Using Data to Develop a Customer-Led Distributorship, Part IV

Here are six great reasons why now is the time to get your electrical distributorship’s data strategy in order.

Sometimes it takes an outside viewpoint to really bring things into focus. The last three articles in this 4-part series (click to read Part I, Part II, and Part III) focused specifically on the electrical distribution industry, but this final piece provides an outside perspective meant to help NAED members and their suppliers better align their data management strategies.

As tED magazine has been reporting over the last few years, the data divide between these two groups is deep and not really getting much shallower, despite the efforts of standards-focused groups and other entities. Where some manufacturers are good about sharing clean, consistent, relevant data with their distributor networks, others are missing the boat in this area. The same goes for electrical distributors, not all of whom have mastered the data management challenge.

Breaking down those walls isn’t always easy, but it’s very necessary, according to Steren Electronics, LLC’s VP of Sales Alan Gatlin. A manufacturer of electronics and accessories, Steren is a leading provider of consumer electronics in Mexico and a supplier to some of the U.S.’ largest cable and telecommunications companies, including AT&T, Cox, DirecTV, and Dish Network.

Here, Gatlin outlines six great reasons why now is the time to get distributors and suppliers on the same page and leveraging data to its fullest extent:

1. Amazon Business is knocking at your door. If your customers are calling and saying, “Why should I pay your price when I can go to Amazon and get it cheaper, the next day, and with free shipping?” then your company needs a better data management approach. “It’s all about survival in an era where the role of the ‘middleman’ is being eroded by forces like Amazon,” says Gatlin, “and by foreign factories that are setting up direct distribution in the U.S.”
2. Margins are shrinking. From Gatlin’s perspective, the two factors outlined in #1 above are creating a shrinking-margin environment, whereby distributors wind up at a cost disadvantage. If, for example, a direct seller is offering products at a price that’s equal to or less than what an electrical distributor is buying it for—and with immediate fulfillment and shorter lead times—then the latter loses out financially in the race to win those orders. Without the most updated, consistent data at their fingertips, independent distributors won’t have the resources they need to be able to compete in this environment.
3. Some customers just don’t care about specification. Where independent distributors have historically stood out on their value-added service offerings, today’s contractor is more price conscious. This makes data more important than ever. “While some customers do buy on specification (e.g., UL-listed solid core wiring),” Gatlin says, “there’s also a segment that just wants an electric equivalent product at the least possible cost. They don’t care about specification, as long as the product works.” One way to sell more to the former group is by maintaining a database of updated specifications for all products—a mission that distributors and their manufacturers can work toward jointly. That way, questions like, “Is this really UL? Show me the certificate” and “Is this an HDMI-certified cable?” can be answered quickly and confidently (and, even better, published online). “Ask your suppliers to give you the appropriate certifications and certificates,” Gatlin recommends.
4. Getting competitive product prices is a must. Back in the day, distributors negotiated with their suppliers for quantity pricing discounts that they were then able to pass on to their own customers. And while quantity price breaks still exist, Gatlin says if you’re not getting three competitive bids from different suppliers—yet another key data point—then you’re probably not getting the best prices for your customers. And because those customers literally have price comparisons at their fingertips now, this oversight will result in lost business. “Make sure you’re not just accepting the pricing that you’ve always received,” he advises. “In this day and age, with the value of copper at 3-year highs and projected to go significantly higher, making sure you have competitive pricing on your product is critical.”
5. You’ll lose money if you don’t mark your products to market. With prices on commodities like copper and minerals fluctuating, distributors should be using their data to mark prices to market. “If you get a price increase, don’t forget to make those changes on your own price list,” Gatlin says. “I’ve seen this happen a lot, and distributors lose out when they forget to update their prices in their catalogs.” Some distributors may blame shrinking margins, for example, when in reality they just weren’t monitoring the data close enough to stay on top of the fluctuations. “In many cases, it’s just because they haven’t carefully maintained their price list with the true cost of their products.”
6. Not knowing your costs is your biggest threat. As he looks around at the distribution base within his own industry, Gatlin says many either 1) don’t utilize data to the fullest extent possible, or 2) neglect to get the data they need from their own suppliers. “When you’re selling to end users, there are only so many things you can control,” says Gatlin. “When you don’t have the most updated, accurate information to work from, you can find yourself in a pretty vulnerable situation.”

To distributors that want to do a better job on the data front, Gatlin says a good first step is to realize that “not knowing your costs is your biggest threat” in a world where survival has become increasingly difficult for industrial distributors across all sectors. “Look at your automation processes and how efficient those processes are. Too many companies assume that putting up an e-commerce website is enough, when in reality those initiatives are often poorly implemented,” says Gatlin. “It turns out that a distributor’s costs may actually be higher than if they had someone taking the order on the phone.”