How electrical distributors can work more closely with their suppliers to create more profitable, successful companies in the e-commerce age.
A manufacturer and distributor of electrical and ventilation products that range from audio controls to commercial power venters, Tjernlund Services ranks as the larger supplier that sells directly to Amazon in the industrial electrical space. With more and more contractors going online first to shop for products, and with many of them starting the process at Amazon, Andrew Tjernlund says it just makes sense for his family-run company to use the e-tailer as one more distribution channel.
“We’re pretty familiar with what Amazon’s game plan is in the B2B industrial space,” says Tjernlund, director of marketing, “and safe to say, it’s strongly targeting that base.” Having seen many distributors lose customers first to big box home improvement stores, and now to online sellers, he says it’s time for electrical distributors to start thinking about how to maintain their current customers, sell more to those buyers, and try to capture additional market share.
“Independent electrical distributors are going up against the big boys in their quest to win more customers in the sector,” says Tjernlund. “They’re also running into major headwinds on the supply side, where distributors just don’t have access to the same product lines that they used to.” To circumvent this problem, he tells electrical distributors to focus on repairing any “strained” relationships with core suppliers, and then rebuilding them.
“A lot of distributors still have access to a wide customer base, but they don’t always have access to the product lines they need,” Tjernlund points out. In some cases, this is because suppliers can’t always see the value that a distributor brings to the table. “If they don’t demonstrate the value to the manufacturers, it puts additional stressors on the relationship,” he explains. “It gets to the point where why wouldn’t a vendor undercut you, sell through your competitor, or sell on Amazon?”
Aiming for the Obscure and Hard-to-Sell
Putting on his manufacturer’s hat, Tjernlund says distributors should understand that their suppliers don’t really need help offloading their best-selling products; they need help selling brand-new and relatively obscure items. This creates an interesting opportunity for the company that’s willing to stock replacement parts and create a situation whereby the manufacturer can send customers to that distributor for those parts.
“When contractors come in looking for this stuff, the manufacturer doesn’t have to send them to Amazon as the only place that stocks it,” Tjernlund explains, “because the distributor is stocking it locally. That’s a really big boon, and a move that will help solidify the supplier-distributor relationship.”
Tjernlund says this “move” may not align with many distribution business models, which are focused more on inventory turns, financials, and lean inventories. The company that goes back to basics (i.e., storing and selling for manufacturers that don’t want to hold too much inventory), can stand out from its peers. “If you can do that, you’re not only creating value for the customer because you have the new cool stuff in stock and you become a place that’s a reliable source even for obscure products,” says Tjernlund, “but you’ll also have happier suppliers.”
Expanding Your Horizons
Knowing that it takes more than just a pool of happy suppliers to grow a successful distributorship in the e-commerce age, Tjernlund sees rebate programs as a particularly good tool for companies to shore up their supplier relationships while also growing their own revenues. With one of his own suppliers, for instance, Tjernlund says that once his firm makes $250,000 in qualifying purchases within a year, it gets a 2% rebate.
That threshold goes up every year (and will be $300,000 for 2020, for example). “It’s an extra reward for us as we push that manufacturer’s specific products,” says Tjernlund. Other viable strategies include adding more product lines and/or expanding those that you already offer. For example, if you’re only selling one or two of a specific manufacturer’s product lines, then it might be time to expand that scope.
“If you’re selling a specific company’s electric baseboard heaters, but if you’re not selling their garage heaters, then there’s a real opportunity to create a win-win situation by adding the latter to your line card,” Tjernlund explains. Even better, if those garage heaters have been difficult for the supplier to move lately, and if you know of one or more electrical contractors that needs them, playing the “matchmaker” in this scenario can create some interesting synergies and financial incentives for all parties.
“Your supplier may be willing to give you a better deal on those garage heaters and add to your margin,” says Tjernlund. “Then, both supplier and distributor can increase your overall sales and become more attractive to a customer by expanding the entire product line that some manufacturers offer—and not just their best sellers.”
Open Lines of Communication
Acknowledging how strained some distributor-supplier relationships have become in recent years (according to the Reimagining Distributor and Manufacturer Relationships survey, 91% of NAED members recognize a “real need” for manufacturers and distributors to reimagine how they can better work together and more collaboratively), Tjernlund tells distributors to focus on creating open lines of communication with manufacturers.
In other words, don’t wait until there’s a full-blown problem before picking up the phone and talking to your supplier about a festering issue (and of course, vice-versa). “Take the time to have a real conversation with someone who can make decisions,” says Tjernlund. “Especially if you’re an established customer, the executive that you call will probably be more than happy to talk to you and even pull the strings on some creative solutions.”
Here are three more tips that Tjernlund says distributors can use to grow their sales while also creating better alignment with both suppliers and customers:
- Be the first-mover to stock new products from your manufacturers. By gaining a reputation of having the “next thing” in stock you don’t have to always rely on winning on price and it earns points with your manufacturers.
- Burn through dead inventory. By constantly having a clearance section, you create extra interest for physical trips or have a welcome reason to stay in front of customers with email notifications.
- Use rebates for credit with your customers. Consider significant customer rebate percentages for all additional sales (compared to the previous year). “You may want to go as high as 5%,” says Tjernlund. “That may seem high, but this is for incremental sales and it incents buyers to do more business with you and less with your competitors.”
Tagged with best practices, e-commerce, sales