Counselor

Commentary: Stop Whispering, Start Talking

Our "Big Squeeze" article about distributors placing excessive demands on suppliers generated a huge response. Here's my take on the issues - including what should happen next.

Recently in SGR and Counselor, we ran a story called “The Big Squeeze,” which outlined the increasing demands that distributors are placing on suppliers. The article drew an incredible response from people across the industry, with many suppliers cheering the piece, while distributors’ feelings were mixed. Quite a few agreed that requests for higher rebates, exclusivity and longer net terms were ridiculous, while others pointed out that eroding margins in deals with end-buyers are really to blame. Here’s a sampling of some of the best responses we’ve collected from emails and social media.

“The Big Squeeze helped make me feel like I was having a huge Dennis Miller-style rant taken off of my chest!” -Victor Macchia

“Distributors who have forgotten how to sell, how to build value, and how to train their clients are unloading their weakly structured deals on their suppliers. Time to go back to Sales 101.” -Chris Plante

“Distributors are being nickel-and-dimed by our customers. I’m also fairly confident that there is more margin being made by suppliers than distributors.” -Mark Smith

“Thank you for addressing a serious problem that’s usually only whispered about.” -Stephanie Doucette

Victor and Chris, I hear what you’re saying. I worry that distributors making these demands are trying to plug cash flow problems – a strategy that won’t work for long. If a small group of distributors is asking so much, they’ll all be gone soon. If this is a broader ask, though, then the whole dam could start crumbling. Mark, I also see your point. One of the real problems here is that promo product prices are decreasing as distributors compete against online sellers. The days of 40% margins are in the past. Distributors aren’t pocketing tons of cash in this dynamic.

Stephanie, your “whispering” comment, though, was the one that really struck a chord with me. Too often I feel like our industry cloaks conversations because putting real talk out in the open would upset some mystical, fragile balance. For example, bring up the topic of going direct and we all talk with inside voices. Newsflash: sometimes suppliers go direct, and so do distributors. Is this ideal for the supply chain setup that’s made the industry successful? No, it’s not, but it happens and pretending it doesn’t is silly.

I’ve seen this hush-hush code at industry leadership events, where executives get on stage in front of their peers and act like Bill Belichick at a press conference – words are coming from their mouths, but they’re saying nothing.

I certainly understand that suppliers don’t want to anger their customers, but I’m disheartened that so many quotes in The Big Squeeze were made anonymously and then rousingly applauded after the piece was published. If you’re going to complain, stand up and complain. Gripe fests don’t change anything – they just lead to a building wave of bitterness and animosity. Suppliers who are on a high from having their grievances aired should come down from the clouds. Distributors think your setup charges are a tax. Also, it’s 2017 and it shouldn’t take days and days to get stock items imprinted and delivered.

Meanwhile, distributors facing cost pressures need to stop hiring so many salespeople and start recruiting more creative types. Customers won’t pay more for products, but they will pay for ideas. Programs and premiums – that’s where there’s money to be made, not selling 1,000 pieces of a commodity. Also, extending 60-day or even 90-day net terms to get big-name clients is like playing with fire. You can’t just pass similar payment terms along to suppliers and also expect them to take responsibility for important things like product safety too.

To sum it up, both suppliers and distributors have legitimate beefs here, but pointing fingers isn’t a strategy.

Everybody isn’t going to get along, and competition in the marketplace is real. But as an industry, we need to stop whispering and start talking about the issues that are most impactful. Sure, it’s easy for me to write these things and hard for industry companies to act on them. And yet, if most keep whispering, what good will that do?

So let’s not make The Big Squeeze an end, but a beginning. The other day, I got an email from the CEO of a Top 40 distributor who asked me to run a story called The Other Squeeze – giving a distributor’s perspective on things – as well as some solutions to the problems. I think that’s a great idea and the story is in the works.

No doubt, there are other topics that we should all be talking about. Tell me what you think they are and let’s tackle them – or at least get them out in the open. I promise that’ll be better for all of us.