EDITORIAL: Shifting Sands For The Rep Business
The entire industry has undergone dramatic changes since I first began my career with SUPPLY HOUSE TIMES 29 years ago. Consolidation is the biggest factor, although not the only one. Advanced technology, globalization and channel breakdown have been major agents in altering the industry's landscape as well.
In particular, it seems that independent manufacturers reps have seen their business change the most over the decades. Hanging around with them at the annual AIM/R Conference and elsewhere has been an eye-opening experience. Here are some of the most profound transitions that have taken place in the rep business over the years.
- From sales to marketing organizations. Rep firms overall have become bigger and taken over more of a marketing role, as opposed to being mainly selling organizations as in days of old. Vendors rely on them for market research, advice, technical support, customer service and other duties. Rep firm principals are salespeople by nature but a lot of them spend the lion's share of their time on business administration rather than selling in the field.
- Growth imperative. I can remember a time when the industry was peppered with one- or two-person rep firms, some of whom handled prestigious lines. A lot of those reps never wanted to get any bigger. A 10-person rep agency was considered large. Now that's near the low end of viability.
- Barriers to entry. New rep firms typically used to get started when a capable factory or distributor salesperson left a company and set up shop as an independent rep, bringing along one or two major lines to anchor the business. Now that's rare. It's hard for an individual rep to gain a foothold with major lines anymore. Factory and distributor salespeople still leave for the rep business, but now the tendency is to join an established organization.
- More lines. Reps used to be more intent about limiting the lines they handled than expanding them. As smaller agencies, they were cognizant of their limitations in representing too many manufacturers. A rep firm with as many as 10 lines used to be a rarity. Now, a “more the merrier” attitude prevails. Partly that's due to steady commission cutting by manufacturers over the years. As percentages decline while rep firms grow in size and duties, the only way to thrive is to take on more things to sell. Manufacturer consolidation is also driving line proliferation. Whenever one manufacturer acquires another, it almost always results in duplicate representation. Even the best rep firms lose some lines as a result, so they need a cushion to assure adequate income when they lose lines through no fault of their own.
- Enhanced professionalism. As their duties have expanded beyond sales, business administration skills have had to keep pace. Many of the industry's top rep principals proudly wear the CPMR (Certified Professional Manufacturers Representative) designation. CPMR is an educational program sponsored by the Manufacturers Agents National Association (MANA), an organization of independent rep firms from various product sectors. (MANA staff also runs AIM/R.) CPMR classes have helped instill the business skills needed to run a modern rep agency.
- Greater acceptance of rep warehousing. Decades ago when I would cover a story about a rep firm, as often as not the principals would ask me not to mention the fact that they operated a warehouse. Their distributor customers resented warehousing reps as somehow intruding on their turf, often accusing them of selling directly to their customers. The perception was always larger than the reality, because few reps wanted to take the chance of antagonizing their largest customers to sell a handful of stuff to contractors. Wholesalers have gotten more mature about the subject nowadays. Most distributors now accept rep warehouses not only as a fact of life, but an asset that they can exploit to obtain goods in a hurry to fill customer orders. I can't remember the last time a rep asked me not to report about a warehouse. More commonly, they brag about it.
In fact, the entire industry seems more mature about the interrelationship among various parts of our industry's supply chain. People used to be overly concerned about who sold what to whom, and who's “stealing” a sale that “belongs” to me. With so many competitive threats coming from outside the industry - from overseas, from the big boxes, etc. - these concerns now seem trivial.
Don't miss Jim's program, “50 Simple Tips To Boost Your Business Writing,” to be presented at this year's ISH North America trade show in Chicago, September 28-30. “It's guaranteed to freak out some English teachers,” Jim says.