From Benfield's Blog: “Do The Current Troubles At Wolseley Signal A Change In The Distribution Model?”
The world is moving toward low cost distributors who streamline services and inventory, drive transaction economics, and deliver a very attractive cost to the customer base.COMMENT:
Do you know the percentage of sales spent on marketing, say the top 100? Have you ever determined the productivity gains a catalog provides the distributor?
Fred Scheel
RESPONSE:
It’s hard to know exactly the promotion dollars spent on the top 100 items in the sales mix. Typically, the sales cost is a constant as sellers are credited and paid on all items. From a marketing standpoint, some distributors promote their top 100 aggressively because, without them, the order economics don’t work. Other distributors market only the new products and technologies. What typically does not happen, but Transactional Distributors have found, is that if you rid yourself of a lot of the slow-moving items, non-stock items, honoring all backorders, and counter sales, you save a bunch of money on your service and warehousing costs as many of these transactions and products don’t make money unless they are coupled with a sizable transaction in margin dollars. By not performing or performing less of the money-losing transactions, you have a cost advantage in service costs and can take it (cost advantage) to the street on the A&B items and promote them with a low price which works quite well.
As far as catalog distributors go, Grainger and MSC Industrial have returns on sales in the 10% to 12% range, which is 5 to 6 times the typical full-service, no-catalog distributor. These companies have sales forces and branches, but they are fundamentally catalog distributors and their earnings are far better than many full-service, sell everything, everywhere distributors.
Scott Benfield
Benfield Consulting
630-428-9311
From Tim Fausch's Blog: “Let's Profit From People's Pain”
Disaster reconstruction… provides the opportunity to help people in their time of need. Rather than greedy charlatans… I suspect these specialists often become heroes to those they serve.COMMENT:
One of my several duties is managing a little under a million square feet of distribution center & office space. I have “been there and done that” with several restoration projects. The guys who perform this work, at least the ones we use, are real pros and they get paid very well. They fill a very unique niche and there are more than a few nuances to doing this kind of work (well) that many contractors will not get right out of the box. Guess I am agreeing that it is a good thing you are offering contractors a venue to meet R&R suppliers and other contractors for some good education. As a facilitiers manager I went ahead and signed up for the publication and newsletter. I am not anxious to launch an R&R project (they usually follow floods or fire or worse for me), but it is good to be prepared. I want my contractor to be prepared as well, so sending him a link to this.
Rick D
