Pricing Management Capturing Value for Distributors

Business & Money

Scott Benfield

Management & Leadership

Loran Nordgren & Co

More than half of all industrial distributors are buying between 10 percent and 30 percent of their requirements from offshore, off-brand suppliers. Even more sobering for North American manufacturers, more than 52 percent plan to increase their overseas purchases significantly. In short, the power of established, domestic brands is declining. 
These findings are detailed in a new book, Disruption in the Channel, which documents the original and far-ranging research of Stephen D. Griffith and Scott Benfield, industrial consultants who have conducted hundreds of hours of interviews surveying nearly 200 distributors, most of whom were executives.
 Griffith and Benfield, who together have more than 50 years of experience in durable goods marketing channels, have statistically validated their comprehensive research for the $2 trillion worth of goods and 200,000 distributors in the durable goods channel. Distributors are claiming an average 35% price advantage buying off-brand products that simply cannot be offset by value-added services and claims from domestic suppliers. 
The research indicates manufacturers that don t address this global imperative will: Lose significant market share in the coming years; Suffer strained relationships with their distributors; Experience more intense competition from those domestic manufacturers that do change to better compete and from importers that increase value of off-brands. 
Although distributors expect to face changes in purchasing processes, marketing events and cost structure to adjust to lower prices in the channel, they report: Offshore quality is as good as or better than traditional branded sources; Offshore sources provide more than adequate services that matter; Customers are happy with offshore sources; Traditional brands don t add enough value to compensate for their price premium. 
According to Griffith and Benfield, both distributors and manufacturers face strategy implications. For distributors, more direct sourcing, more cooperative sourcing from offshore manufacturers, and more private labeling from offshore sources loom on the horizon. For manufacturers, a disaggregation of the value chain and elimination of non-value-added activities; outsourcing of activities better performed by other organizations; relentless reduction of overhead applied to the distribution business; and an end to the distributor s role subsidizing low margin business are among imminent rethink strategies.

Disruption in The Channel: The New Realities of Distribution and Manufacturing in a Global Economy

Literature & Fiction

Stephen D. Griffith

Genre Fiction

Power Publishing

Book by Scott Benfield, rich Vurva

Restructuring the Distribution Sales Effort for Maximum Productivity

Brown Books Publishing Group

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Books by Scott Benfield