Industrial Distribution

Jack Keough

The value of independent distributors
October 17, 2006

Affiliated Distributors celebrates its 25th anniversary this year, and at a recent meeting of its North American Industrial Division, CEO Bill Weisberg reviewed the group’s start, its growth and plans for the future. But later in his keynote address, Weisberg came out swinging against national chains, explaining how the independent distributor has really seen the growth in sales over the past quarter century.

In his talk, Weisberg noted that when A-D was formed members were unsure if they could successfully compete with the national chains and survive the consolidation that was rampant.  That turned out to be a needless concern as independents actually grew business against those chains.

“In fact, every time the national chains buy someone, our members in that market get stronger and realize accelerated growth,” he said  “They  pick up new customers that miss the flexibility and service levels that the acquired company no longer provides. They hire quality people that quickly become disillusioned about the new owners and the bureaucracy with which they operate. And they soak up market share like a sponge.”

Weisberg went on to say there are still people today who predict the imminent demise of the independents and the dominance of chains. “These are people who look at the volume of mergers and acquisitions taking place but don’t notice the volume of business that leaks out after every deal. These are people who buy into the spin that executives at these chains use to promote their value in the financial markets while ignoring their company’s performance in customer markets,” Weisberg said.

Weisberg said the future will see an industry increasingly divided. On one hand, he said, will stand a few giant distributors run from corporate headquarters by financial managers with little regard for their company’s people or their relationships with their long-time suppliers—and with little understanding of each local market. Their priority, he said, is the financial marketplace.

“On the other hand stand an army of strong independents. Some are family owned, some are employee owned. Both are professionally managed by people who have a deep commitment to their employees, their long-time suppliers and their local communities. And their priority is the customer,” Weisberg said.

Independents, he added, will be the ones gaining share in local markets, attracting new customers every day, and hiring more and more of the best people.

“Whether you are a distributor or whether you are a supplier, where you choose to stand will determine the success of your company,” he said.

What’s your opinion of Weisberg’s comments? Will the independent distributor continue to grow and take market share from the national chains? Will consolidation result in a handful of giant distributors, with independents fighting for a smaller piece of the sales pie?

Whatever your thoughts, Bill Weisberg raises a number of interesting points and challenges as to the role of the independent distributor. To see the complete text of his remarks click here.

Posted by Jack Keough on October 17, 2006 | Comments (2)