Small distributors are a vital part of the supply chain, say manufacturers who responded to an INDUSTRIAL DISTRIBUTION online poll in May. Small distributors (those with less than $15 million in annual sales) make up more than half of their distributor base and will continue to do so in the years ahead. Why? Because of the service they provide to customers, their loyalty to the manufacturer, and the product knowledge they bring to each account.

More than 40 manufacturers responded to the survey. Their sales ranged from $1 million per year to more than $5 billion per year, and their product lines ran the gamut of industrial goods – tooling, nails, casters and wheels, hose, cutting tools, brushes, abrasives and clamps, to name some. Though the group was diverse, their message was clear: small distributors are important and they're here to stay. Specifically,

• 76 percent described small distributors as "very important" to their business, while 20 percent said they are "important"
• On average, small distributors comprise 53 percent of a manufacturer's distributor base
• Service (37 percent), loyalty (29 percent) and product knowledge (20 percent) are the small distributor's most important attributes
• And 56 percent of manufacturers said they will continue to sell through the same number of small distributors in the future, while 34 percent said they will rely on small distributors even more in the years ahead; just 10 percent said they plan to use fewer small distributors in the future.

A valuable commodity

Ray Reynertson, president and CEO of assembly tool maker Sturtevant Richmont in Franklin Park, Ill., says the loss of small distributors would be a tough pill for his company to swallow. But he doesn't see that happening any time soon.

"We really need a two-fold approach to go to the marketplace," says Reynertson, who describes his company as a small, niche manufacturer. "We are very interested in, and have aggressively pursued, the large catalog houses. We also have found it very beneficial to zero in and focus on specific accounts with small distributors who specialize in assembly tooling."

Reynertson says he doesn't like to generalize, but he admits there is validity to the long-held notion that when it comes to product knowledge and developing personal relationships with customers, small distributors have an advantage over the competition. Those attributes are still important today, he says, especially for manufacturers of specialty products – those that require special skills or technical knowledge to sell and service.

"There's a significant advantage for the end user to have a distributor who is focused on a few assembly plants where they spend a considerable amount of time," says Reynertson, who also is president of the Industrial Supply Manufacturer's Assn., a trade group representing manufacturers of all sizes. " … Typically, you find that the distributor we're looking for, when it comes to that kind of focus, is very narrow and tends to be small."

About a third of Sturtevant Richmont's domestic business is done through small distributors; that figure is even higher overseas, says Reynertson.

Another reason for the small distributor's staying power may be, ironically, integrated supply. The reason? No company can be all things to all people.

"Even when [a customer] brings in an integrated supplier, the fact is that they still need someone on the plant floor that is capable of helping them solve the problems that develop," says Reynertson, adding that those problems can be many and varied. He says his company is finding that, in those cases, the integrated supplier is allowing the small distributor to come in and sell around the contract or come on board as a second-tier distributor, providing sales and service on some of the more technical items needed in the plant.

"I think there will continue to be a future for those small distributors, as long as they come in and provide a service that the integrated supplier can't," Reynertson says.

Dave Thompson, president of Kennnedy Manufacturing in Van Wert, Ohio, agrees. He also points out that as large distributors have chased integrated supply and national account business, a large portion of the marketplace has been left underserved. While some of those customers have been picked up by large, self-service type distributors, many of them still need the expertise and service that local, specialty companies provide.

"There's a need for people to take innovation to the smaller customers that still exist," Thompson explains. "Large distributors tend to focus more, as they should, on integrated supply as they segment their customer base, so the smaller distributor tends to focus on open accounts."

Thompson says it looks like that trend will continue.

About 75 percent of Kennedy Manufacturing's business is done through small, specialty distributors. The company makes industrial tool storage equipment, more of a capital purchase for customers of all sizes. Therefore, Kennedy relies on distributors with the knowledge to sell customers solutions, not just products, that are better than what they may be using.

"Smaller companies have a strength there," says Thompson. "They fill a role in helping inform the customer as to innovations in products."

Like Reynertson, Thompson doesn't see small distributors disappearing from the industrial supply landscape any time soon. As technology costs come down, and support organizations (such as buying and marketing groups) continue to grow, he says the small distributor is likely to find it easier to compete in today's market.

At the end of the day, there is room – and, indeed, a need – for everyone "I don't see small distributors going away," says Thompson. "They're very important for a distribution strategy."