Words by George Bowie, managing director at 2pure
How product gets from point of manufacturer into the end user’s hands has traditionally been a simple matter of logistics, which has generally been provided by a link between brand, manufacturer, distributor and retailer. The product is touched many times before ending up in the consumer’s shopping bag.
Five years ago we looked at our business model and asked if it was the right model for the future. The answer was, we don’t know. Things are moving so fast, brands are selling direct to consumers, retailers are importing exclusive brands, retailers are creating their own brands, brands are creating brand stores. Everyone is concerned about the pressure on pricing and how they can influence the consumers purchasing decision.
The internet is changing how we shop as consumers, how we are marketed to, how we compare things, there is true global visibility and access to information is impacting on what our supply chain is going to look like next year, never mind the next ten years.
I was reading a Neilson report that at one end had Portable Healthy Nutrition as one of the fastest growing categories in the US grocery channel and Photographic film as the biggest loser, which was no surprise. That said, innovation is a game changer and invariably outside of our control. Likewise, the road scene is on fire in the UK, why? Probably lots of events all coinciding at the same time, timing plays a part. That said, imagine if it had been a hot dry summer in the UK, what would the impact have been on the industry, positive in many ways, but would we have run out of bikes. And next up 650B, good or bad, it will happen. Mountain biking is flat right now, but did the same people buy a road bike this year and next year will they spend some of their budget on their mountain bike passion, we don’t know.
Look at the large specialist internet retailers, compare them to the likes of Amazon, they are all having a global impact, but who is the biggest threat, who can be trusted, where does it leave distributors? What does it do to pricing, what happens to choice, where will they buy from, how will they get over individual countries laws relating to product and consumers? Does it matter to the UK distributor? Yes, if you have built your business by relying on them.
The questions and things that will influence our future is never ending, so it is difficult for us to know what strategy to adopt and the tactics required to achieve it. One thing is for sure right now, if you are a retailer or distributor we all need to be developing our businesses so that we are adaptable, flexible and able to change depending on what the market demands.
Most importantly as a distributor we must add value in the process of getting product to market otherwise we will not be required in the same way going forward. We must add value to aftersales, we are a technical industry and the product we sell requires service back up. We must find a way of improving the flow of knowledge about the products we sell. The consumer has access to the internet which is full of informed individuals, so we need to make sure we are the experts, which means educating our retailer’s employees. Do we need UK brand sites? Maybe in some cases. We talk about margin a lot, but gross margin is different to net margin, how does a distributor ensure that the retailer is able to remain profitable and stay in business by being able to earn a fair net margin? Pound margin is different again, does our industry have enough scale to benefit from identifying what is a fair pound margin and evaluating the percentage margin impact, thereby being able to offer the consumer a more attractive price on expensive goods? This would require a rethink on supply chain efficiencies, but it is possible. Look at Apple.
Distributors have to stop focusing on shifting boxes and look at meaningful ways in which they add value to the brands that they represent and to the dealers that they work with.
These are just observations and I’ll probably be a long way from covering everything, I am no expert, but never in my 20 years in the industry have I been as excited about the future, nor as uncertain.