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How will the business of Distribution evolve in the future?

Business of Distribution

Until the beginning of the 20th century, the distribution of goods was a responsibility for manufacturer who produced them. As the 1900’s began, a wave of industrialization swept over the developing world, bringing about Adam Smith ideas;  the division and specialisation of labour and consequential mass production. As producers grew and specialised a schism appeared, between the producers that made goods and the consumers that needed them. It was in this opening that Distributors & Wholesalers filled the gap.

In todays in a globalised world, the distributor remains the central nervous system of the economy, acting as the broker between the manufacturers and trade customers.

 

As the behemoth of the internet arose in the 1990’s there were many who anticipated a trend of disintermediation. It was thought that manufactures would bypass their distribution partners and sell directly to their customers through internet. This never happened and in fact, the intermediaries became even more powerful.  Distributors controlled market access and often forced manufacturers to cut costs.

 

There as signs however that this paradigm is changing. New businesses are bringing forth business models characterised by disintermediation. 2018 will mark the 1st year that digital purchases will account for more than 10% of the total retail sales in Europe. It is clear that the millennial generation values price & convenience over all else, which is what makes the online channel so attractive. The question moving forward is will disintermediation take the place of traditional Wholesale? It is difficult to see how online sellers will be able to provide services like the generous credit terms that are offered by distributors. Moreover, the B2B sales process has tended to be slow moving, requiring constant discussion and relationship management. This depth of relationship may prove to be difficult to maintain through an online only channel.

 

With Distribution, all that matters is getting the product as quickly and as efficiently as possible into the consumers hands. The steps involved in this process, from warehousing, fulfilment, purchasing and selling can all change very quickly with new technological advances. The advent of autonomous vehicles[1] and drones[2] with imbedded AI will entirely change last mile fulfilment from distributor to B2B customer. Advances in Artificial intelligence will soon enough make fully automated warehouses a reality. Imagine intelligent robots[3], picking and packing items, ready for delivery. In the future developments in Blockchain Technology will enable disparate partners from around the world to do business together that wasn’t previously possible due to a lack of mutual trust and distance.

 

As technology continues to disrupt the business model, distributors must seize the opportunities offered by new innovations, otherwise they will struggle to survive. This general trend is known as digitization and it already underway.

 

The most immediate manner in which Wholesalers & Distributors must evolve is in developing their own B2B e-commerce platform where they are able to provide their customers with an omnichannel experience. On such a platform, customers are able to reach out at a number of touchpoints and be able to benefit from a personalised and comprehensive shopping experience. Imagine a situation where a B2B client can reach out, at his or her own convenience and have real time access to all customer specific information. The B2B E-commerce platform can offer them information on products, inventories, account status, delivery status, self – service ordering options, customer specific price lists, and a 24/7 after sales service.

 

B2B e-commerce solutions like the one described will replace the carbon paper order sheets and email enquiries of old. Orders placed in store can be ready to ship within 15 minutes of order placed, which can have huge implication on the efficiency of the supply chain. We can see that this is way the market is going already, the B2B e-commerce marketplace is set to double its B2C counterpart over the next 5 years and is projected to reach 6.7 trillion by 2020. Given this trend, there will no longer be an overwhelming reliance on company sales rep to place orders via telephone and email on behalf of retailers. The role of an in-store company representative as an order capture point will pivot to one focused on transferring information and insights to the retailer. From cross selling and upselling information, product seasonal trends, and market trends in general.

 

Wholesalers and distributors must prioritize technology moving forward. Technology will increase efficiency and speed through the supply chain and those who don’t evolve will be left behind. Distribution has always been a way to move inventory through your supply chain as quickly as possible and digitization, done correctly is a sure way to be able to achieve this. Technology should be central to the evolution of the business model, processes & culture. When testing new digital products it is useful to think of the Silicon Valley slogan, ‘Fail fast & fail cheap.’ Build an MVP, test it in the market and iterate until you find the best solution.

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