The internet is changing the way we work and play and the change is fast.
Did you know that children born in 2015 will not know what a CD is, for example? Today manufacturers sell CDs to online retailers and reach virtually all users in a single click. Previously, the same CD had a mark-up of a wholesaler and distributor/retailer and a cost-to-serve model that included two sets of warehousing, a salesforce etc, all of which more than doubled the cost of getting the product to the end-user.
The sustained economic downturn and this rapid technology innovation are also shifting the power in office supplies from the channel to the consumer.
The dynamics continue to shift fast, even in the online environment, and they differ from the B2B to the B2C model.
The fastest online growth sector is ‘click and collect’ – buy online and pick up in store when it’s convenient to you – just look at catalogue (on- and offline) operator Argos’s growth in this area.
This dynamic is not necessarily the same for B2B where many users, with the exception of some small business owners, can buy online and have products delivered anytime to the office.
Amazon and other online retailers are moving into the B2B office supplies environment and online price comparisons create an almost “perfect competition” environment. This again puts pressure on the price/service value ratio of the small and medium-sized dealer.
So is this the end then of the independent dealer? No! There are other long-term socio-demographic trends that actually support the need for the local retailer/distributor such as ageing population, single households, urbanisation and home/mobile working.
However, the independent dealers’ business model will need to change in order to survive the near perfect knowledge of the consumer via the web and mobile apps, and the continuing tough economic climate.
They will need to focus on their core competence of in-depth product knowledge and personal service and outsource the parts of their model that create unnecessary cost, blending personal service with web/mobile app efficiency, in order to provide added value versus the pure-play suppliers.
The wholesaler can furthermore play a bigger part in supporting independent dealers and help take out duplication in their business model. This could be with regard to direct delivery options and stock-holding aspects for the dealers – ultimately and potentially helping them to morph to become stockless dealers. The wholesaler can, and in some cases already does, provide back-end web platforms for the dealers and their customers to order.
So, if this were to happen, how do dealers remain truly independent?
This is where the marketing and buying groups can become increasingly important, providing a method of business independence for dealers instead of the perception of becoming the wholesaler’s agent. They potentially will add value with the economies of scale they bring to marketing, web and mobile apps services, and purchasing power for dealers independent of the wholesaler.
For the manufacturer, these dynamics create similarly rapid changes – it is critical that manufacturers have a fair and transparent pricing model across channel and geographies as the web reduces the relevance of these boundaries. They must also stay relevant through innovation.
However, this isn’t a revolution we are talking about, but more an evolution that is happening at such a pace that only those who are willing and able to adapt and change quickly will realise the opportunities.