Every weekday in December, tED magazine is counting down the Top 20 Stories of 2014. Below, the #8 story of 2014, originally posted on May 23, 2014.
By Jack Keough
Dirk Van Dongen, the president of the powerful National Association of Wholesaler-Distributors and long-time expert in distribution, says the threat posed by Amazon into the industrial marketplace should not be ignored.
At the same time, Van Dongen points out that distributors have proved to be resilient over the years and those companies that adapt to change and focus on customer satisfaction will be around for some time to come
In fact, Van Dongen, whose NAW group encompasses more than 80 distributor associations, says that distribution could be stronger and larger in five years than it is today.
In an exclusive interview with tedmag.com, Van Dongen said that distributors need to take Amazon seriously because of the substantial amount of money it has to invest in the sector and its recognized customer service. In addition, although demographics might be in Amazon’s favor, successful distributors will be able to meet that challenge.
“Years ago, people said that disintermediation would be the demise of distribution,” he said. “It didn’t happen. Distributors learned to use the Internet as a sales and marketing tool. Customers didn’t flock to the Internet to buy stuff. Distributors have been around for many years because they have performed an essential set of functions for their customers. As long as they continue doing that, they’ll continue to be around and successful for a long time.”
Disintermediation was the term used by many industry observers who believed that because of the Internet, distributors would be bypassed in the buying process.
He mentioned the success of many distributors that have established successful e-marketing programs and have taken Amazon “head on.”
The veteran industry executive also noted that the reach of Amazon into so many markets such as food delivery and now package delivery makes it more difficult for them to compete in the distribution marketplace. “It’s very difficult for a company to be all things to all people,” he says.
However, Van Dongen says that despite proving to be resilient, distributors must also must recognize that simply ignoring a competitor like Amazon is not a smart business strategy.
“The distributors who will be in trouble are those ones who don’t recognize that the world is changing and they have to change with it,” he said.
He noted that distributors must continue to adapt, innovate and increase their relevancy and value to the customer whether Amazon is in the marketplace or not.
“Anyone who comes into our marketplace and attempt to perform the functions that distributors provide should be considered a danger,” he said.
Some distributors have become pro-active to these new threats.
Distributors now, for example, are advertising on radio building up name recognition for potential customers. Other distributors have branched into new markets through acquisitions and are carrying additional products to become a “one stop” shopping experience for customers. Brand awareness is one of the hallmarks of a successful distribution program and needs to be enhanced, experts say.
Relationships are still critical in the distribution business, Van Dongen said.
“When I talk about relationships, I’m not talking about going out to play golf with a customer. I’m talking about the company becoming important to the customer in a business relationship. In other words, the company’s relationship is based on being a consultant to the customer.”
Amazon has long held the upper edge in competing with distributors because the giant e-retailer didn’t have to collect sales taxes unless it had a physical presence in the state.
“We’re (NAW) strong advocates of the Marketplace Fairness Act (MFA) that would require all online retailers to collect state sales taxes whether or not they have a physical presence in the state. This would only help level the playing field for distributors who have been forced to collect sales taxes regardless of whether they have a physical presence in the state,” he said.
The MFA specifically grants the states the authority to compel online and catalog retailers, no matter where they are located, to collect sales taxes at the time of the transaction-exactly what local retailers are required to do.
Van Dongen referred to a recent news article that Amazon sales have dropped 9.5 percent in states where they are now required to collect sales taxes.
“Consumers apparently decided they would go to other online retailers or brick and mortar stores to make their purchases,” he said. “Amazon had had a huge advantage until they were required to collect sales taxes.”
Van Dongen says distribution has always proved to be a vital force in driving the nation’s economy.
“If you think about the distribution sector in our country, it is phenomenal. There’s nothing like it in the world,” he said noting the efficiency of the supply chain in bringing products in a timely manner to customers.
Distributors should provide services that customers truly value and then focus on how to make a seamless transaction allowing the supply chain to become efficient.
He said that distributors, in order to better compete, must create a better online presence, improve their marketing skills and develop and strengthen their relationships with customers.
“We (distributors) are and will be successful in many, many instances competing against these new competitors,” he said.
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