"It is impossible for ideas to
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Thomas Mann, 1896
The Business Forum
Compete in a Changing Landscape
This year includes more change in the distribution landscape. Wholesalers of
products ranging from material handling to safety supplies are facing increased
competition more than ever. Larger, resource-rich distributors are leading the
way in evolving traditional channels. The smaller distributors who do not adapt
may face a tough time competing.
What is competition among distributors like in 2013? And how can smaller
In this paper, we discuss the issues that wholesalers and distributors face and
spotlight the wholesale-industrial machinery & equipment market. These issues
affect most distributors who are considering interacting and selling to their
customers through multiple channels, especially ecommerce.
The Bad News
The bad news is that only a few distributors are equipped to compete directly
with large distributors and worse, many distributors are not making the
necessary changes in their operation to market themselves better and win
back their market share.
As stated earlier, this paper will address the industrial distributor’s
competitive landscape and recommend solutions that can be executed rather
quickly, without requiring significant financial investment. The recommendations
will focus on helping distributors compete more effectively without changing
their business model.
The Competitive Landscape
Companies in this industry distribute machinery and equipment used in
manufacturing, oil and gas exploration and production, and warehousing. Major
companies include W.W. Grainger, Ferguson, HD Supply and Fastenal.
According to the US Census Bureau, the US industrial equipment wholesalers
industry consists of about 33,000 companies with combined annual revenue of
about $131 billion. Domestic demand for industrial machinery is expected to grow
moderately in the next few years. Key growth drivers include low interest rates
and the health of the economy.
Demand depends heavily on US manufacturing activity. Profitability depends on
having the right product selection and running an efficient operation. Large
companies have the budget to launch big advertising and sales programs, while
smaller companies compete by specializing in particular industries, end-use
applications, or geographical areas, and by offering special services.
The industry is highly fragmented: the 15 largest companies account for about
$56 billion of industry revenue:
The 15 Top North American Distributors
(Based on 2011 Revenue)
1.Ferguson (Wolseley) $9.75 billion
2.W.W. Grainger $8.1 billion
3.HD Supply $7.7 billion
4.MRC Global Corp. $4.8 billion
5.Airgas $4.7 billion
6.Motion Industries $4.2 billion
7.The Fastenal Company $2.8 billion
8.Wilson/CE Franklin $2.62 billion
9.McMaster Carr N/A
10.Applied Industrial Technologies $2.2 billion
11.MSC Industrial Direct $2.02 billion
13.WinWholesale Inc. N/A
14.Edgen Group $1.7 billion
15.Interline Brands $1.25 billion
A note about
Not shown in the previous list is newcomer Amazon Supply that was formed in
April 2012 by $61 billion Amazon.com. This will be a company to watch since it
has made an aggressive entry in the highly competitive industrial distribution
space. It will leverage Amazon’s excellent fulfillment proposition and
will invest further in having the right inventory with effective customer
Industry News Headlines
With this landscape becoming increasingly competitive and now facing the entry
of a newer potential threat (Amazon), these current industry leaders continue
their investment in ecommerce:
In 2008, Chris Ann Jackson, Manager ecommerce at Ferguson, North America said,
"Through research projects and focus groups, customers told us they wanted more
functionality online and they wanted us to make it even easier for them to do
business with Ferguson. "
In December 2011, W.W. Grainger’s website accounted for as much as 40% of all
sales 3 while in January 2013; Grainger reported sales of $9 billion in 2012.4
HD Supply Facilities Maintenance, a distributor of maintenance, repair and
operations (MRO) products, recently released its 2012 full-line catalog,
featuring more than 22,000 in-stock products.
Airgas launched its initiative to overhaul its current e-business platform at
the beginning of 2012, with a roll-out of the new platform scheduled for the
first quarter of calendar year 2014.
MSC Industrial Supply Co., one of the nation's largest maintenance, repair, and
operations (MRO) distributors has teamed up with Ariba, Inc., the world's
business commerce network, to create an efficient, consumer-like shopping
experience that enables its customers around the world to quickly find, buy and
receive the goods they need.
Fastenal Company, an international industrial and construction supply company,
has selected Knotice’s Concentri® SiteTarget to improve web site content
relevance and conversion performance on http://www.fastenal.com and the
company’s landing pages.
These top distributors know that they must continue to support evolving channels
with new technologies in order to stay ahead of the pack.
We are moving in fast company these days, and we simply have to move faster than
anyone else if we want to lead the race.
Thomas J. Watson, Jr.
What if you had the guidance to compete among this background of news? Is there
a chance to capture some of the market?
There is. And here’s the game plan.
Make Your Inventory Visible
If you intend to gain market share within the current landscape then you need to
provide your customers with a means of showing your complete product line. Your
customers need to know that you offer what they’re searching for. This means
showing appealing images, adequate product descriptions and have technical
specifications that will facilitate their research. If you as a distributor make
it difficult for your customers to view your products they will move onto a
competitor that will make it easier.
Offer Your Products Online
Industry leaders know that in order to be on par with the best of the best, they
need to have all their products online. Online ordering furthers your reach as a
distributor – you may be a regional player, but now you’ll have national
presence. Similar to what was stated earlier, a well-designed website includes
being easy to use, having attractive product images, allowing quick product
search and enabling a robust check out process. Further, facilitate transactions
by not requiring your customers to register and instead offer check out as
Send out “Offers”
A powerful way to strengthen your relationship with your current customers and
introduce yourself to potential buyers is through print and digital
communication. The idea is to remain ‘top of mind’ with your target audience and
the messages you send should always be of value.
Building an effective marketing database will allow you to do this in an
effective manner. By leveraging a database, you will know when it’s appropriate
to educate your customers on new product launches, offer them incentives to buy
or forward industry news that may benefit their business. The bottom line is
that your target will appreciate anything of value you have to offer them.
It is important for customers to know what your products cost. If you feel this
will scare off potential buyers then make it a point to state that you are
willing to negotiate. The published price can serve as a starting point for
conversation. Not having prices shown sends an incomplete picture to your target
and you want them to make an informed decision and prevent them from seeking
this information elsewhere.
Simplify Your Transaction Process
Offer your customers a means of streamlining their transaction process. Make
sure your order entry system allows for your sales reps to quickly locate their
customer’s basic information including contact and company names, phone numbers,
email and physical addresses and method of payment. A well-designed website
should include the means to store this information right from the start.
Registering your customers online will allow them the ability to check out with
very few clicks on subsequent visits. If customers find it
easy to buy from you, they will call on you more often.
Understand what you’re selling and you’ll gain the trust of your customers.
They’ll come back to you more often because they’ll want to consult with the
experts in the field. This service not only offers the benefit of an improved
customer experience, but the feedback you gain from your customers will allow
you to make further improvements to your business. Offering technical support
can sometimes be one of the main reasons a prospect chooses your products over
To counter the situations where you feel the competition has an edge, we offered
the above 6 point structure for you to follow – at the very least use as a guide
for your current operations. When your customer enters the buying cycle they
will start online shopping across potential sources, you do not want to miss the
opportunity to sell to them.
You do not need to replicate the top 15 distributors’ sophisticated merchandising
and category management offerings. But you cannot afford to be invisible during
this important moment in the cycle. Developing marketing programs to stay top of
mind with thoughtful valuable communications will give your customers reasons to
look for you and provide incentives them to buy. Lastly, reduce the incentive for the
customer to shop around by making it easy to conduct transactions with you and
presenting yourself as the expert of the product you are selling.
is a web development and marketing company that supports small to medium
size businesses using the Magento eCommerce Platform. Magento is an open sourced
solution that continues to evolve with each extension developed and with each
system upgrade. One of Magento’s key selling points is its ease of use for both
the seller and the customer. The Magento platform addresses all the points made
in this paper through a robust solution allowing for attractive product
displays, powerful search capabilities, targeted promotions and merchandising,
and an easy check out process.
You can learn how this is done through a personal webinar. To schedule a
webinar, please call 626.506.2859 or email us at
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