Dealing With The Forces Of Change

December 19, 2001
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LAS VEGAS, NV — J. Michael Marks, a principal with the Indian River Consulting Group, Melbourne, FL, asked NHRAW meeting attendees to consider some future scenarios of wholesale-distribution by looking five years into the past and five years into the future.

“If you could see today but be back in 1996, what actions would you have taken then?” he asked in his seminar handout. Marks titled his presentation “Key Messages for 2006.”

“There are four key things I want you to take away from this session,” he said. “First, you need strong input from your customers, since they are going to define how they are going to buy. Second, [distribution] channels evolve to solve customers’ problems, not to push products. Products flow through channels; channels do not flow through products.

“Third, the Internet will enhance, not replace, existing channels.

“Fourth, prepare for the future; don’t try to predict it.”

Marks advocates using “scenario planning” for uncertain futures. “Scenarios deal with the ‘what if’ question,” he said. By looking at current trends and forecasting them forward, Marks believes that businesses have good tools for “contingent action planning.”

THE INTERNET

Marks predicted that online product ordering will grow, but will not dominate the market by 2006. He pointed out that there is a distinct difference between ordering and shopping.

“Very few cars today are purchased online — they are shopped for online,” Marks pointed out. “Ordering does not equal shopping.”

He said that simple products and routine purchases are likely to be made online, but the more complex the item, the more likely it will be purchased locally. Customers will use the Internet as a tool to search for new suppliers, request bids, or get product information. But he concluded, “Our customers will not be buying online, they will be shopping.”

Marks challenged members to define the changing role of their salespeople, since the Internet has become a useful tool for shopping. “The Internet has turned our salespeople into order takers,” he said.

BRICKS AND CLICKS

Marks presented some responses from manufacturers, wholesalers, and customers to a survey done by Pembroke Consulting (www.PembrokeConsulting.com). The survey included a question about the Internet: “Will the Internet have replaced the wholesale-distribution sales force as a means of providing information to customers in 2006?” Forty-three percent of the manufacturers who responded felt this scenario was likely to happen; 30% of the wholesalers felt it was likely; and 52% of the customers felt it was likely. Marks cited four “conflicting futures” for the distribution channel, but he added that the popular “bricks and clicks” scenario — with both online and physical presences — is still the best business model. Marks said that some companies prefer to whine about these changes, but they must learn to deal with the forces of change. “Wholesalers need to get up to speed with the latest technology and with the way of doing business. “You can’t just be supportive of change — you have to drive change,” he said.

Sidebar: NHRAW Lists Distribution Trends

The NHRAW identified 16 different trends in the distribution industry today. They include:
  • Customer relationships are increasingly critical.
  • Gaining access to customer information yields marketplace power.
  • Value-added services are expanding to meet customer needs.
  • Channels of distribution are evolving and changing.
  • Distributors are forming alliances with suppliers to reduce costs and increase power.
  • Business is becoming “North Americanized” and trade borders between the U.S., Mexico, and Canada are dissolving.
  • Products are being introduced from Europe and Asia that influence North America in terms of application and design.
  • Multi-branding is commonplace.
  • Consolidation continues.
  • Deregulation is opening markets.
  • There are serious workplace shortages.
  • There is more professional ownership of distribution and fewer family-owned businesses.
  • E-commerce is enabling 24-hour, 7-day-a-week business.
  • The consumer is now more educated based on the availability of information on the Internet.
  • There is great interest rate volatility.
  • Great intergenerational wealth transfers are occurring or are about to occur. Publication date: 12/24/2001
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