Supply House Times

Why Are Distributors So Secretive?

October 28, 2008

Coca-Cola has a secret soft drink formula worth preserving. Various companies have R&D projects underway that are good to hide from the prying eyes of competitors. Market research departments often uncover hard-won data they want to keep proprietary - until they figure out a price tag and peddle it to everyone they can.

I’m running out of examples of truly valuable business secrets. The ratio of business information deserving of confidentiality is about the same as the percentage of spam worth saving.

So why do so many distributors try to hide in plain sight when it comes to business information?

Don’t get me wrong, I love you folks, but I’m going to come right out and say that wholesalers as a group are the industry’s most secretive bunch by far. Manufacturers, reps and contractors are far more forthcoming in discussing their sales figures and operations than wholesalers, for reasons I’ve never been able to figure out.

Most wholesalers are reluctant to reveal even something as innocuous as their sales volume, though anyone with a feel for this industry can come within 10% or so via educated guessing. Even more to the point, does it really matter? What possible advantage can a competitor gain by finding out how much you sell in aggregate? In fact, competitors are in the best position to come close with an estimate. Maybe some wholesalers are trying to hide the information from creditors, the IRS, or divorce attorneys. This would be understandable, but I refuse to believe that so many of our industry citizens have so much to hide.

90% of their secrets are anything but. Information comes out from customers, vendors, reps, disgruntled employees, competitors and even the Internet. I suspect many wholesalers guard their privacy more to prevent embarrassing information getting out than to protect anything of value.

Business success has little to do with proprietary information. The American business community is renowned for innovation, but except for patented technology, it’s virtually impossible to keep innovations from spreading rapidly throughout an industry - and even patents expire eventually. Public companies - including some our industry’s largest wholesalers - are obligated to reveal their business strategies and fairly detailed financial information to all interested parties. Does that handicap them in any significant way? McDonald’s, Burger King and Wendy’s know everything worth knowing about one another, yet they still run distinctive operations, and that’s the way it goes in all large industries.

What makes a business succeed or fail can be summed up by one word - execution. It’s not what your employees do, but how well they do it that counts.

Am I missing something? Are there good reasons to closely guard innocuous information such as sales volume? Let’s hear your take on this.

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