The $7 trillion wholesale distribution industry(opens in new tab) is more important than ever right now. Distributors not only fuel other critical industries such as manufacturing and retail, but they also represent some 415,000 individual work sites in the U.S. and the millions of people who work there.
It’s a focus on those people — paired with a strategic, tactical game plan — which will allow distributors to emerge with renewed vigor after a rough couple of months, says Dirk Beveridge(opens in new tab), the founder of UnleashWD, a wholesale distribution consultancy.
And that emergence has already begun.
As the economy reopens, “it’s time to ensure we’re thinking not just about today,” Beveridge says. “… There’s an opportunity to shift our thinking to tomorrow and to coming out of this stronger than when we went in.”
To that end, he offers five steps distributors can take right now.
Watch the video above for some of Beveridge’s tactical advice for distributors. Below, we’ll describe his suggestions in detail.
1. Define and accept “the new rules of business” for your specific environment.
It’s no surprise the COVID-19 pandemic is “going to change how we live, work and play,” Beveridge says.
Instead of avoiding that reality, confront it: “I want distributors to take that premise, put it up on the wall, and say, ‘Do we spend enough time thinking about the future?’” he adds.
Sit down with your team and “clearly identify the new rules of how business is going to be done” based on changes in employee, customer and supplier behavior as a result of COVID-19.
These “new rules” will be unique to each distributor based on its market segment, geographical region and relational network. Identifying these rules for your business specifically is the first step to building a strategy for moving forward, Beveridge says.
Imagine a Georgia-based distributor of gym equipment whose suppliers are overseas. The “new rule of business” for this distributor might include:
- “New rule” based on changed employee behavior:
The distributors’ employees now must maintain six feet of distance between each other and work in staggered shifts. They desire a feeling of safety more than before, which means leadership will host weekly meetings to brief them on the health precautions it’s taking.
- “New rule” based on changed customer behavior:
The distributors’ customers aren’t buying as much gym equipment as they were before, because they’re low on cash. Thus, the distributor might focus on selling smaller pieces of equipment vs. larger ones.
- “New rule” based on changed supplier behavior:
The distributors’ overseas suppliers weren’t able to ship products during COVID-19 shutdowns. So, the distributor is now building relationships with backup suppliers to prevent this from happening again.
? Case study: A distributor of wellness supplements, Physician’s Choice, explains how its relationships with "backup" suppliers(opens in new tab) allowed business to continue despite COVID-19 closures.
2. Showcase purpose and meaning in your operations.
In this new reality, Beveridge predicts purpose and meaning will replace product as the “magnet” that attracts both employees and customers to a given distributor.
So, devise a way to showcase your company’s purpose in its operations. Beveridge suggests starting with safety: If your business counts safety as a core value — and chances are high that it does — then show it by:
- Making a safe physical workplace for employees.
This includes requiring folks to wear masks and following other basic governmental guidelines. This industrial printing company(opens in new tab), for example, set up workstations that are six feet apart. It also includes making a plan for what will happen if an employee gets sick. Take, for example, the policies adopted by this design firm(opens in new tab) for its office reopening.
?Resource: the office reopening plan(opens in new tab) of a top Boston design firm, which other businesses can use as a template for their own plans
- Ensuring employees are safe while working remotely.
This entails ensuring employees are secure, privacy-wise. Think, for example, of finding a low-cost VPN service(opens in new tab) or instating two-factor authentication on employees’ laptops.
?Resource: our 10 steps to keep remote workers secure(opens in new tab)
- Creating a safe emotional space for teams.
A “safe emotional space” is any in which team members can vent concerns and enjoy camaraderie despite social distancing. For this business(opens in new tab), doing so entails hosting a weekly team call that allows time for non-business chatter.
- Ensuring customers feel safe when shopping for or receiving shipments of your product.
Organize your retail location or coordinate with delivery teams to address both government guidelines and customer concerns about safety. For example, consider how this firm built a contactless delivery option(opens in new tab) so delivery drivers don’t need to do in-person hand-offs.
3. If you can make a process digital, do it.
Now is the time to “reinvent yourself” as a business, Beveridge says. For distributors, that means making as many processes as high-tech as possible.
Beveridge says he’s heard distributors cite “very good reasons” for failing to digitize, whether it be that employees aren’t ready for the change or that customers don’t have the high-tech systems that’d be required to keep up with said change.
Those excuses have got to go.
“Over the years, distributors would say, ‘Yes, we need to become digital-first distributors ... but we have some runway,’” Beverdige says. “... COVID has turned that runway into a drag strip. That runway is not there.”
The specific technology you’ll need to succeed varies by organization, he adds. By and large, current must-haves for distributors include:
- Enterprise resource planning (ERP)
An ERP software brings multiple, smaller business systems -- human resources, inventory, accounting and more -- together in one system.
- Remote working tools
These include everything it takes to work from home(opens in new tab), from company laptops to a secure Wi-Fi connection.
?Resource: our 10 steps to keep remote workers secure(opens in new tab)
- Customer relationship management (CRM)
As the nature of sales changes, you’ll need to keep track of your teams’ interactions with customers all the more closely. A CRM system helps.
? For more: Read “What is CRM?(opens in new tab)”
- Marketing automation tools
These software tools(opens in new tab) automate manual tasks like posting to social media or sending marketing emails. Plus, they can tailor communications such as those marketing emails to a given buyer’s previous shopping habits.
- Sensors that connect to the internet of things
Gadgets like these can make your business more efficient(opens in new tab) by, say, tracking the speed of delivery trucks or alerting you when a machine needs maintenance.
4. Identify sales tactics and market segments that are working for you and/or present a profit opportunity.
Chances are that customers who stop doing business with you due to COVID-19 won’t return within three to five years, Beveridge says.
So, “we have to align and energize our team around profit opportunities now.”
This process is simple. Complete these steps once while thinking short-term and again while considering the long-term “new rules of business” for your particular environment:
- Identify where your company is strong, sales-wise.
- Identify where it is weak, sales-wise.
- Identify holes in your strategy in which competitors might find a foothold.
- Identify profit opportunities.
Loosely speaking, profit opportunities are sectors in which your business has a chance to win sales based on the current “rules of business.” Right now, those include the janitorial and sanitation sector and consumer packaged goods. Other high-opportunity sectors will vary depending on your location, Beveridge said.
?Resource: A list of sectors(opens in new tab) likely to outperform the broader stock market in the near future, per Charles Schwab
- Pick a profit opportunity, and go all-in.
?For example: Distributor Precision Medical discovered increased demand(opens in new tab) for its recovery-focused medical supplies, as surgeries are getting rescheduled after a COVID-induced hiatus. The company is now channeling extra resources into that channel, to take advantage of the profit opportunity.
5. Create a strategic sequence of moves to power ahead. Then, communicate it to your teams.
Beveridge agrees with other experts(opens in new tab) who say that in moving forward from COVID-19:
- Businesses must continue focusing on fewer initiatives than before.
- Taking care of employees and their morale is critical to carrying out those initiatives.
“We can’t do it all, so we have to be strategic, and we have to make decisions,” Beveridge says. “And we have to be able to communicate and tell a story to our team about why we’re making these decisions.”
Your company’s core values — what it stands for, at a basic level — will likely inform those strategic decisions. Beveridge recommends referencing those values when communicating with employees. Doing so is “the first step” in building their confidence, he says.
? For example: Per Beveridge, an ideal message would sound like:
“While the world is changing around us, our company really hasn’t changed. We still care about our employees, our customers, the long-term growth of the organization. How we go after those things, that’s what we’ve been changing. But it’s all geared toward taking care of those values that we believe in.”
6. Keep the customer front-and-center.
In addition to having digital processes and prioritizing employee morale, “the distributor of tomorrow is going to be absolutely customer-centric,” Beveridge says.
As distributors, “our future is all about understanding our customer better than anybody else, understanding what they’re trying to accomplish going forward, and bringing the solution to that.”
Use the analysis you performed in step 1 to inform your sales tactics. Ensure those tactics are based on what customers want now, not what they wanted pre-coronavirus.
? For example: Geospiza, a software company, formerly made tools to help its government customers visualize neighborhoods’ risk of damage during disasters like floods and hurricanes. Right now, however, those customers want(opens in new tab) help analyzing the risk the coronavirus causes to their populations. So, Geospiza developed new tools to meet that need and changed its sales pitch accordingly.
Keeping the customer front-and-center will sustain you in this new climate, both short- and long-term.
Here is a full transcript of the conversation:
We have a big audience at NetSuite that knows who you are, but for the percentage that doesn't. Can you give us a brief introduction to yourself?
I'm the founder of UnleashWD(opens in new tab). We are a strategy, design and innovation firm that helps legacy distributors become nimble and innovative leaders.
Before COVID-19, “BC,” as we're calling it. What percentage of the U.S. GDP did wholesale distribution account for? And what does that equate to in dollars roughly?
Wholesale distribution is about a $6.9 trillion business. And if that were a country in and of itself, it would be the third largest economy in the world behind the United States and behind China.
How has COVID-19 impacted this industry?
Well, I think it's impacted the industry in a lot of different ways. As we look at the second quarter, right? Maybe GDP is going to take a 30% hit. It's never done that in history. When I talk to distributors, some are actually up, right? Some are actually up. But if you look at other businesses, they're down anywhere from 20, to I've heard, 93%, the revenues are down.
I would love you to dive into some of those tactical strategies(opens in new tab) distributors can take to shift to tomorrow.
This pandemic is going to change how we live, work and play. But what does that mean to leaders? What it means, is we need to improve our strategic foresight(opens in new tab). So I want distributors to take that premise, put it up on the wall and say, “Do we spend enough time thinking about the future? Do we spend enough time thinking about how the rules of the game are going to change after this?” I believe my premise is this: Is that purpose and meaning are going to become imperatives in terms of attracting customers and employees. Safety is going to become a driver, I believe. And that's part of this deeper meaning and purpose that goes just beyond pick, packing and shipping some product off the shelf.
Yeah, I love that. Those are two big strategies. Any others you want to hit on?
I think digitization. You're either going to break away, by the way, following your true North, your purpose, finding that. Or you're going to be destroyed. This is the time to reinvent, and this is the time to take digital transformation to heart.
Are there any specific technologies that you think are going to be critical for distributors moving forward?
I truly think it's going to depend on the value proposition of the organizations, but I absolutely do think that there are certain fundamental technologies, right? And I'm talking NetSuite(opens in new tab), and I believe in the need for an ERP platform, right? Of course, everybody's talking about remote working capabilities and digitization of that. I think we're going to have a chance to rethink the sales organization. Okay? And I really believe CRM systems are going to be a must have rather than a nice to have.
I think marketing automation is going to be a must have rather than a nice to have. Over the last several years, I've led a couple think tanks on digital transformation. And these distributors, wicked smart individuals, one of the words they used was runway. That, yes, we need to be thinking about digital transformation. Then there was always a but, but we have some runway. Here's my belief of what COVID has done. I believe COVID has turned that runway into a drag strip. And that runway is not there. And even if there's not another pandemic for another 10, 20, or 100 years, I truly believe the rules of business are being changed as we speak right now. And we do need to take a digital first mentality.
What about on the tactical side? What would you add there?
I think there's a three step success path that distributors need to be thinking about to strategically power ahead in these unprecedented times. And I think the first step of that success path is, we need to clearly identify the new rules of how business(opens in new tab) is going to be done. And we need to spend time thinking with our team about the behaviors that have changed in our employees, the behaviors that have changed in our customers, the behaviors and thinking that have changed in our suppliers and the like. Can I tell you exactly every rule that's changing? I can't. But I can lead you and your team to think through in your environment, in your segment, in your geography, with the relationships you have, what are the rules that are changing? We have to identify those as the first step.
The second step of the success path is to energize and align your team around the profit opportunities. I heard a piece of data that blew my mind, that says that 85% of your customers that leave you during this pandemic, will never come back in the next three to five years. We have to align and energize it to our team around profit opportunities now.
And then number three, we've got to define our strategic sequence of moves to confidently power ahead. We just can't do it all. So we have to be strategic. We have to make some decisions. We have to be prepared to pivot(opens in new tab) and be able to internally communicate and tell a story to our team about why we're making these decisions so that we can get the entire team to embrace this strategic direction going forward.