Editorial: The Devil's Advocate
The term "bull session" has a bad connotation in that the quality of the information exchanged in such encounters tends to be suspect. Be that as it may, a recent bull session with an old friend gave rise to a central issue of your business. We'll get to it in awhile. First, though, let's do a little assessment of the bull.
The friend is a contractor from a small town in the east who specializes in hydronic heating. I ran into him quite by accident, in a town both of us were visiting for different reasons. It had been about a year since we last spoke, and the conversation turned to this magazine, which our company had taken over around the time of our last encounter. I told of all the problems that had befallen wholesalers in the 17 years I was absent from Supply House Times, and commiserated with their plight.
My friend fires his bull as straight as a sniper, which is a big part of the reason why I like him. Derisive laughter would best describe his reaction to my wholesaler sympathy pangs. As far as he was concerned, all of you could disappear from the face of the earth without any effect on his business. As he told it, wholesalers have three basic functions to fulfill - inventory, training and credit - and the supply houses in his area fall short in all three.
I was puzzled about the credit part and asked what he meant. Seems there's at least one wholesaler in his town that has taken to credit card payment in a big way, and gives better pricing to contractors who use plastic. This erases the wholesaler's 30 days of grace and shifts the risk to the credit card company. It sounded to me like not a bad idea from the wholesaler's point of view, but I could also understand the contractor's point about removing some value from that wholesaler's operation.
He also bemoaned that he has to carry more of his own inventory than ever before because none of the supply houses ever seems to have all of what he needs when he needs it. And as far as training goes, a direct quote is, "Hah!" He was on a roll. I stuck up for you folks, making a comment about all the consolidation and price pressures impinging on the industry. "They brought it on themselves," he chortled without compassion.
Don't Stone The Messenger!
I'm just reporting all this, friends, not endorsing it. As with all bull sessions, I suspect much of what he said was exaggerated. There are always two sides to every story, and no doubt his wholesalers have tales worth hearing as well.
Nonetheless, besides being a friend, this contractor is successful in his business and an industry stalwart who has held leadership positions and been deeply involved with technical education. Thus, I listened more attentively than I do to so many underachievers in the contracting ranks who habitually blame everyone else in the supply chain for their shortcomings. This was not your run-of-the-mill hothead.
Besides, rationality scarcely matters. Perception becomes reality, and the ranting and raving I heard from this fellow is rather commonplace these days. I've written before that PHC wholesalers don't get much respect anymore from anyone in the channel, including themselves.
Whether on target or unfair, such discontent cannot be good for your business. Either wholesalers are not getting the message across about the value they bring to the marketplace, or they don't bring much value. And this leads us to the central issue of your business.
What do you provide in return for the profit margin you absorb? Trade customers must perceive advantages buying from wholesalers that they wouldn't get buying direct from your vendors, or from the big boxes, or from any other intermediaries.
Last July and again in October, Supply House Times ran articles dealing with the concept of "Market Center Distribution," developed by contributing editor and NHRAW officer Jim Truesdell. We intend to run more about MCD in the future, because it deals with the industry's most essential question: What can you do better than other sellers of PHCP products?
The answer has to pass a reality check in that it must be things recognized and valued by your customers. Too often, it seems that wholesalers are from Mars and contractors from Venus when it comes to evaluating service. For instance, I've heard wholesalers pat themselves on the back for filling nine out of 10 orders from stock, and contractors grumble about the fact that 10% of the stuff they buy gets back-ordered.
What can you do better? Whether it be inventory, training, credit, or some other services, if you can provide an answer that passes a reality check, you will prosper. But if you can't, you're in a heap of trouble.