Straight talk, common sense and powerful interactions all describe Frank Hurtte. Frank speaks and consults on the new reality facing distribution. Contact Frank at River Heights Consulting via email at email@example.com or via phone at 563-514-1104.
As part of our follow-up, we did deep dives with nearly two dozen distributors, in four lines of trade (HVACR, industrial, electrical and automation, and building supplies). Clearly, distributors are struggling to get to a compensation plan that drives the right behaviors. And thoughts on commission extended past outside sales.
Finally, and at long last, we are entering a time of high growth. This information comes not just from anecdotal reports from distributors across the country but also from some pretty respected economists. While speaking to the National Association of Wholesale/Distributors Executive Summit, economist Alan Beaulieu of ITR Economics confirmed much of what distributors were noticing in their local territories: business is expanding.
Quite frankly, I can’t imagine any distributor not assigning a value to their service and recouping at least a portion of the expenses tied to the service. While I personally believe 10 percent is a bit low, it is a start in the right direction.
While there was a definite period of growth in the years immediately following the big economic storm, recent years have been mostly flat. The economy has moved, but it was definitely slow growth. While most distributors have only been able to maintain their sluggish margin position, reports from nearly every sector indicate faster growth on the horizon for the next year and a half.
There is nothing new about distributor compensation issues. As far back as the 1960s, wholesalers have been concerned about innovative approaches to motivating salespeople. The environment back then was different; warehouses were smaller, inside sales were untrained, and phone systems were inefficient.
HARDI distributors have mastered the art of change. They have shifted their business model from relationship and local inventory to value-creation and problem solving. They have streamlined and focused their business to match the new economy.
In my last article, I proposed some questions every distributor should contemplate as they move their business forward and offered up a list of 50 more that they could have just by asking for it. The response was fantastic. Most likely, because we were in the question mode, at least a half dozen distributors hit me with their questions. It was thought-provoking.
Here’s the scoop in distribution: Nothing happens instantaneously. Looking back over my career, I can’t help but notice it took nearly a decade for HVACR distributors to adopt enterprise resource planning (ERP) systems and something like five years for the group to fully adopt email.
Myths about customer relationships abound in the world of distribution. A few are based in reality while some are based on a promotion gone viral. At best, most are only partially accurate. The adage, “the customer is always right,” has always stuck in my craw. I suspect many fine folks out in distributorland will disagree when I say if you live by this motto, you will soon be enjoying downward mobility and celebrating financial ruin.