Most distributors keep busy enough just handling incoming calls, emails and, in many cases orders from their website. But how do we know if we are actually winning?
It’s probably even more important for your long-term success to take some time now to revisit why you are in business and what customers want and need most from you.
Because the IDEA Connector dramatically lowers ordering costs, the cost savings fall to the bottom line and directly increase profits. With manufacturers and distributors operating on razor-thin margins, strategic changes that reduce costs can have significant impacts on profitability.
For the best customers, Distributors can devote resources to maximizing the business relationship, while for less profitable and less efficient customers, Distributors can find ways to lower cost-to-serve and increase dollars per transaction.
A surprise for many Distributors is that a lot of accounts they consider “good customers” because of the frequency or regularity of orders, the total amount of revenue they contribute or the total gross profit or gross margin percentage they seem to provide are actually costing them significantly more money than they bring in to the company.
While most distributors learned long ago to avoid managing for top-line sales revenue as a measure of results, many of today’s distribution businesses still believe that managing by gross margin is effective. In particular, sales compensation is typically rewarded based on gross margin for a particular deal.
Research from the previously published annual 2015 State of E-Commerce Study indicates that more than 41 percent of distributors are generating less than 5 percent of revenue through e-commerce.
E-commerce revenue as a portion of total revenue has grown significantly in the past year through the growth of existing e-commerce sites, as well as new implementations, according to a joint MDM online survey with Distribution Strategy Group conducted at the end of 2012.
When we ask successful distribution company executives about the sweet spots in their market, they readily provide a confident answer. The problem with the answer is that it is usually incorrect or at best partially correct.
Up-selling and cross-selling are the two primary means of growing an account. Among these, cross-selling is paramount. Here’s why: many distributors have regular customers who buy the same set of 10 to 20 SKUs over and over, yet, they have thousands of other products that could be sold to those same customers.