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Disintermediation and Amazon Business – Two Reasons For Distributors to Lose Sleep

By Chris Brown, CEO Wiedenbach-Brown
@illumigeddon

Solid State Lighting brings both threats and opportunities to electrical distribution. While not responsible for disintermediation, SSL may accelerate it. We know about LED startups and brand-recognizable new entrants to the U.S. lighting market, but what about established domestic manufacturers faced with ‘do it or lose it’ opportunity (i.e., take the order direct)? We have a slippery slope with the traditional lighting and electrical manufacturers.

My Illumigeddon blogs have brought several responses from industry insiders acknowledging C suite conversations about disintermediation. I don’t think it is unreasonable for them to be having these conversations and making contingency plans in the face of the huge disruptions SSL is bringing.

So what is a distributor to do? If distribution can’t provide significant and measurable value, it doesn’t belong in the sales equation. A simple answer to the question is to become invaluable to the manufacturer, the end user, or to both. And that answer is also a partial solution to the Amazon Business challenge, which is more dangerous to at least the commodity product aspect of distribution.

And as LED lamps move more to commoditization, the threat increases. Two things strike me as undeniable. First, Jeff Bezos has web, logistical and financial capabilities most distributors can only dream of. And he has no Wall Street mandate to make money! Second, as the business world gets more and more connected, the much-maligned “millennials” will be making purchasing decisions. They’ve grown up with the ease, speed and simplicity of Amazon and other sites. They have every right to expect similar easy-to-do-business-with experiences from their suppliers. That alone might be a good reason to hire your own millennials! And yes, they move quickly from job to job, they all want to be entrepreneurs, and they all think they can run the company better. Well, if that’s our new workplace reality, we need to deal with it.

So, if one solution to the challenges of disintermediation and Amazon Supply (and other web suppliers like Amazon) is to become invaluable to either or both supplier and client, how do we do it? I’ve asked Guy Blissett, author of “Facing the Forces of Change: Reimagining Distribution in a Connected World,” to suggest methods to become invaluable.

Here is Guy’s response:

The threat of disintermediation is certainly not new but advances in e-commerce and shifts in B2B customer preferences are heightening the risk in some lines of trade.  Peter O’Neill and Andy Hoar of Forrester Research recently wrote a provocative report on these B2B customer preference shifts and threats to the traditional sales force.  The report highlights the fact that, by a factor of three to one, B2B buyers would rather self-educate than talk to sales representatives. It is already difficult for distributors to differentiate based on the products they carry, increasingly difficult for them to differentiate based on services, and now buyers of products and services don’t even want to talk to them.

The path to sustainable value creation in this challenging environment is for distributors to leverage their position in the middle of the value chain, and develop solutions to customer needs. Services, which represent work done for another party (e.g., kitting, assembly, delivery to point of installation), will remain important, but the real source of future value is in creating solutions (i.e., product and service combinations delivered with the intent of positively impacting a problem or need).  For example, opportunities exist for distributors to play a more assertive role in designing and specifying building lighting and automation systems, engaging early on in lean construction projects to help design and specific products, suggesting ways products can be more efficiently staged during the project (and options for offsite assembly), and to flow delivery of those products/components on a JIT basis exactly to the point of installation without damage and with minimal packaging.

Distributors can also play a bigger role in managing the supply chain associated with complex construction projects, moving beyond simple alignment with the project plan (i.e., ensuring product is in the warehouse and on the job site as needed), and instead act as more of an integrated supply chain service provider.  This shift will require a significant investment in new skills / capabilities related to the design of lighting and automation and other products, knowledge of the full suite of building systems (e.g., HVAC, security, lighting), a sales force comfortable selling solutions and compensated under a different scheme, and a supporting logistics and IT infrastructure that creates a fluid flow of product and a high degree of visibility and flexibility (e.g., delay the delivery of 15 troffers to the 3rd floor of the new hotel project by 2 days because the necessary wiring is running behind).

Referenced Forrester report:  Peter O’Neill and Andy Hoar, May 11, 2015 “Threats to Their Traditional Sales Force Will Change the Focus For B2B Marketers

 

 

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