With supply chains in disarray and every business variable imaginable weighing on the industrial market, there’s never been a better time for partnerships. Buying groups and coops have long served the market for independents looking for a leg up, providing resources and buying power to help small businesses scale and gain competitive advantage. As the pandemic’s challenges wane and others ramp up in their place, we asked some top buying group leaders how their organizations are making a difference in these turbulent times.
Scott Bebenek, vice president of IBC Industrial Buying Group, discusses the biggest challenges and the group's initiatives to combat them.
Biggest challenges facing distributors
I look at distributor challenges as falling into two categories: controllable and uncontrollable. Uncontrollable challenges get lots of attention: labor shortages, disrupted supply channels and managing constant upward pricing pressures are current examples. We wish we could help distributors with these challenges, but nobody can — they are systemic.
Unfortunately, these challenges take the distributor’s focus off their controllable challenges — strategies relating to better positioning their companies against their competitors, and their evolving customers’ needs. For example, most small and medium-sized independent distributors lag in providing online resources for their customers (ordering, product information, problem-solving blogs, etc.). Also, these distributors continue to manually administer most of their PO-to-payment processes, adding pressure on selling margins that are already thin. And speaking of margins, many of these distributors focus only on providing customer solutions and sales, versus also investing in marketing programs that further differentiate them from their competitors and take the customer’s focus off price.
How IBC can help
Traditionally, the “buying group” business model has focused primarily on rebates, holding a conference, and maybe member education. IBC does those things, but we do not believe they provide enough long-term sustainable benefit for what a distributor needs long-term.
Everything IBC does focuses on only two things: bringing our distributors more revenue, and growing our members’ margins.
A distributor benefits much more from an extra dollar of revenue than from a rebate on a dollar of spend. IBC has an award-winning National Contract/Minority Contract program to help our distributors win new large-account business. We operate a centralized digital product database, currently at 750,000 SKU’s and growing rapidly, to enable our members to develop their own online customer experiences. We offer IBC University for training members’ staff, and recently launched a loyalty-based points program for our members to increase their stickiness with their customers.
Regarding growing our members’ margins, this is where our rebate programs come into play. But more importantly, we are the only industrial buying group that enables our distributors to reduce transaction costs by fully automating their PO-to-payment processes.
Describe some big wins from the past two years
There is nothing more gratifying to us than to see our members prosper from the tools we offer them. We currently have 23 distributors that are working on something they could not do on their own — building their own online catalog at a very affordable cost. We also have a number of distributors offering loyalty points to their customers; preliminary results are showing >20% growth with these customers, plus they have stabilized margins with these customers by taking the focus off price.
Our most ambitious initiative yet to come
Looking ahead through the lens of “growing our members’ margins,” we have established a committee of members that are evaluating the viability of building a Private Label for our distributors through partnering with some of our supplier partners. Through our approved supplier network, our members compete very well with the Tier 1 brand names; however, they lack competitiveness and differentiation in the low-price-point segment. Initially focusing on Cutting Tools and gradually expanding to other product segments, we want to give our members a proprietary product line that appeals to their non-quality-conscious customers.
