Distributors Get Dissed Unfairly
After hundreds of visits I still never tire of touring supply houses. Their offices, warehouses and counters seldom contain any surprises anymore, but I always get a kick out of observing the logistical ballet that brings our industry’s products to market throughout the country. Few outsiders appreciate the complexity of distribution, especially the fact that its large capital and delivery expenses get supported by razor thin profit margins. It’s why everyone in the business seems obsessed with squeezing a few paltry percentage points more out of their suppliers. Multiplied by thousands of skus, even an extra fraction of a percent of gross margin can make a big difference in business fortunes. It takes rare talent to succeed in such a business.
Every distributor that has survived the economic maelstrom of recent years has trimmed expenses closer to the bone than ever before, excepting the start-up era when a lot of founders worked out of car trunks and the like. Three years ago nobody in this industry could’ve imagined the things - and people - they could do without, even as they hated to do without. Quite a bit of muscle got nicked along with fat, although somehow product is still flowing where it needs to be for the most part.
Several years ago while on a train trip to Montana I marveled at all the pipe yards we clickety-clacked by along the way. They signaled small town plumbing/PVF supply houses that always sprung up around railroad tracks in our sparsely populated western states. People who live in our country’s out-of-the-way places may lack some amenities, but no longer are they denied the essential creature comforts that define modern civilization. Virtually all of them have running water, indoor plumbing and central heating to combat some of the coldest temperatures in the lower 48. When you see how far toilets and boilers have to travel to reach the nooks and crannies of the population, appreciation grows for the people who make it happen.
Nonetheless, distributors have always been looked at through jaundiced eyes by business interests desiring to cut out the middleman. Over the years, various manufacturers, retailers and end users have experimented with handling distribution functions themselves. Almost all have found out the hard way that the 25% or so cut of the selling price taken by wholesaler-distributors turns out to be a bargain. Middlemen always seem disposable until they get disposed of. Then people with products to sell find themselves in a pickle trying to distribute them to all the isolated locations where they are in demand.
PHCP distributors nowadays suffer slings and arrows of a different sort. Hardly anyone denies their capability as logistics providers, but a lot of manufacturers and their reps complain that distributors have forsaken the marketing function. They are good only for pull-through sales, goes the refrain. They don’t push or pioneer lines. Outside salespeople are an endangered species with most distributors, and reps everywhere gripe about the added burden of calling on secondary market players.
All of this contains at least a kernel of truth, although it raises a chicken vs. egg question. Did distributors abandon the marketing function, or was it snatched from their grasp by a host of entities better positioned to take charge? Did distributors have any say when manufacturers started cutting deals with the big boxes and tossing megabucks at consumer advertising? Did independent reps start building distributor-size warehouses because distributors quit marketing, or because the rep role naturally evolved in that direction? Cause and effect are not very clear-cut upon close examination.
The “distributors aren’t marketers” mantra falls apart when it comes to showroom merchandising. Plumbing distributors are still very much in that marketing game, and it happened largely over the span of the last generation. Plumbing distributors operate some of the nation’s top bath and kitchen showroom facilities, and nowadays distributor-operated heating and alternative energy showrooms also are popping up with regularity. Anyone who disses our industry’s distributors as marketing has-beens has some explaining to do about these phenomena.
Yet the fact remains that a free economy is relentless in pursuit of efficiency. Over time supply chain functions will gravitate toward those who can deliver goods to the market at least cost. Distributors are unchallenged in their ability to make sure goods arrive where and when they are needed. If others are better at creating those needs, have at it. But show some respect for your irreplaceable business partners.