Compete With Online Marketplaces - Deepen Customer Relationships

Globalization, consolidation, and the persistent threat of disintermediation affect distributors large and small, promoting industry leaders to transform their supply chains and business. While the threat of online marketplaces such as Amazon is considerable, every wholesale distributor should have a business strategy that includes creating customer relationships that are hard to replicate.

If you want to protect your customer base, you must consider what you can offer that others cannot easily do. Value-added services are one way to do that.

This post pulls together various approaches to value-added services that every distributor should consider: logistics, information services, and customer business processes.

Whether you call it “increase customer stickiness” or “build a moat around your customer,” ultimately, you need to make the value to your customer nonreproducible. Nonreproducible by an entity that could never be local - a digital marketplace. Being local is one of the original wholesale distributor value propositions - it still applies, and we need to leverage it.

Three Critical Areas to Focus On:

Logistics focuses on getting products to their destinations as quickly as possible and with as little friction as possible, for example:

• eliminating extra paperwork,
• kit and packaging,
• delivery to the job site, and
• consigned inventory.

Customers come to expect some form of logistics value-added services, and they are quickly becoming commoditized. Most wholesale distributors provide them in one form or another; it is no longer a competitive advantage.

Distributors must add value to customers in these areas, but they cannot stop there.

Information services provide product descriptive; product comparative; and product quality assurance information that only distributors may process. Distributors today use their superior product knowledge and technical expertise to deliver customer value.

Digital technology is presenting new opportunities to deliver distributor product expertise to customers in cost-effective and efficient ways. For example, augmented reality is a highly visual, interactive method of presenting relevant digital information in the physical environment.

Get the Customer’s Job Done Better

There are two customer roles involved with the wholesale distributor relationship:

1. The buyer
2. The user
   
   

Defining a unique and valuable service offering to your customers starts by understanding your customer’s job they are trying to get done with your product. What are the outcomes they deem essential and are currently unsatisfied with purchasing and using your product or a competitor’s product? These are the opportunities to; optimize business processes, innovate on better/new products or overall solutions and at the same time are tough for competitors to copy.

For example, for your high volume and complex products, follow the customer’s assembly and manufacturing process to understand their unmet needs:

1. Identify inefficient processes and outcomes.
2. Improve the manufacturing process, product performance, life-cycle cost, ease of installation.
3. Research with vendors to innovate their offerings to meet your customer’s unmet needs.
   
   

Conclusion

If you want to compete against Amazon Business and other companies that excel at logistics, shift your focus to digital information services and value-added processing. Information services and value-added processing affect your customer’s business’s functions. You want the customer’s costs to fall as you do more work, saving them time, effort and money, and integrating yourself into their operations.

Be sure to read another of Gil's blogs!

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