Facing Up To The Challenges Of The Wholesale Sector
- Published: Monday, 11 September 2017 16:27
The wholesale sector will face some tough challenges in the coming years. Now is the time to face up to those challenges and start to put the appropriate responses in place, says Adrian Kitching of Crompton Lamps
Any business that wants to survive, and thrive, in the long-term needs to anticipate change and put mechanisms in place to tackle any challenges that are coming their way. For electrical wholesalers one of the major challenges relates to the changing routes to market for lighting products.
A major driver behind these changes is the avalanche of new LED technologies over the last 10 years or so, displacing many of the traditional lighting products and delivering much wider choice for customers. There is now a multitude of different wattages and lumen outputs in an ever-broadening range of formats – clear, pearl, filament, crown prism effect – where will it end? Indeed, will it end?
Alongside this increase in choice is a growing number of ‘disruptors’ entering the market with new business models that threaten the traditional wholesaler role. To understand just how threatening such disruptors can be you only have to think about what Netflix did to Blockbuster, or what digital cameras did to the manufacturers of photographic film.
From the end customer’s point of view having a wider choice is probably a good thing, though too much choice can often make it difficult to reach a decision. For the wholesaler, though, it creates significant challenges in terms of stock holdings and product obsolescence with the average LED product cycle now at 12 months before they are superseded
Clearly, in terms of stock holding, it’s important to know what the customer wants, but how do you know? Do you have time to carry out market research, read all the emails that come in, read magazines widely or browse LinkedIn all day? Talking to customers is also valuable but again time-consuming and only a relatively small representative sample.
Talking to suppliers can also be helpful as long as they’re well-informed and are being straight with you, rather than trying to get you to take their stock for their own benefit.
Then, of course, there’s always guessing what the next trend might be, but even if it’s a good guess based on some market knowledge from other sources, things are changing rapidly.
So basically it’s all a bit of a minefield and it’s not unreasonable to look to manufacturers for some help and support in this area. For example, some manufacturers are now offering stock cleanses and some will offer sale or return, or consignment stocks.
In fact, the lighting market has a strong wholesale presence and a good track record of supporting electrical contractors – but is that all changing? It is a simple fact that more and more non-traditional distributor companies are trying to get an edge over electrical wholesalers by offering out-of-hours service, late night ordering, next day delivery and competitive pricing.
One of the benefits that wholesalers have had in the past is providing the service and availability that comes with stocking in depth which, of course, ties up capital that could be used for other purposes. Now there are several large businesses that essentially operate as super distributors and stock all sorts of items in depth. These are a double-edged sword. On the one hand they can be a daily source of help for wholesalers that don’t have the resource to increase stocks. On the other hand, they are a constant frustration to head offices that know they aren’t buying well by working this way, but allow it as the sale has been in and out again before anyone can complain.
So is that the way we’re heading, with a country full of large warehouses offering 24/7 delivery? If so, it represents a threat to the industry.
For instance, the Electrical Distributors Association does a great job of promoting apprenticeships but where will this talent go if things change in the ways described above? Where will the contractor go when he/she has a tricky job and would normally go to the wholesaler for help? Faceless websites certainly won’t be able to offer the vital advice that contractors sometimes need quickly.
Clearly there are some things that wholesalers can do to safeguard their position. Not least of these is customer service, which needs to be moving with the times and the ever changing demands of contractors. For the latest generation of contractors it has become second nature to order online through mobile devices and access online forums for support.
Wholesalers clearly have to think about how best they can serve this new breed of customer and add value in ways that big online companies like Amazon can’t. The answer is more training and expertise about the products they sell. Just as technology is changing the face of the lighting market – and other areas of the electrical sector – it may also prove to be the panacea for wholesalers if applied in the right way.