dramatically, as more complex products demand services, such as a fully manned help-desk and technical back up,” adds Neil Drain.
BDC’s Helen Harding, head of brand marketing, agrees: “Effective supply chain management is key to providing retailers with the standards of service they require while allowing the distributor to gain competitive advantage in a tough market. By reviewing the total supply chain, distributors can identify gaps and develop faster ways of getting the product to the retailer on time and with a minimum of waste.”
Clearly, the speed of distributors’ response becomes their competitive weapon. A London-based independent Lee Holloway who manages Raff UK commented to IER: “I have a number of direct accounts with manufacturers which I use frequently, but when urgent availability and speed of delivery is key, I go to my regular distributor whose service is second to none.”
As ‘time becomes new money’ and customers expect retailers to deliver goods almost overnight, not only the speed of delivery but also the breadth of product offering becomes a deciding factor for an independent choosing a distributor. “As retailers push to reduce the number of different vendors they do business with, it becomes increasingly important that the ones they trade with offer products across every part of the spectrum – white goods, consumer electronics, small appliances, lighting, heating and accessories, comments BDC’s Helen Harding.
Beneficial relationship
Distributor’s service comes at a cost – however competitive this cost is. It has to be perceived as a value for money proposition by the independent for the distributor/retailer partnership to continue. So what are other benefits of this relationship? The traditional one is the distributor’s stockholding capability which addresses the space limitation in the dealer’s store. This situation may have been improved slightly for the ‘brown goods’ independents by the reduced package volume of the flat panel TVs in comparison with CRTs. However, increasingly larger sizes of flat panels and large pieces of AV furniture eat up stockroom and warehouse space and the stockholding value strains retailers’ cash-flow and liquidity.
Equally important is limiting the risk of overstocking, particularly in a price sensitive market. “It would be disastrous for a retailer to buy in large volumes top of the range LCDs and then find that the market price has dropped and they are left sitting on stock. By calling off product direct from the distributor when required, the retailer avoids that danger, “comments BDC’s Helen Harding.
Increasing sophistication of products and growing market regulation also calls for another type of support which some distributors are able to provide. “We believe at Jegs that our area sales managers must be competent and up to speed with the latest product usages and regulations. In the Jegs extensive catalogues we have articles on the WEEE Directive; Part P; comparison charts for energy saving lamps, button batteries and many other useful pieces of information which is at the disposal of the retailer; and fully trained staff who will help any customer with further information on such regulations, products and comparisons,” says Jegs’ Martin Gibbons.
Some distributors also offer product- and sales-related training. Gordon Dutch, chief executive of BBG, who personally delivers the training comments: “The retailers themselves are not taking this area seriously enough. Yet, in our training, we explain the issues facing the independent retailers, so all staff understands the issues and the business; we explain how to address them, how to improve on them and leave the staff feeling involved and confident in what they need to do for the store.”
The other end of the spectrum – manufacturers
The distributor/independent partnership is defined, to a large extent, by the relationship at the other end of the retail chain – that of the distributor/manufacturer . “The distributor provides the elements of service that manufacturers cannot,” stresses Stephan Hollingshead, deputy chief executive of Inmans. “Our reasonable returns policy takes away a big headache for the retailer. We also help with service arrangements and advice. These are all areas where we can significantly outperform the manufacturer. In addition, the distributor must proactively manage offers and promotions on behalf of the manufacturer.”
Yet, at times it may mean simply being an extension of the manufacturer’s warehouse. “That means if the manufacturer does not have a product in stock they can come back to us and we will supply it as a trading partner,” says Adrian Gillman, managing director of D.A.D.
A distributor trading with the independent sector has to be selective in its choice of suppliers. Lawton’s Neil Drain explains: “We have become highly selective in brands we take on because the products must offer selling differential and exceptional value, and the manufacturer must be able to maintain the level of product support that our customers expect from us. In return we offer a complete service to the manufacturers that is more akin to outsourcing a complete sales, marketing and logistics operation rather than the traditional distribution model of just sticking their products in a catalogue.”
Best sellers
Operating between manufacturers, responsible for the supply side of the industry and retailers who respond to customer demand, distributors closely monitor sales trends in the market.
“In consumer electronics flat screen TVs are still driving the market; the choice between Plasma and LCDs is still open – depending on what you want to pay and what you want to watch – fast action sports or general programming.
The independent can also take advantage of some great warranty covers from the manufacturers, ” comments Helen Harding at BDC. Inmans’ Stephan Hollingshead adds to this Freeview devices, all of which offer a welcome return to higher value product with good margins for the independent, and an opportunity to offer a service distinguishing them from the competition.
In the accessory sector, the best-selling products are HDMI, AV furniture, wall brackets and personal audio/DAB. Particularly HDMI is a fast growing high-volume market on the back of the HD revolution. “The sheer diversity of wall brackets again lends itself to just-in-time distribution, allowing retailers to get any bracket for any TV on a next day basis as opposed to keeping several hundred lines in stock,” adds Neil Drain of Lawton.
For D.A.D. which operates in the domestic appliances sector “the best selling lines are still laundry – it’s a washing-orientated UK business followed by range style appliances, retros etc.” comments Adrian Gillman.
Raising the bar
It is unlikely that the present difficult market conditions are going to alter significantly over the coming months. Technology developments continue to accelerate, making obsolescence faster and product lifecycles shorter. Therefore with the continued erosion of prices, margins and profits, the demands put on distributors, by both manufacturers and retailers are only going to be greater.
“Maintaining and developing a first class service is the main challenge for distribution companies into the future. Retailers will be looking for a more comprehensive service, including a live help-desk for technical queries, immediate answers to what brackets fit what TVs, for example, and also a strong commitment to sales and product training,” comments Neil Drain of Lawton.
It is obviously a good time to raise expectations in relation to your distributor – the partner who could be instrumental in gaining or losing that important sale. There is no need to accept second best. Yet, “I find that retailers have been buying from the same supplier for years, despite the poor service, high prices and limited range and are reluctant to try something new, even if the evidence is overwhelmingly in support of the other supplier. An independent retailer is fighting against the multiple. None of the above would be tolerated for one minute by a large multiple.” says Jegs’ Martin Gibbons.
Make sure that in the future you keep company with the best only.