Expanding Services – Margin Upside

Product margins vary for Wholesale Distributors, based on products, territories, and their own efficiencies. But clearly, service margins are usually much higher. Along with outsourcing, manufacturers are also closing branch offices and service depots. Businesses don't want the head count or the challenges associated with the resource management of diverse and remote facilities, logistics, and people.

That represents the upside for the wholesale distributor! Local market knowledge, the strength and weakness of the product catalog, and insight can be provided into the types of services that customers need. Today, many brand companies clearly know that their channel partners are the 'sales and service arms' of their companies. And many have put large investments in place, from sales training to product installation, repair training and certification.

For call centre management, this capability can also be leveraged to support clients' businesses. Again, instead of making the WD just a cost centre to manage customer interactions, it can become another service and a source of revenue.

Manufacturing services are playing a great part in the distributor's business model. From light 'kitting' and assembly to custom value-added-reseller (VAR) services, the proximity to customer markets, again, allows the WD to open discussion on these higher margin activities. Once the WD is in the 'manufacturing game,' customer-specific services such as configuration management, pre-loaded software and installation can all be done.

Diversity and Multi-channel

A big challenge for the WD is managing diverse methods for customer sales and self-service options, often called multi-channel. This is the ability to provide a 'single face to the customer' regardless of their preferred shopping method—direct sales, web, catalog, phone or showroom. Often, established customers use multiple channels. This is a huge issue if the processes, system and business tools can't identify this customer and assure that all the appropriate services and agreements are instantly known. Does the sales person in the showroom know that this customer is entitled to a 30% discount? Does the system know that this customer, when ordering on-line, has higher priority when allocating scarce product? Can the 3rdparty warehouse have access to all the proper labeling and shipping information?

Foundationally, today's WDs should be old pros at this type of challenge. Right?

Added to this are the complexity and diversity of the services, priorities, pricing, and 'deals' unique to each customer. In addition to providing transparency in sales and fulfillment, the WD's business accounting software and billing system has to be precise, productive and transparent to the customer. Too often WDs are filled with paper tracking down pricing complaints, dealing with charge-back and settlements with customers, with no audit trail of transactions and service add-ons. Making the sale, only to lose margins in poor paperwork and 'give backs' to customers, who clearly did not really earn those discounts, is an all too familiar story. Diversity can cost. But it doesn't have to be that way.