The competitive marketplace is driving the need for category expansion with distributors of all types. What is known as the “Amazon Effect” has created expectations by end users to do more one-stop shopping through their distribution source. The lines between product type distributors are blurring and many types of distributors are selling JanSan products.
Jeff Lancaster, director of value of wholesale at Essendant, a U.S.-based wholesale distributor of office, technology, janitorial, sanitation, breakroom and industrial products, breaks down how JanSan businesses can embrace category expansion to remain competitive in an agile marketplace.
What ways can distributors drive organic growth through strategic category management?
Four things come to mind when thinking of ways distributors can drive organic growth through strategic category management:
1. Adapt to the market forces: Not only respond to competitive activity but recognize that more companies are entering this space, and then know that you need to be entering new spaces also in a proactive manner.
2. Optimize Working Capital: Cash is king to our business success and working capital costs are rising; so, it’s vital that you identify key areas to improve cash flow.
3. Re-engineer the Supply Chain: Speed to market is critical and looking at the supply chain to improve speed while optimizing working capital and freeing up cash is critical.
4. Leverage Supplier Capabilities: Utilize suppliers as part of improving the supply chain.
How can distributors defend market share from larger rivals?
Sellers in verticals like office products have not hesitated to expand into JanSan, and JanSan distributors must do the same to remain competitive.
Wholesale is a low-investment, low-risk way to grow your product categories outside of JanSan and connect with new inventory and capabilities. JanSan distributors may not be familiar with breakroom products like coffee and cups, for example, but wholesalers are already established within these networks and can help distributors ease into category expansion and ensure competitiveness. Categories worth thinking about expanding into include: safety, MRO, breakroom supplies, food service disposables, and office products to start, but ultimately consider an endless aisle approach.
Make additional investments in e-commerce experiences that attract and retain modern customers. Have a user-friendly website that has rich content, rich product search, filtering, and product information. It’s important that you personalize your services.
How can smaller distributors stay competitive?
JanSan distribution operation is more expensive than it was 10 years ago, and decision makers must stretch limited resources to match the Amazon distribution and delivery standard.
With some luck, JanSan distributors can sustain another decade or two of business on their current courses. But to fully overcome today’s biggest operational challenges, decision makers must re-engineer their supply chain approaches and optimize the entire process around a fundamentally different JanSan marketplace.
JanSan distributors earn more money and happier customers if they can improve their inventory turns. Wholesale allows you to benefit from your partner’s existing supply chain capabilities and standards, leading to more efficient inventory turns.
What is the distributor missing out on if they don’t embrace strategic category expansion?
There is high risk that by not expanding their offering, their current order size is being threatened as the alternative suppliers will take away not just the product or services that they do not have, but also some of the products that the distributor is currently selling as one-stop shopping is becoming an expectation and not a luxury.
It should be approached in an offensive manner, but it is just as much defense as offense. Order sizes have dwindled in the past years for example due to office dealers or Amazon offering the same products. Unfortunately, this overshadows the JanSan distributor due to ease of ordering and one-stop shopping. And so, it is vital that distributors also be open to category expansion.
What should be another priority for Jan San distributors at the moment?
Speed to market is critical, which includes next day, low cost or free delivery. Gone are the days that 3-day lead time for an end user in the JanSan business is acceptable (with the exception of some rural areas). Leverage wholesale and other supplier relationships to maximize your speed to market.
Jeff Lancaster, director of value of wholesale at Essendant, a national wholesale distributor of office, technology, janitorial, sanitation, breakroom, and industrial products.