3 Reasons the Middleman Is Here to Stay

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The "threat" of distributor disintermediation is not new.

Pre-pandemic, it wasn’t uncommon to hear that the days of independent distribution were coming to an end. In fact, we’ve been hearing it for decades.

And with the rise of e-commerce in B2B, manufacturers have seen an opportunity to sell directly to the end-user – and many are.

Their role may be evolving, but distributors are still here. We need to obliterate the false narrative that distributors don’t have a seat at the table. Distributors contribute experience, expertise, an understanding of the end-user’s business and deep product knowledge.

“As the problems that companies are trying to solve become more dire, the opportunity is there for distributors to take, and I think they will.”

That’s coming from Andrew Hastert, the director of channel partnerships for Rockwell Automation. On one of my recent webinars, he shared his transformation from a skeptic of the value of a distributor to that of an ardent champion of their role.

The value of a distributor is only going to keep growing. Here’s why:

Broad product portfolio – wrapped in services

Distributors must have what customers need when they need it, but they can’t always compete on that alone. Distributors that stand out are selling solutions. They help customers identify what products they need, how to use them and the best way to get the most from the product.

They’re offering inventory management onsite that gives customers visibility into what products are available and when, and after it’s delivered, when it needs to be replenished again. They are embracing technology to support that so they can help the customer optimize their spend. Distributors are also getting creative. I’ve heard of distributors selling lighting as a service, storeroom management and tracking analytics for their customers.

They are out there doing the work, adding value with every interaction. That’s hard to replicate.

Deep expertise

After working with sales organizations for several decades, I’ve championed the 40/60 formula. Distributors need to have the right product at the right price for quick delivery to satisfy their customers’ needs. But if 40% of a customer’s buying decision is based on those criteria, that means the rest is based on the added value that distributors provide.

So, 60% of the decision to work with a distributor is based on their deep expertise – the value that’s added beyond the product itself.

Consider this anecdote about a distributor sales rep Andrew knew years ago:

“This guy had a rocket on his back. He spent 80 hours a week visiting customers. He’d meet with everybody and get to deeply understand their business, their business challenges and their objectives – more deeply than any of them understood it. He’d be able to tell them insights about their business that they previously didn’t understand.

“Suddenly the products just fulfill a value delivery, a business outcome, but the distributor is out there doing the work. It’s an evolution of what they’ve always done. Distributors have always added value.”

Generational relationships

Just last month on the We Supply America Tour, I heard a customer tell a distributor:

“I’ll always do business with you because your father was the only one who gave my father credit when he really needed it.”

I met another leader in a family-owned distributor, Jason Packer, CEO at Hill & Markes, on last year’s We Supply America Tour. His parents and uncle started the distribution company. His was just one of many stories I have heard of mothers, daughters, fathers and sons working in the same business that their grandparents and great-grandparents built.

These distributors have long been embedded into the local communities they serve. That type of intimacy and the deep knowledge of the customer, its business and its people can’t be replicated by a manufacturer or a solely ecommerce-based seller. 

Own your swagger

I’m back on the road as part of my We Supply America tour, visiting distributors across the country and seeing firsthand the value they’re delivering to their customers, employees and communities. People still buy from people. And the distributors are right there, in front of customers every day. In my recent conversation with Andrew, he told me distributors need to “own their swagger.” I love that.

He also said: “It’s almost arrogant to think that (manufacturers) can do any of that on their own, let alone all of that on their own.”

Distributors tend to be a humble bunch. But you service the heck out of your customers, deliver innovative solutions and supply America. You – the middleman – add tremendous value to the supply chain. You’ve earned your position. The middleman is the backbone of this country, and we need you.

Dirk Beveridge is the founder of UnleashWD, executive producer of We Supply America, and president of the Beveridge Consulting Group.

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