What it takes for a wholesale distributor to win your business, earn your loyalty

BY RICH SCHMITT,

management specialist

First I need to introduce myself. My name is Rich Schmitt and I write the lead column in Phc News’ sister publication The Wholesaler each month entitled Smart Management. My column focuses on helping wholesalers to improve their businesses. The topics cover many areas including inventory management, hiring good people, cost and pricing control and, most important, working with their trade customers. Phc News editor John Mesenbrink asked if I would write a column from the wholesaler’s perspective. As I thought about the topic, I decided to describe some of the qualities of a great wholesaler because, I think, you should be working to identify and buy from great wholesalers. As you will see, my definition of “great” mostly relates to the way they serve their trade customers so, in the end, buying from a great wholesaler should make you more efficient and more profitable.

As a consultant to many wholesalers, I often recommend what I call the simple strategy of wholesaling. I call it the simple strategy because it is simple to say but not at all simple for a wholesaler to implement. This is the strategy that many of the most successful wholesalers are currently using:

Become the primary wholesaler to a group of selected contractors

By primary wholesaler I mean the wholesaler that gets called first when a contractor needs material for a job. The primary wholesaler is the supply house where a contractor stops when he is running for parts. (Normally, most of us have a primary, go-to supplier for just about everything we buy whether it is groceries, clothes, appliances or cars and trucks. We call or stop at our primary, go-to provider first when we need something. If they can take care of us, there is often no need to go any place else.

Many of us want to do business with our primary supplier enough that we might even give them a “last look” if their price is a little high. I tell wholesalers that they have to earn the right to be that first call or first stop and to get that last look with their contractor customers.

In my experience, I have found that wholesalers must do four things to earn the coveted “primary supplier” role with their contractor customers. (I think you will see that every one of these recommendations is aimed at making the wholesaler better at serving his contractor customers because that is, in my mind, the secret to success in wholesaling.) I also think one of the secrets to success in contracting is to identify and buy from a wholesaler who is doing these four things, rephrased to address the contractor’s perspective:

1. Your primary wholesaler must be able to get product to you reliably, reliably, reliably — if you can’t count on your wholesaler to get the product to you, as promised, you ought to be looking for a better wholesaler.
   1. The branch locations should be convenient and should be well-stocked so you can swoop in on any location and know they will have the parts you need. (Of course you can’t expect them to have every odd-ball repair part but they should always have the bread and butter items on your list.) So if you get to a wholesaler’s counter and can’t get a box of 1/2" copper 90s, you may need a better wholesaler.
   2. Your primary wholesaler should also be easy with whom to do business. It shouldn’t take an act of Congress or a call to the president to get a box of fittings or a jug of refrigerant placed on an order and delivered to the right location on time.
2. When your wholesaler does everything that he should, you make more money. When he doesn’t perform, it costs you money. Whenever you have a crew sitting idle due to the wholesaler’s mistake (not on time, error on the order, shipping error, etc.), it costs you money.
3. Unreliable wholesalers often lead with price as a way to get contractors to tolerate the fact that their service and support stinks. This cheap price can be fatally attractive for a contractor. That pipe at 10¢/foot cheaper isn’t a good deal when it doesn’t arrive when you need it, is damaged or the wrong size. Your profits suffer but missing a completion date can really hurt your reputation.
4. Your primary wholesaler should have the lines you use available in the quantities that you normally buy -- he should be a one-stop shop for most, if not all, of your jobs.
5. One of the most inefficient activities for any contractor is wasting valuable time running from supply house to supply house rounding up the parts for a job. That drive time is seldom, if ever, billable and never the best use of a highly paid technician. Even if the wholesaler delivers the product, just ordering from a bunch of different wholesalers probably costs you money since there is time dedicated to each wholesaler relationship that you maintain — specifically, talking to the salesperson, ordering material, checking in orders, reviewing invoices and statements, writing checks and dealing with problems. If you buy from three wholesalers, you do each of these activities three times, and that is going to leave a mark on your profits. Again, I think your primary wholesaler will be able to reliably provide all the material that you use every day. I think smart contractors will use their primary wholesaler almost exclusively as long as they perform.
6. Your primary wholesaler should be fast, efficient and even fun to do business with — specifically:
   1. A wholesaler’s slow counter can be a killer for your profits. (Counter wait time is also unbillable.)
   2. A wholesaler’s incompetent or, even worse, unhelpful people hurt your efficiency. When they give you the wrong parts by accident it costs you time and money.
7. A good wholesaler’s team will have your back and a bad one can stab you in the back. (I have seen an arrogant counter guy laugh after a contractor had driven away. “He’ll be back. It’s his own fault, he ordered the wrong fittings for the product.”) A good wholesaler will add value by helping you to get the right parts and everything you need on the order.
   1. A good wholesaler should be able to properly support you in installing the products that he/she sells.
   2. He/she should support you in selling the products he/she sells.
   3. He/she should provide training to help with both the technical side and the business side of your operation.
8. Your primary wholesaler should offer fair pricing. Note that I said fair pricing. To me that means competitive, but not always the lowest rock-bottom pricing on everything in the market. Quality wholesalers cannot provide all the value (reliability, product, inventory, service, support, training, etc.) to their contractor customers and also offer the lowest pricing in the market.

I tell wholesalers that they owe their contractors fair and competitive pricing day in and day out. I also tell them that their customers ought to be able to count on fair pricing without a lot of chest beating, arm wrestling and head banging. Most importantly, though, is that they don’t always have to offer the lowest stupid price that an unreliable, no-service, no-inventory, turkey of a wholesaler offers in the market. From the contractor side, it might be penny-wise/pound-foolish to get the lowest price from a wholesaler who does not perform. Remember, if it costs more to get the job done right it might be worth it…as I think about it, I just had a contractor tell me just that when I asked why his price for a job was a little higher than one of his semi-pro, moon-lighting competitors.

The second part of the wholesaler strategy is to be selective in choosing which contractors they will pursue. As with every profession and type of business, there are some contractors out there who are no darn good. I tell wholesalers that these turkeys hurt their profits and their relationship with the good contractors. I am sure you compete with some of these duds who create problems for their contractor competitors, their wholesaler suppliers and to their customers. They also give your profession a black eye. Some wholesalers spend a lot of time and energy chasing deadbeats and I tell them to focus their energies on the good contractors. The truth is that most wholesalers can make more money by getting rid of some their bad customers or by getting those customers to straighten up.

I also tell wholesalers to find and work with contractors who are good business people. Over the long term, many contractors who get into trouble weren’t tending to their business. Even some really great technicians can get into trouble if they don’t manage their business. (Many good wholesalers are frustrated when they offer business-oriented training to their trade customers and very few attend. Take advantage of these opportunities to learn more about the business of contracting.)

As I said, the simple strategy of wholesaling isn’t simple to implement. When you find a wholesaler who is doing all these things it can be the basis for a solid, long-term, win/win business relationship. The contractor has a wholesaler partner who allows him to stay focused on the activities that make contractors successful: Selling jobs, completing jobs on schedule and, of course, collecting for the job. I always appreciate feedback and questions at rich@go-spi.com.                    

Rich Schmitt is president of Schmitt Consulting Group Inc., (www.go-scg.com) a management consulting firm focused on improving the profitability of distribution and manufacturing clients. Rich is also the co-owner of Schmitt ProfitTools Inc. (www.go-spi.com), a business producing print, CD-ROM, Web and palm-based catalogs as well as pricing management and analysis software for wholesalers.