“The race is not always to the swift…. but that is the way to bet.”
Pandemic Sales-Hit? Scramble or Hyper-Focus?
Sales are pandemically down for many types of distributors. Two counter strategies are:
- Scramble to get “lots more (web order) accounts”?
- Or: a) hyper-focus your best-talent on; b) co-creating next-level, procurement solutions; c) with the top-few, most-innovative customers?
An Unprofitable, Web-Selling-Scramble Case
Big distributors get PR for investing in and winning new, web-order activity. But, is this business profitable given their service-cost model while trying to match Amazon’s value prop?
For clients with Cost-To-Serve analytics, the answer is: NO! Typical results:
- A doubling (or more) of active accounts
- But only a 5% gain in gross margin dollars with a 20%+ increase in transactions.
- Average Order-Size Math: the (gross-profit-dollars) << (fulfillment-dollar-costs) to yield net-loss dollars.
- So, overall busy-ness grows while profits decline.
- Distributors don’t have Amazon’s – lowest fulfillment and delivery cost – capability.
- They can’t afford to match AMZ’s: availability; prices; no minimum order; delivery response time with trackability; and free freight.
- AMZ loses on small orders too. But, AMZ monetizes the clickstream (digitally without human costs) to win more: Prime loyalty/fees; cross-selling; and advertising.
- By focusing on the quantity of accounts and orders instead of order-size quality: what is the foregone opportunity cost?
Partnering Customers with a Future!
Only 3-4% of all companies are successful, perpetual innovators. David Birch dubbed them: “Gazelles”. They grow 2-4 faster than their industry capturing all new growth and stealing plenty from the hides of unchanging, dying competitors.
How to spot them? Their 5-year track record – for sales, hiring and experimentation – sparkles. Their managers (and engaged employees) can tell you explicitly: what types of customers they target and avoid; and why their value prop is unmatched.
As innovators, Gazelle leaders are also accessible and open to better ways of buying commodities from distributors: a big, pandemic need.
SO: survey target Gazelles on their interest in co-creating a procurement model that has already swept retail distributor channels (and others). Which is: an open-book, cost-plus, services (a la carte) for fees – replenishment solution. Partner the amenable ones, and they will grow you going forward.
Your New, Pre-requisite Capabilities?
Unbundled service contracts require a cost-to-serve model. And, you will have to skill-up your Tiger Team to execute a nine-step, consultative-selling process. How exactly? Skim my webinars especially #s 8-10. Then, Carpe Gazelles!