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The Business Forum Journal


How Industrial Distributors Can
Compete in a Changing Landscape


Contributed By Thoughtrend Inc.



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 distributors compete?

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. 1 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 2: (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
12.Sonepar N/A
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 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 service.

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. 5

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. 6

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 and the company�s landing pages. 7

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.
President IBM
October 1963

The Solution

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 �guests�.

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.

Price Everything

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.

Technical Support

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 the competition.

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.









Thoughtrend Inc. 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 [email protected]

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