By Ann Grackin

Gone are the days when wholesalers were classified as middlemen. Many of the so-called wholesale distribution sectors are, in fact, growing at a rate faster than the economy. That means they are doing something well, and taking market share from someone else.

Who is that someone else? Retailers. Wholesalers are creating new and interesting business models, spreading their wings across a broader horizon of opportunity. But the reality is everyone is changing a bit—seeking new business opportunities and eying each other’s territory. Omnichannel retailing and home delivery services, for example, are driving retailers to build fulfillment warehouses. And as you enter a Costco or Home Depot you immediately know you are in a warehouse—just one that is safe enough for shoppers to wander around. Retailers are also encroaching on the wholesalers’ B2B turf.  Conversely, some retailers are embracing their wholesale distribution partners to provide those needed warehouses in the local geography to support new fulfillment models.

So the battle is on. And a key weapon of choice? Cloud-enablement. In fact, many types of business are benefiting from cloud-enablement to expand their business models.

Wholesalers Meet the Challenge
But back to our wholesalers. They are growing by selling direct to consumers. Easy to say, but servicing consumers is not child’s play. Customers are now conditioned to stellar websites, assortments, and even more stellar service and fulfillment such as same-day or free shipping, generous return policies, and maximum choice for the lowest price. If you are competing for the consumer business, falling below the bar set by the best retailers means not only that shoppers won’t return, but also that you will eat up vital working capital pleasing them.

So how are small and midsize wholesale distribution (WSD) companies competing and winning on the stage of global markets?

Business Model Transformation. Today, wholesalers have options to move up the value curve—expanding the business footprint horizontally, providing service and repair, fulfillment, and light assembly to the brands they support. Retailers generally don’t do repair work, though they might sell the service contract. And the manufacturer may not have reach in the local market. The WSD that does can fill this important role and capture loyalty and revenue.

Retailers are also on the hunt for reliable and cost-effective fulfillment. Brick and mortar businesses in the same-day and free shipping race are seeking efficient partners to help support this new game.

For the retail market, WSD companies are providing returns, liquidation, and helping the retailer and brand recapture some value from slow-moving or out-of-season products. The growth of this sector—closeouts, overstocks, and surplus—has been so promising that some retailers are looking to recapture the business they once sold off to others. But many wholesalers and even third-party logistics providers are getting into this market as well as surplus marketplaces. The essential expertise is being a category expert and having market intelligence and a savvy ecommerce provider. WSD companies need to know where to find the deals, determine what’s a good deal, and then find a channel to sell it. Everything from online large lots or complete store merchandize auctions in B2B down to one-each consumer bargains are territory for the wholesaler’s business.

Category Expertise. As mentioned above, this is the hallmark of the WSD. It has been—and will continue to be—their principal expertise. Category expertise is, in fact, their competitive differentiator. This can be “world domination” for many, as we see in certain industries such as healthcare, where some wholesalers with category expertise in medical supply have become virtually exclusive suppliers for a market.

But wholesalers are also expanding vertically, entering into adjacent markets. So if you are stellar at the wholesaler model, you know you can provide all the services required with scale. You know you have the foundation to add new products into your offerings.

Expertise is key and your customers are seeking that expertise. Assuring that the right product is selected—the right valves, fittings and finishing in industrial suppliers, for example— requires knowledge. Another aspect is advising customers on their project such as what is the optimal configuration, how to install and maintain, etc. And while the big ecommerce player out there may be a super aggregator and create a great website, it cannot provide the kind of assurance, or service, a customer might require.

Service and Support. Both consumers and B2B markets want to assure continued value—usage from their product investments. And this starts during the product selection through warranty management and end-of-life. Wholesalers are gaining momentum in markets such as healthcare, energy, electronics, and heating products by providing on-premise product care for institutions such as hospitals, residences, business building complexes, and more. This is high-value, high-margin, and maintains the long-term customer relationship.

Relationship/Partner Management with Manufacturers and Customers. Serving two masters is essential in the wholesale game. As discussed above, value-added service is important. But creating an unbreakable relationship takes more. Channel and contract management are foundational to support complex relationships. Equally importantly is mobile integration so your sales reps can engage with partners and customers, in constant communication with the best information about market orders and prices.

Demand Management. No longer will WSD companies rely on retailers to tell them about market demand. Nor will they rely on the manufacturers to proclaim what the big sellers are to be, therefore pushing their products. Often, wholesalers assume possession of the inventory so they need to think for themselves what will be fast movers and big margin makers. If you are taking the risk, that risk should be based on an honest picture of demand—a reliable forecast to start with. A process of engagement with your customers and suppliers should be put in place to get their best insights and build a consensus, creating a unified strategy to execute.

Of course, consumers make up their own mind about things, so consumer engagement on the web and mobile helps to understand and sense what consumers are more likely to do. But of course, they can also be incented. Pricing and promotion management methods and technologies are evolving rapidly to assure that promotions increase sales without erosion of margin. Successful wholesalers have been embracing demand forecasting and demand shaping techniques as they see their pivotal role in their industries.

First Place on the Web. Wholesalers often don’t think about their web presence and position as a brand. But several factors should be considered. First, both for B2B or B2C, finding suppliers and products is largely a web research exercise these days. Second, much of the need to find a supplier is fairly spontaneous—that is, unplanned either due to new needs or current suppliers found wanting in some way.

As a wholesaler, your brand and web position can matter tremendously. Though you might not invent the next cool product, you can certainly build a reputation as the cool place to find cool stuff. Often we hear the term endless aisles or rich assortments. These don’t necessarily have to come at a large risky inventory position. The relationship management and cross-selling opportunities between partners that can augment your catalog, as well as stellar supplier management to assure visibility to availability may still hold the most promise, enabling the WSD to maintain that go-to-site supremacy.

Consumers seem to pick their sites based on page one search position, but it’s not just about the ads and promotions. Social networking, how-to advice web pages, and promotions build your position—not just buying your way to the top and paying for Google ads, though you may indulge in that, too.

Supply Chain Management. Cool consumer factor aside, it all comes down to assortment and availability—B2B or B2C. Therefore, Inventory Management has to be the core strength of the wholesaler. Shrewd management on when to invest—in what products and categories—is high on the list of competencies.

Customers count on your knowledge of the supply markets. Small businesses are not scouring the world looking for the assortments of tools, apparel, lumber, you name it. They look to the wholesaler to know this and provide it. So available-to-promise capabilities between the wholesaler and their customers as well as to the suppliers is actually one the most important capacities. This innocent-sounding, fairly old term hides the depth of capability required underneath to make it happen—seamless processes, highly accurate inventory counts across all locations, the ability to allocate in real-time, current pricing and product data, as well as accurate lead times. Making the promise gets you the sale. Keeping the promise keeps you the customer.

Though the term Omnichannel is being talked about endlessly, at its heart it’s all about granular data—especially inventory access. But it is hard to do when you are patching together many legacy systems. A single version of the truth inventory and ordering capability that sits below the omnitouch world (mobile, web, store, catalog) can provide that capability.

These competencies are not created in isolation, but clearly support one another. One can debate who owns these capabilities in the enterprise, but the changing vista is also changing the internal structure of how the enterprise views itself. Foundational enterprise systems can support the needed integration and access by roles and perspectives to have teams develop ideas such as those above to grow the business in new and profound ways.

Living in a Continuously Changing World
Wholesalers are confronted with more challenges and choices. Opportunities may knock—but can you answer? When confronted with new business opportunities, the concerns about what it takes to scale—stocking inventory, bringing on new hires, training employees so they are productive, providing information to keeping employees and partners informed on the latest market trends and your product service offering—require choices, and capital.

However, some risk can be removed from these types of investments with today’s continuous deployment technology models from the cloud. Why distinguish a continuous deployment approach as being critical to success? Today, the bulk of businesses, of any size, are still sitting on legacy technologies that just don’t fit for the world in which the wholesaler finds itself now. Traditional software approaches— unique perpetual licenses, in the cloud or on premise—keep the enterprise in a cycle of perpetual disruption—lagging behind.

By contrast, in the cloud world of continuous deployment, the enterprise has access to and can ease into the new features continuously without reinstalls that interrupt business activities. The system is always up-to-date with the latest capabilities.

Feature and functions aside, there are always a few architectural approaches that are game changers for the end user. Beyond the continuous deployment is multi-tenancy. Though not for everyone, the economic model of multi-tenancies has provided previously inaccessible rich software to even small companies.

So when the market is knocking— retail, new services, expanded customers relationships—the wholesaler with the right game plan and technology foundation can open it to new opportunities.

About Author

At ChainLink Research, Ann Grackin and her team have advised hundreds of global corporations, achieving dramatic improvements in business performance through process and technology innovation. ChainLink Research leads the market in research coverage of supply chain—the links in the chain.Before ChainLink, Ms. Grackin was Managing Director of Marsh & McLennan’s Supply Chain Risk Management group. Earlier in her career she was Executive Vice President for Supply Chain Strategies at AMR Research and previously Foundation Partner at Benchmarking Partners She spent over ten years in global manufacturing and logistics at Digital Equipment Corp (now HP).She is a popular speaker and respected writer featured in leading trade publications. The Brief, ChainLink’s online magazine, where she serves as Editor in Chief, has attracted over 300,000 readers. Ms. Grackin is active in several supply chain and technology industry groups where she has participated or led the creation of supply chain methodologies.