The annual ASA-Supply House Times distributor roundtable, which takes place at NETWORK each year, has always been published in two parts as distributor members tackle topics from supply chain status and inventory management to government affairs and hiring. Below is part two of the conversation which dives into threats to distribution, working with the next generation and more. Be sure to catch up on part one of the roundtable discussion if you missed it in the January issue.

THREATS TO DISTRIBUTION

With big-box stores focusing on selling to the pro, online retail rising customer expectations and industry consolidation looming, the road to continuous relevancy is never easy for independent distributors.

Pace Supply’s Keith Hubbard kicked off this conversation by pointing out that big box stores are targeting distributors’ customers. “Our biggest threat is our inability to change quickly enough to meet customers’ expectations and needs.”

Hubbard explained that while there are many customers who want the value add services and expertise that distributors offer, there is also a group of customers coming in that don’t need or want those value add services. “We’ve found success in talking to our customers about what they want and need, how we can help them face their challenges, etc., but there is a whole subset of customers who are just after a frictionless experience.”

Distributors around the table agreed that an independent distributor’s edge is the added value they bring via product and industry expertise, experience and reliable relationships. But according to Hubbard, the question is how to monetize those services in order to compete in such a competitive marketplace?

“We need to make sure we’re the best at the things we offer customers that competition cannot,” he said. “We’re looking closely at our cost-to-serve and focusing heavily on meeting the customer where they are.”

“It’s a great business, an honest business and a people business. We can sit next to each other as fierce competitors and still help each other out which speaks volumes about our industry. I’d like to do a commercial about the plumbing wholesale business to show it’s more than just selling toilets or driving a forklift. It’s so much more.”
— Matt Laiolo

While none of the distributors around the table said they are currently charging for services, it was evident that identifying cost-to-serve with value add services needs to be a priority moving forward.

Rubenstein Supply’s Matt Laiolo brought up another threatening factor — manufacturers selling direct to customers. “Some manufacturers are going direct to the customer, and it’s only gotten worse in recent years,” he said. “They’re expecting us to handle rebates and they’re creating national accounts and builder programs which is taking us out of the equation. We’re looking to partner with manufactures that aren’t going to take sales out of our hands in the long run.”

Ihrie Supply’s David Price agreed, saying, “I don’t have an issue competing in the same market with a fellow wholesale-distributor, I have an issue competing with the manufacturer.”

Consolidation entered the roundtable as another potential threat to distributors. Hubbard pointed out that consolidation at both the distributor and manufacturer level is going to continue to drive price and margin challenges. “We’ve also got consolidation of customers to watch,” he added. “We’re seeing some of our customers get purchased and their sourcing practices and loyalty can change when that happens.”

Kenny Pipe and Supply’s Anderson Hill agreed, noting that consolidation among manufacturer partners is a growing concern. “Consolidation with our manufacturer partners is always a concern, especially in today’s climate where we rely on multiple manufacturers to fulfill our customer’s needs,” he said. “We are thankful to have longstanding supplier relationships, but need multiple options to help our customers succeed.”

Roundtable participants agreed, adding that brand loyalty has changed in recent years as distributors have to branch into secondary sources in order to get product that customers’ need; a concept that you likely wouldn’t have seen much of a decade ago.

When discussing consolidation, Price added that mergers and acquisitions in the manufacturers’ rep community can be challenging as well. “As a wholesaler we realize that change is a constant and things must continue to progress, however, rep consolidation has continued to make supporting many different product lines more difficult,” he explained. “Larger agencies with so many lines can struggle to provide the wholesaler with the same level of service we experienced historically.”

NEXT GEN

Next the participants discussed whether or not they’re feeling the effects of the next gen customer and employee. Hubbard said PACE Supply is seeing the shift, and it’s exciting. “We are definitely seeing it and I find it super exciting,” he said. “We have some longtime customers who are family businesses, so we’re seeing the sons start to take over for their fathers and we’re able to talk to the sons about how their business will adapt. We’re in a time now where the new leadership is taking over, but the veterans are still involved and there to guide.”

Hubbard added that the next generation coming up doesn’t have that gut instinct on how to handle situations based on experience, so it’s important to appreciate the balance between seasoned and new generations. “It’s not perfect and sometimes egos are challenged along the way, but it’s really exciting to see the synergy between the generations and how they can learn from one another.”

Ace Stainless’ Tom Murphy brought up some behavioral differences he’s noticed in both the next gen employee and customer. “No one wants to talk on the phone,” he said. “We have to step back and remember they just aren’t used to it the way we are, and encourage them not to be afraid to pick up the phone because that’s still a huge part of our business.”

Hill mentioned the balance between implementing e-Commerce and maintaining strong relationships. “Kenny Pipe has seen great success in our e-Commerce platform this year,” he said. “But it’s interesting to talk to customers who are reluctant to use it. We have to explain that it’s a tool and we aren’t trying to push them to online ordering of they don’t want it. It’s not replacing the relationship, it’s enhancing the experience for those who want it.”

Hubbard agreed, noting that any technology introduction should be presented to customers as a helpful tool.

A COMMERCIAL FOR THE INDUSTRY

These roundtable participants all share the same passion for the industry and goal to preserve the longevity of PHCP-PVF wholesale-distribution. Towards the end of the conversation, the distributors were asked, “What is one thing you wish more people understood about PHCP-PVF distribution?”

Murphy said he wished more people understood the stability and opportunity that lies in our industry. “It’s a mature business that can give you a great life,” he said. “People often take for granted the access to clean water we have. I wish more people knew the business that lies behind providing that water. It’s a business to be proud of; we have the opportunity every day to add service and quality to our customers and grow, and Ace Stainless is really proud of that.”

Hubbard agreed, emphasizing the pride factor. “We’re building the fabric of our communities,” he said. “It’s a durable business. And I think it is glamorous. We just have to shift our perspective; we are a part of infrastructure and bringing water and sanitation to people. People take that for granted, so there’s a mind shift that needs to happen. It’s an industry full of honest, hard-working people and it can take you to places you never thought possible.”

Price added that the generation coming into the workforce needs to know that a great living can be made in the PHCP-PVF business. “There are people in all aspects of the trade making six or seven-digit incomes,” he said. “We are the marketing department for our industry. We have to get the word out about what success can be enjoyed here.”

Laiolo summarized everyone’s thoughts well, stating that he wished we could blast a commercial for the PHCP-PVF industry. “It’s a great business, an honest business and a people business. We can sit next to each other as fierce competitors and still help each other out which speaks volumes about our industry.

And people need to know that it’s more than a trade; there are accounting, marketing, logistics roles and much more. Once you’re in, you can develop into all sorts of careers. In the grand scheme of things I’d like to do a commercial for the plumbing wholesale business describing that it’s so much more than toilets and forklifts.”