Several changes are underway that threaten to send all wholesalers to "Jurassic Park," according to James McNeil, vice president and general manager of Emco Ltd. West, a billion-dollar-a-year, independent but fully integrated subsidiary of Detroit-based Masco Corp. Emco has 143 locations.
As president of NHRAW, McNeil brought a different perspective to this association, and frequently refers to a favored topic, that of "vision engineering." This industry is changing drastically, and the association must change with it, McNeil believes. To know how to change, however, you must have a grasp of what challenges members are facing, and in turn what they expect from NHRAW. Once you have this vision, he said, "you engineer a solution based on your strengths in order to satisfy those member needs."
Those changes that threaten the very existence of wholesaling, according to McNeil:
"The position of the wholesaler in the distribution channel has always been debated by those seeking to eliminate the cost but not the function. To many people, wholesaling is perceived as an extra step, cost or service in the value chain."
Contractors, according to McNeil, have the right to demand the following:
- Responsiveness to all customer requests, questions and orders
- Product-in-stock; maintain fill rates of 98%
- On-time delivery: delivery of products and services to customers on time, all the time!
- Proximity: meet customer expectations for product and account accessibility seven days a week, 24 hours a day!
One current trend is found in distributors forming alliances with suppliers. Some manufacturers such as Lennox and The Trane Company are buying up their own distributors - what does this mean for the independent wholesaler?
Other trends quickly emerge: more new products are coming from Europe, and he cites hydronic heating and mini-splits for air conditioning as examples. The demographics of our own country are changing, too: the population as a whole is aging; more members are concerned with succession planning, which is not a simple process.
Not all members have the same needs, either.
McNeil and others have also championed the idea of Market Center Distribution, as well as market segmentation when he first took office. "Segmentation has to do with breaking the market down into manageable chunks," he says. Doing this allows you to focus your efforts in a cost-effective way, to best provide those products and services which your customers demand. This is the opposite tactic from the home centers who are trying to compete with wholesalers by being all things to all people, and perhaps ultimately not serving any of them as well as they could.
Market center distribution is based on the idea that only regionally established business centers staffed by those familiar with local markets and customers can effectively maximize a product's market share. The more technical or specialized the product, the more expertise must be provided by the product's distributor.
Distributors can retain their edge through market segmentation, which McNeil further explains as choosing between: Product Superiority; Customer Intimacy; and/or Operational Excellence.
For example, many of your best customers will look at a distributor as a resource, almost a partner, in an effort to grow their own business. Matching your organization's own strong suits, or talents, to match your particular customer's needs, remains the challenge to today's distributors, because not all customers will want - or require - the same things.
At the same time, all wholesalers can profit by maintaining the edge that brought them to where they are today: by filling orders promptly and cost-effectively. McNeil calls this part of "what a contractor has a right to demand." In other words, fashion your business around your customers' continuing foundation needs, rather than around your own limitations.
McNeil said he sees an opportunity for NHRAW to reach out and to expand its membership, possibly to include more specialty wholesalers, contractor buying groups, and extending to the plan-and-spec market.