It’s far from the only issue challenging our industry’s supply chain partners and maybe not the biggest, but private labeling seems the most irresolute.

t’s far from the only issue challenging our industry’s supply chain partners and maybe not the biggest, but private labeling seems the most irresolute. That’s the conclusion drawn from a panel discussion at this year’s annual convention of the Pacific Southwest Distributors Association (PSDA), held May 1-3 in Indian Wells, CA. Consider these opposing points of view expressed by moderator Robert Vick (Legend Valve) and panelist Dan Mariscal (Hirsch Pipe & Supply).

Vick: “Distributors cannot promote private labels and expect the manufacturer to provide training and other services. You cannot private label A and B items and expect the manufacturer to provide only C and D products.”

Mariscal: “Private labeling is a problem created by manufacturers. So many manufacturers have gone to China, and that has come back to bite them. Their products have become very similar, so wholesalers might as well capture the margins.”

A couple of distributors in the audience chimed in to support Mariscal. “Private labels are not going away,” said one. “I can’t see any reason not to private label. The profit margins are huge.”

Someone then asked: “What prevents manufacturers from going direct?”

“As time passes, that may be inevitable,” came a reply.

“That’s the train wreck I was referring to,” commented Vick. The tone never became uncivil, but it’s hard to identify any common ground between manufacturers and distributors on this issue.

The panel presentation was titled “Confronting Industry Challenges to Make the Channel Work Better for Everyone.” Vick, who serves as chairman of the Vendor Member Division of ASA and sits on the ASA Board, prefaced the panel discussion with a detailed assessment of industry trends and the relative positions of manufacturers and distributors. Vick elaborated on themes presented in an address at the 2006 ASA Convention in Chicago, which was featured in the Nov. 2006 edition of Supply House Times.

Private labels weren’t the only subject discussed at this session. The moderator asked panelists to identify the single most important issue facing the industry. Quick to pounce on it was Rick Banner (Keyline Sales), chairman of the AIM/R independent rep organization.

He asked for a show of hands by people under the age of 40, and it looked to this observer like no more than 15% of the audience responded. Banner reiterated a challenge he gave to the AIM/R membership to “come up with the dough to bring young people to conventions so they can build industry relationships.”

The remaining panelist, Robert Garcia (Plumbing Wholesale Outlet), gave an interesting response to another query asking what’s the most important change they’ve made in their business. Garcia told of setting up two separate trade counters, one catering to quick checkout of self-service customers, the other to those needing assistance. Going in he anticipated that 80% of his trade clientele would opt for the self-service option, but instead found around 80% in need of assistance for some reason.

Garcia noted that this became a blessing in disguise. “It helped us get to know our customers really well. That gives us an opportunity to upsell and to create new business – not just take sales away from somebody else. By seeking assistance, that contractor becomes our salesman.”

The 2008 PSDA Convention also featured a presentation by economist Jeff Thredgold. His gloomy outlook is pretty similar to the mainstream of economic forecasting these days - no recovery until the end of this year or early next year, and then nothing spectacular.