203. Invent New, Distributor Models

Levels of Innovation:

All businesses innovate along a continuum from: trivial to breakthrough. Some rearrange the deck furniture on their Titanic (incremental innovations). Some might get an iceberg-resistant ship (new business model). And, a few will pursue an iceberg-free route (new channel model).

Thanks to digital disruptors (starring Amazon Business), distributors must start unbundling and re-bundling their selling and service costs using digital tools to:

  1. Let Best Customers buy from a range of selling/service models including omnichannel scenarios
  2. Stop cross-subsidizing, net unprofitable customers
  3. Stop cross-subsidizing losing SKUs with Cream SKUs that will get web-roomed.

How? Borrow from Model-Changes in Forerunner Channels

In retail channels in the ‘80’s, barcode-stock-replenishment transformed distributors’ standard, business model. Instead of field reps calling on independents to fight for account share, chains mowed down the independents and then married just one distributor on a cost-plus basis. “Extra services” were unbundled and offered on an a-la-carte-fee basis. A few distributors changed and won. Most died.

In the early ‘90s, big, MRO-Buyers started seeking “integrated sole supply” contracts. The few distributors that pursued this new model of selling had to go (again) to a cost-plus, a la carte service-pricing model to co-create custom solutions.

Suppliers, in some cases, have taken biggest customers direct, but continued to use existing distributors to service those customers on a fulfillment-fee basis.

In all cases, distributors had to – (re)think, calculate and co-create custom solutions – like 3PL firms to partner key customers and suppliers.

Electronic, Proprietary Channels

From ’83 to ’88, Walmart invented “quick response”. Store scanning data was summarized and instantly shared to supply-chain partners. A key result: 7000 of the biggest-consumable SKUs flow, just-in-time, through cross-docking DCs to give us 99% fill-rates at Every-Day, Lowest Prices (EDLP).

Amazon’s all-digital, in-the-cloud, AI-run “value-channel” infrastructure is different. It starts with our screens and home/office doorsteps and goes back to global producers. No one can match their long-tail B2B, SKU selection or their prices/delivery for a spot-buy of most shoppable (cream) SKUs.

Questions:

  1. What specific SKUs will AMZ’s accelerating capability steal from your channel on a spot-buy basis?
  2. How will legacy B2B Brands and distributors co-create – e-selling, business and channel – models to: minimize AMZ’s sales takes; and, win more share from slowpoke, traditional competitors?
  3. Will Brands and distributors share SKU analytics and activity costs to co-create new models?

For more ideas? Skim the sub-topics of my 12, now-recorded webinars.

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