Talk to manufacturers and distributors today and you hear about the challenges in the industrial space and slow to moderate growth for in the construction market, and it depends upon where you are. And the first half outlook is “challenging” with everyone hoping for a “second half upturn.”

While the economy undergoes macro-economic gyrations within the world economy and global politics further riles up things, distributors and manufacturers need to focus on issues within their control and address what they can--and in some cases will--do to differentiate themselves, take market share to outperform on the top line and, perhaps most importantly, ensure a healthy bottom line. Here are our thoughts.

1. Much has been spent by some in the industry on eCommerce and more will be spent in 2016, with costs declining and industry-focused resources gaining increased visibility. The distributor(s) who, once launched, invest in the resources/strategies to gain customer adoption will attain customer preference. While you want your site to generate sales, it needs to function as a “why you,” provide application content to generate demand, and act as an eBranch/alternative order entry system.

2. eBusiness, defined as beyond your e-store, will take on greater prominence, require more investment and generate new management challenges for manufacturers and distributors. And don’t forget about connecting direct to customer purchasing/estimating systems through punch-outs, marketplaces and integrating with contractor estimating systems. Issues such as customer relationship management (CRM), content marketing, content syndication, virtual showrooms/branches/vignettes, microsites, local advertising, building information modeling (BIM), search engine optimization (SEO) and more will require focused personnel with an unclear return on investment (ROI). Is it an added cost? An enhanced revenue stream? Perhaps a future revenue stream? A customer expectation? Or a retention tool?

3. Do more with less. More will, and has been, requested of distributors. But with material pricing (due to commodities, competition, lack of inflation, etc) keeping material costs down, and operating costs continuing to rise, distributors need to use technology and process improvement initiatives to continue to drive down operational costs to maintain net profit levels.

4. Distributor information collection will improve--and it needs to improve. Distributors have to know more about their customers, their customers’ customers, the types of projects they do, key contacts, what they sell, and what customer challenges are, all so they can more effectively promote the right information to the right people and provide better service. Data matters … and it’s not just sales data or product data. What ’t your customer doesn't use matters as it identifies sales opportunities.

5. Voice of XXX as a stakeholder is important. If you are a manufacturer, this means your reps/sales organization, distributors, their branch managers and/or salespeople and end-customers. For distributors, it’s your salespeople, your reps, key factory personnel, and your customers. All impact your profitability and the key to success is capturing their share of mind. They can help answer the question, “Why you?”

6. Live your brand. To customers, aside from some product lines and perhaps selected individuals with specific expertise, distributors can sound like a commodity. Everyone has good service. Everyone has good people. Everyone sells quality products. Everyone says they carry inventory. Everyone says they can deliver. Everyone says …. So what’s the difference? You need to live your brand as well as be able to measure your performance … at the customer level.

7. Want improvement? Invest in a metric management culture. Reviewing data and crafting metrics provides insights to drive direction and engender accountability. If you don’t commit to objectives, then qualitative criteria can be perceived as favoritism or enabling mediocrity, which lowers morale and overall performance.

8. Acquisitions will continue, but the “core” has been taken out of the middle. Those who were considering selling have sold. Those who haven’t, have typically been approached and either desire to keep their businesses and grow it (but could still sell if the price was right) or are not of interest. There will be acquisitions, albeit fill-ins / bolt-ons. There are few markets where nationals seek to fill-in holes.

9. As uncertainty in the market place increases, decision making slows because many managers and owners/CEO’s have aged (some say lost interest) in the business or they are comfortable where they are. Inertia is a powerful competitor.

10. Rebirth/resurgence of Private Labeling. In late 2006/throughout 2007 we wrote about the emergence of private labeling in the industry as a way to reduce acquisition cost and increase margins. It’s coming back. The use of unlabeled and private labeled products from contract manufacturers grows. Is this a rush to the bottom of the market place? Or is it a time to improve profit and weight the risk vs. reward. The aggressiveness of some companies leaves others in their wake as bid price margins increase. Or will more companies consider Tier 2/3 suppliers and sacrifice brand cache?

11. Distributors that use their own number schema open their purchasing up to broader horizons ... essentially most items are generics. Additionally, some distributors use “scrambled” SKUs online to inhibit product price comparisons. This is prevalent in the retail lighting industry. But if you use non-labeled, current carrying product, protect yourself against potential product liability.

12. Synchronized data increases faster SPA claim backs There are now reported distributors that claim within 7 days of sale to be credited back the morning of the 7th. And there are more operational, productivity, pricing and profitability benefits with synchronized data.

13. Money Ball results for Distributors: Product data synchronization, combined with predictive analytics can grow top line revenue and bottom line results. While there are tools for medium to large distributors, companies like Insight Analytics are targeting the <$30 million distributor with a SaaS/outsource model. Larger distributors are using analytics through tools like Phocas, Tableau, Microsoft BI, Zilliant and others. Some CRM systems like Sales Management Plus, Tour de Force and Microsoft CRM also integrate sales analysis and some marketing automation tools which can pay results when used well by salespeople, sales management, marketing, pricing and purchasing. The increased insight can pay dividends. If you’ve enhanced your back office productivity using your computer ERP system, you also have an opportunity to increase your bottom line and strengthen processes for future benefits.

14. The patchwork economy continues. Some areas are soft, others not. We’re seeing that metropolitan markets are having accelerated growth which progressively slows the further one reaches into rural areas. Resource allocation initiatives should be considered to maximize opportunities. Those who take share will be ones that can execute ... out-sell, out-service, out-think ... while optimizing processes and managing costs. Proving you're the best is different than hoping your customers experience it. Specific "basic" initiatives can win the game if you're willing to invest and are thinking beyond the 2016 horizon.

15. Segmentation & Stratification: The one size fits all sales and marketing approach is no longer sufficient to profitably grow. Horizontal efforts ensure you rise and fall with the tide. Marketing by customer segments; stratifying customers, suppliers and possibly SKUs by profitability; and promoting value proposition by segment will ensure profitable revenue and market share growth.

16. Brands matter, but only if your brand is real. Distributors who invest in their brand by delivering on their promise will take share. Manufacturers who communicate their points of differentiation will take share. Those who wait for others to support them may survive based upon cash flow initiatives but with significantly less profitability.

Succeeding in 2016 will take determination and commitment. The devil is in the details. And, in the words of a sales manager “if you don’t ask for the business you can’t get the business”, so, ask us how to capitalize on these 16 distribution trends for success in 2016.