Top 3 challenges facing industrial distributors

by | Mar 9, 2016 | Omnichannel, Retailers, Suppliers

Retail is undergoing a major transformation that is affecting all industry trade partners, including industrial distributors. A combination of global market forces and consumer-driven demands will make this a particularly tough year for distributors that sell into the construction, oil and gas, and other heavy-industry segments.

Here are the top three challenges industrial distributors face in 2016 and beyond.

  1. Economic uncertainty.

Industrial companies are feeling strong headwinds from declining global oil and commodity demand, low inflation and a strong U.S. dollar. All of this is stifling sales and ultimately exerting downward cost pressure on distributors.

As a result, industrial distributors are feeling squeezed to boost their efficiency while continuing to meet customer demand. Many are discovering that streamlining and automating supply chain operations provides the best means of achieving these objectives. In the 2016 Retail Insight industry benchmark survey, 80% of distributors identified “Streamline fulfillment” as one of their top priorities for the year.

  1. Attribute expectations.

Item information is all the rage in retail. Customers expect to find an exhaustive amount of product detail and images online. This expectation is especially high among the discerning, well-educated buyer who represents the industrial distributor’s typical customer.

In consequence, many distributors are asking their vendors to provide 50 or more attributes for every product they carry, which creates a new organizational challenge in need of a solution. This, too, aligns with the findings from the 2016 Retail Insight report. One of every two distributors we surveyed named “Grow e-commerce sales” a top priority.

  1. Drop-ship demand.

More and more frequently, industrial distributors are collaborating with their vendors to provide a drop-ship order fulfillment model. This allows items to be shipped directly from the supplier to the end customer’s jobsite or factory on the distributor’s behalf.

Drop ship allows industrial distributors to meet their customers’ needs without having to stock the inventory — which is an especially important benefit considering the large, bulky items present in many of these orders. But it also requires a whole new level of coordination, data exchange and trust between distributors and suppliers.

SPS Commerce offers a variety of products and services for helping industrial distributors uphold efficiency, profitability and customer satisfaction, even in challenging business environments. Please contact us to find out more.

Get products in the hands of more consumers.

Get products in the hands of more consumers.

Automate processes, integrate systems, manage item info, gain data insights and more with SPS solutions.

Scott Bolduc

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