Newer Industrial Distributors’ Digital Advantage

Research shows that a large chunk of the industrial distribution market is still struggling with the digital conversion. However, newer distributors seem to have a natural advantage. Hear from three such companies about how they were able to hit the ground running with a digital-first mindset.

An increasing amount of conversations in the industrial distribution space surround the overall topic of ‘digital transition.’

If that phrase makes you cringe, you’re not alone.

B2B e-commerce has been a mainstay in the market for about 15 years, more distributors are making use of software like sales order automation and others are putting their entire product catalog online. Yet, many small and mid-sized industrial distributors are still struggling to keep up with their peers. Whereas large distributors — like those on Industrial Distribution’s Big 50 List — have more than enough bandwidth and resources to ensure a digital-first mindset that matches the shift in today’s industrial buyer, if often requires a hard learning curve for executives and salespeople at those independent, family-owned companies.

Besides having plenty of baby-boomer executives and sales staff, many of those smaller, older firms have outdated technology or software that result in a lot more manual operations than how things are being done at their more modern counterparts.

Sure, ‘If it ain’t broke, don’t fix it,’ has its truth, but also has its limitations. The CFL light bulbs that were in the house I recently bought were working perfectly fine, but I still replaced almost all of them with LEDs because I know they are more energy efficient and will save me money in the not-so-long-run.

Of course, there are plenty of small and mid-sized distributors that are several generations old and have taken the digital transition in stride. But research tells us a large chunk of the industrial distribution market is behind the times. In ID's 2017 Survey of Distributor Operations — conducted in March — 37 percent of respondents said e-commerce is not a priority for them, 43 percent aren’t offering e-commerce, 49 percent said their website content is updated less than monthly and more than 19 percent said they can’t recall how long it’s been since their website was redesigned.

With the rise of e-commerce has come a new type of distributor. Today, it’s fairly simple process for a group of people to get a warehouse, fill it with product and start selling online. Selling exclusively through e-commerce — or at least mostly — greatly reduces overhead and puts a much smaller reliance on field sales. Beyond that, these types of distributors naturally have a digital-first business model. The same principal could be said for any new media group, where digital is always the priority — something many old, small-town newspapers are struggling with.

At the recent Industrial Supply Association Convention April 22-24 in Denver, I spoke with several newer distributors — each founded in 2010 or later — about if getting started in the digital age gave them a natural advantage over their older competitors.

Here’s what they had to say:

Tiger Tool Supply (Glendale Heights, IL. Founded in 2014) — Co-Owner, Sales Manager Lance Steffey: Everyone’s trying to get to that digital point. Well, we’re kind of starting at that point and moving into the future. It seems like we’re ahead of some of these other guys. It was a big decision for us to decide to go the traditional route or the e-commerce route. Being the younger guys like we are, we think e-commerce is where it is. Aligning ourselves with manufacturers that are thinking that way as well is something we’re trying to do. A lot of the manufacturers that have been around a while are always asking ‘how many reps do you have?’ and we’re like ‘zero, but we’re all online.’ So a whole mind-shift has to happen eventually. We’re hoping we’re on the leading edge of that.

All Industrial Tool Supply (Huntington Beach, CA. Founded 2010) — President Jeff Perry:  When I first started, I was old school, entering in part numbers manually with no digital strategy at all. I’m paying the price for it now. We’re actually in the middle of an ERP implementation. So we’re faced with taking that bad data and making it friendly for the future. It’s been such a great exercise for us. We’re really growing up and seeing the value of great data. To be honest, I don’t have great data. I don’t have great CRM data. After we go live after the ERP implementation, it’s going to transform the way we do business. It’s going to give us a competitive advantage over those that aren’t doing it, which appears to be most our competitors, from what I’m seeing. We’re seeing roughly 35 percent year-over-year growth, and that’s in large part due to our e-commerce business. Our e-commerce business actually represents a majority of our revenue. We’ve harnessed e-commerce and running with it. The website and e-commerce is not the end-all, be-all. It’s never going to replace relationships. But it’s opened doors locally for us that we had never been able to get.

(All Industrial was profiled by ID in our 2017 Watch List. See the digital version here)

AgoNow (Tulsa, OK. Founded 2016) — CEO Larry Davis: We’re a company’s job is to sponsor profitable, sustainable growth. That’s what we do. Part of that is being digital. This industry is going there very rapidly. One of our jobs is to bridge the gap between distribution and manufacturing in a digital way. [Starting in 2016] certainly has its advantages and disadvantages. We thought we could come into this space through an acquisition. But in doing our ‘voice of the customer’ and market research, what we found was the businesses in this space weren’t doing what the customers need, and it was accelerating away from them. Where we thought we could acquire someone and retool it, we had to go build it from scratch. So we kind of got forced into that, which wasn’t fun for a lot of reasons, but the advantages are we are designing a business model based on the customer’s needs, and it’s digital. The supply chain is optimized out of the gate and is set to continue to be optimized because all our analytics are native to our systems. We have a very robust digital platform that gives us capabilities we never dreamed of.

(See Davis’ public letter about the company founding penned exclusively for ID this past January)