Research: The Phoenix Report

There's been plenty of doom and gloom about the state of the dealer community over the years. But for a good part of it this has been unfounded, as a new MWA and OPI report reveals.

The independent dealer channel in the US is very much alive and kicking – that’s one of the key findings of a new report by Martin Wilde Associates (MWA) and OPI called The Phoenix Report: Is The Dealer Channel Rising Again?

Based on extensive online interviews with senior executives at 200 independent OP dealers in the US, as well as telephone interviews with the prominent dealer groups and wholesalers in the country, the report provides vital insights into the current size and state of the independent dealer channel. It also reveals whether dealers are growing and profitable, what their product and sales channel focus is and how they are buying, selling and stocking product. 

So is the dealer channel really resurging at this moment and, if so, how is that being achieved?

Rise of the mega dealers

The survey found that while the rationalisation of the US dealer base – which has been ongoing since the 1980s – is continuing, there are still a significant number of dealers in place, some of a very substantial size. Furthermore, it is clear that the vast majority of these US dealers (66%)saw an increase in overall revenues in 2015, with 22% claiming increases of over 10%.

One of the reasons for these kinds of increases being achieved and the persistent shrinkage of the overall dealer base is the trend of large dealers acquiring smaller ones. Indeed, such is the confidence at present that 44% of dealers are looking to acquire another company – usually another dealer – while the majority not only expects sales to increase further in 2016 but also has no intention of exiting the business, or the sector,  in the foreseeable future.

Better still, it’s not just revenues that are on the up, dealers are also profitable which is by no means a foregone conclusion. MWA’s survey found that – at 27% on average – dealer margins are still respectable at present and are more widely reported by these dealers to have increased than decreased in 2015, with a variety of strategies being used to improve them.

This ongoing growth in dealer sales is also being achieved through the successful extension of product ranges into new adjacent categories and services. It is encouraging that, on average, 16% of sales are now generated by jan/san and breakroom products, for example.  

Core OP sales down

On the other hand, one of the main reasons for any shrinkage in dealers’ revenues in 2015 was through a decline in demand for core OP. This is fundamentally nothing new, but it serves as an unmistakable wake-up call for the whole channel, particularly since the survey also found that for a large number of dealers core traditional OP still accounted for almost all of their revenues. 

Other areas and topics covered in The Phoenix Report include the product sources used by dealers and how these are changing; dealer perceptions – and usage – of key wholesalers and dealer groups; and dealers’ exit and acquisition strategies.

The report is an invaluable guide to help OP vendors, wholesalers and dealer groups assess the current and future health of the independent dealer channel, thereby enabling them to optimise their own marketing, product and service strategies. 

The Phoenix Report is available in two volumes. By the time this issue of OPI goes to press, both the US and the UK version will be available for the price of $2,600 and £1,600 respectively. To order your copy, go to www.opi.net/phoenix

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