Is the long-term relationship over?
Can industrial distributors still have long-term relationships with their manufacturers?
By Bill Jatho -- Industrial Distribution, 1/1/2000
The industry has been buzzing recently with distributors' concerns about manufacturers adding new distribution channels. Repeatedly, manufacturers of all sizes answer our concern by saying: "The market channels are changing." That answer is baffling to distributors who for years have been referred to as "partners" and "teammates."Market channels are indeed changing, and the Internet is playing a major part in shaping those channels. We frequently hear of manufacturers developing interactive Web pages that allow customers to directly buy small quantities of product for testing. Distributors are told the manufacturers have no intention of selling direct in the future, that this is just a method of tracking product samples and that the manufacturers will send the information to distributors to follow up. But history suggests that the manufacturers are evaluating direct sales for future consideration.
The advent of the Internet does not have to mean the demise of the manufacturer-distributor relationship. I believe it would be beneficial for manufacturers to partner with distributors in establishing an Internet presence. They could look to distributor partners for input in developing a site that customers will find easy-to-use, informative and helpful. Distributors could provide manufacturers with valuable insight regarding the potential for their product in the industrial online marketplace and how an Internet site could enable a manufacturer's distributors to increase business and better serve customers.
Additionally, we learn about new acquisitions and mergers with each industry publication we read. With all these changes, manufacturers are finding the traditional territories they established decades ago suddenly awash with new distributors carrying their lines that they never intended to support.
Rather than taking a firm stand, manufacturers typically let the new distributor keep the line because they fear limiting future distribution options. That territory then becomes very competitive, prices and profits drop, and distributors look for alternative product lines.
Most recently, emerging multi-manufacturer efforts to sell products directly to small OEM shops have struck at the core of the small distributor's bread-and-butter business. For years manufacturers have believed that small distributors haven't pushed their products enough with smaller customers.
But in most cases, small distributors have done a very good job supplying products to small end users and been able to offer manufacturers invaluable knowledge regarding small users' product needs and price demands. Those close relationships with small end users have been a large source of income and profit for small distributors.
As a result of these conflicting perceptions of the market, we're seeing cooperative efforts between manufacturers and distributors diminish. Our long-term relationships are in jeopardy. There are still manufacturers who truly do partner with their distributors in advertising and marketing programs, but they seem to be specialized or smaller manufacturers.
As the face of industry changes, it seems that those companies who try to tackle the problems and challenges together, will have greater success than those who go it alone will. Manufacturers and distributors alike should choose partners by evaluating territories and determining which business partners are best suited to meet their needs.
Manufacturers will do well to remember that their distributors provide the best, most direct source for information about the end user. We know what our customers want and need. Don't go it alone. You have many willing partners waiting to take on new challenges and new markets.
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