Master Distributors Fill A Key Niche
Master distribution is a testimony to entrepreneurial inventiveness in a free economy. Our industry's manufacturer-distributor channel serves as the best way to get bulk goods to market, but it doesn't work all that well for dealing with oddball items, short orders, imports, repair parts and other specialty goods that don't fit snugly into this channel's normal stream of commerce. Master distributors popped up to fill the gaps.
The role of the master distributor has been enhanced over the years as product lines and suppliers - especially those from overseas - have multiplied. That's why we decided to survey our readers about their purchasing habits vis-à-vis master distributors.
It's the second survey of its kind in a two-year span. We did this to see if there are any significant variations in purchasing habits indicative of a recent trend.
In comparing the results of our 2005 survey, completed last December, to the previous one evaluating the 2003 calendar year and published in the April 2004 edition, we can find only one noteworthy change falling outside of the plus-or-minus 5% accuracy claimed by our market research department for a survey of this nature: that was in the number of master distributors purchased from. Our question asked: “Approximately how many PHCP master distributors did you purchase from in the past year?” The 2003 results showed 55.8% of respondents saying they patronized between one and four master distributors, while the 2005 survey reflected 68.6% saying they bought from between one and four. Corresponding to this was a significant decline in the number who said they purchased from between five and 10 master distributors - from 19% in 2003 to 11% in 2005.
The best interpretation this observer can lay on this result is that it reflects an industry-wide trend toward vendor consolidation. One wouldn't necessarily expect master distributors to be much impacted because of the nature of their business in supplying short orders and hard-to-find goods, but I can think of no other reason for this result. It also coincides with a remark submitted by one survey respondent: “We are always looking to cut back on the amount of purchases from master distributors. (Our vendors) usually have purchasing goals set for us annually, and buying from master distributors deters us from reaching those goals.”
The SUPPLY HOUSE TIMES 2005 Master Distribution Survey was a Web-based questionnaire distributed to some 5,000 PHCP wholesalers in all regions of the United States. That was 1,000 more than our previous survey. The response rate was 9%, higher by several percentage points than the usual expected response for a Web-based survey. Percentage-wise, response was within a tenth of a percent the same as the last survey.
The graphs and charts accompanying this story nicely summarize the gist of our findings. I see no reason to waste space with a narrative further explaining what's self-explanatory. What I do think is worth sharing, however, are the comments received from various respondents to the final question on our survey, which asked: “Please…describe ways master distributors can better serve your needs, or raise any other performance issues you think appropriate.” The wholesalers who purchase from master distributors had this to say:
- “Be there when needed, even on Sunday.”
- “Web-based order management and order tracking, weekend hours.”
- “Better customer salesroom for parts and equipment, more or less for impulse buying.”
- “Keep us informed of new developments (and) do not sell direct.”
- “Be more discerning in the type of companies you sell to.”
- “Faster service becomes more and more required from (our) clients.”
- “Growth in offerings, prompt shipment, having items in stock for immediate shipment.”
- “Have product on the shelf, be able to ship the same day.”
- “Having the right mix of inventory and same-day, low-cost shipping are key, along with friendly, knowledgeable service at a competitive price.”
- “Keep me better supplied with literature and price sheets - some are great with this.”
- “Increase inventory levels and broaden the base.”
- “Manufacturers need to educate the inside sales personnel better, many are not very helpful.”
- “Most masters don't seem to carry a lot of variety of stock, some products are in short supply.”
- “Pay us our due commissions when shipping into our territory.”
- “Educate sales and counter people better, get away from being order takers … (lead) us to products that do the same thing in new and better ways.”
- “Provide more access to leading products' list price catalogs and information sheets.”
- “Some master distributors' costs are too high, and they only get my business when availability is a problem.”
- “They have all been wonderful - fast, friendly service, technical support that is second to none.”
The entire 50-page study, titled “PHCP Master Distributors Profile,” can be obtained for $95. Contact Cory Maxwell at email@example.com
WHAT IS A MASTER DISTRIBUTOR?A common definition of a master distributor in our industry's parlance is that of a distributor who sells to other distributors. But this definition suffers from a lack of precision.
For one thing, almost every wholesaler sells at least a little product to fellow wholesalers from time to time when someone needs something in a pinch. Moreover, depending on product lines and other factors, some companies widely regarded as master distributors may sell to other customers besides wholesalers. Some master distributors also manufacture some of the items they sell. Does this make them a manufacturer or a distributor? Some operate other kinds of businesses, such as BAVCO's backflow repair or Kolson's decorative showroom operations.
For the purposes of this article, we've defined master distributors as companies whose main business is selling to conventional PHCP wholesalers, even though they may be involved in other endeavors as well.