Over the past two decades, Big Box stores such as Walmart, Best Buy and Home Depot have changed the retail landscape immeasurably. Consumers are now able to purchase many goods in a single place at lower prices than were previously possible. In some cases, this has resulted in less choice; but, by and large, consumers have decided that the trade-off was well worth it. On balance, the effect on consumer products manufacturers has been less positive: entire categories have been commoditized, manufacturer’s margins have been pushed lower and some manufacturers found themselves unable to compete.
A similar consolidation of distribution is coming in industrial products. It’s a number of years behind consumer products, but the impact on industrial manufacturers is likely to be similar to the impact felt by consumer products manufacturers. In some respects it will be worse because (unlike consumer products) the typical industrial manufacturer’s end-user value proposition has some component of service to it; distributors are already starting to encroach on that portion of the value proposition… eroding the end-user value proposition of the manufacturer.
Industrial manufacturers that will win through distribution in this new frontier must do two things very well:
- Establish and evolve highly- compelling end-user value propositions. Winning manufacturers must have either high-value/highly-differentiated or low-cost/low-price end-user value propositions. Manufacturers caught in the middle will suffer. Those manufacturers with high-value/highly-differentiated value propositions will have the most leverage with distributors.
- Establish and evolve highly-compelling channel partner value positions. Winning manufacturers must be highly effective in understanding and delivering on the needs and priorities of their channel partners.
Good channel partners tend to emphasize on those manufacturers that are good at BOTH 1 & 2. They are not the same thing and it isn’t enough to be good at one.
Industrial manufacturers tend to spend a great deal of time focused on their end-user value propositions. That’s a good thing. Unfortunately, most aren’t properly focused on their channel partner value propositions, primarily because they don’t understand what it means to have a solid channel partner value proposition or how good their current channel partner value propositions are.
Industrial Channel Research (ICR) helps industrial manufacturers improve their end-user value propositions by shedding light on opportunities for channel partner value proposition improvement and the associated actions required to make those improvements.
Bart Schwartz, President / ICR / 630.503.6093