HOW DEALERS WILL SURVIVE

It will come as no surprise to most dealers that many manufacturers are very frustrated by the current market structure, with many dealers almost entirely dependent on back-end buying group rebates for their profitability. “E&S distribution is clearly broken,” one manufacturer told me recently. Of course, it was cocktail hour, but there were also a couple dealers in the conversation.

As some of you realize, I’ve been writing for some time about the “disintermediation” that John McDonough (then at ITW) and John Nackley (still at Metro/Emerson) warned about nearly a decade ago. It is in fact well underway. Internet sales and multiunit operators demanding to pick-and-choose services and compensation structures are the main drivers. The Great Foodservice Recession accelerated the latter trend as multiunits spun out E&S and facilities functions to dealers. If anything, the real question is, why hasn’t the distributor structure exploded more quickly? Why haven’t manufacturers just rebelled and gone direct, using the Internet and other new channels?

My manufacturer friend had two keen insights and my dealer friends agreed with him. First, operators, even multiunit operators, like a single point of contact. They want someone to help them spec and bundle all the products and services. All operators have many different suppliers and need the purchasing, credit, staging, installation and other services dealers provide. They will pay someone to assist them in managing it all.

Second, while replacement has become a much bigger part of the total E&S market as it has matured,  manufacturers still need dealers to help “bird-dog” the scores of thousands of new units and major renovation projects. “Replacement may be 60% of the market or more now,” the manufacturer said, “but you can’t afford to miss the new unit or major redo, as that gives you the base for the replacement later.”

For dealers, this is a roadmap on how to survive and prosper. First, provide services operators need and want at prices they can afford. If you need a rebate to make it work, go for it, though many multiunits won’t let you take them. Second, stay very, very close to your current customers and consultants and find some way to aggressively prospect new ones.

Remember, distribution always finds its most efficient means. You must add value to get someone to pay you.

Cheers,

Robin Ashton

Publisher

rashton@fermag.com

“””