The changing role of master distributors

by Richard Vurva

Distributors expect more from master distributors today than simply to provide them with inventory and logistics capabilities. Recognizing their evolving role in the supply chain, master distributors are expanding their value proposition to accommodate the marketplace changes.

In the past, small to mid-sized distributors relied on master distributors for their broad product lines, many of which the distributor couldn’t access direct. Today, distributors of all sizes buy from master distributors even if they have direct access to a manufacturer’s brand. Master distributors offer them advantages that a manufacturer can’t provide, such as lower minimum order requirements, more flexible freight policies and the ability to consolidate orders across a wide range of products and brands. In addition, master distributors are increasingly providing their customers with sales and marketing expertise.

“First, we became the logistics arm for distributors, but now we’ve become the marketing arm for them as well. We provide them with tools they need to help grow their business,” says Larry Davis, vice president of marketing for ORS Nasco in Muskogee, Okla.

Those tools include quarterly sales fliers and a nearly 2,000-page annual catalog that distributors can customize and mail to end-user customers, plus help in developing point-of-purchase displays. When a distributor enters a new product category, for example, Davis says ORS Nasco shares its expertise about what sells and what doesn’t sell in a particular market to help them tailor their product offering and display materials.

Joe Sodini, president of United American Sales in Wilmington, Ohio, a master distributor that specializes in safety supplies and personal protective equipment, agrees that distributors expect more today than a conduit to low-cost products. They want value-added support as well.

In prior years, United American Sales produced 28-page fliers and seasonal catalogs that distributors could customize and give to their customers. Because distributors wanted a more comprehensive solution to help them market safety products, this year the company developed a 200-page catalog. It sold out in eight months. “Distributors are looking to us more and more to help provide them with marketing tools such as catalogs and Web sites,” Sodini says.

One thing distributors don’t want to give up when doing business with a master distributor is the field support that manufacturers typically provide. Donna Bruno, president of Logistics Supply in Charlotte, N.C., says her company lets distributors have the best of both worlds.

By establishing exclusive relationships with a limited number of manufacturers in a product category, Logistics Supply provides inventory, logistics and sales and marketing support to the distributors the manufacturers have the most difficulty serving.

“Manufacturers want to provide equal service to all their distributors. The problem is, we all know that’s not going to happen. The top layer of customer gets the best service and it goes down from there,” Bruno says.

She says Logistics Supply shares point-of-sale information with the suppliers it represents, giving manufacturers greater visibility into the channel.

“We share with manufacturers exactly what the customer purchased and what price they paid. We provide the manufacturers with sales reports showing them who is buying their product,” she says. Point-of-sale visibility is crucial for manufacturers to develop new products and marketing programs, Bruno adds.

“One reason distributors don’t like doing business with master distributors is the manufacturer loses sight of the distributor. With us, they don’t lose that visibility. If anything, they become closer because we provide them with an extension of their sales force, a representation of their brand out in the field, and detailed sales reports. All of which open up lines of communication and provide exceptional service,” she says.

A new catalog that Logistics Supply will soon launch also serves as a training guide for distributor salespeople. It features product descriptions and photos, explanations about how to sell the items, regulations that govern how the products are made or operated, and other information designed to help salespeople market the products to their customers.

In addition to greater demand for sales and marketing support, master distributors have also noticed an increase in the number of distributors requesting drop shipments to end-user customers.

“In the old days, distributors would put four or five orders together, place the order and have it shipped from one location. Because of end-user demands, distributors cannot wait for the order to come in. They’re letting us do the shipping for them,” says Sodini.

Drop shipments eliminate inventory handling, which lowers the distributor’s total costs.

“At the end of the day, we’re focused on the distributor’s total cost of doing business, rather than just product price. Drop shipping is growing because it’s another way to take cost out of the channel,” adds Davis.

Future trends
Companies that follow a “pure wholesale” model refuse to sell direct to end-users. But master distributors also face competition from catalog houses and national distribution chains.

Travers Tool Co., a Flushing, N.Y.-based direct-mail company that specializes in metalworking tools, recently began focusing more of its efforts on selling to distributors.

Steven Geringer, director of distributor sales, says his company can offer distributors some of the same benefits they get from master distributors, such as same-day shipping, blind drop shipments to end-users and access to more than 125,000 items in inventory. But Travers also provides technical support and the ability to place orders and check inventory availability online.

“We stock all the major manufacturers’ brand products, including imports, and offer them to distributors at competitive prices so they have an alternative to selling products other than what they currently carry,” says Geringer. Like a master distributor, Travers Tool Co. provides distributors with access to a particular brand even if they don’t want to become a stocking distributor for that line.

While pure wholesalers argue that distributors should avoid buying from companies that also sell direct, Geringer sees no conflict of interest with distributors.

“We don’t have a local presence. We’re selling to the type of end-user customer that prefers to buy through a catalog house with stocking inventory as opposed to a local branch distributor,” he says.

As competition for business heats up, look for master distributors to beef up their service offerings, including more comprehensive direct-mail marketing materials and Web-based ordering capabilities.

“Customers want to get on the Web and place orders, check delivery, trace shipments and retrieve invoices,” says Sodini. “I see that as an upcoming trend. We’re seeing requests for that type of tool at all levels, and I think you’ll be seeing that in the next year.”

Davis adds that ORS Nasco is working on an online solution for distributors that will give them greater visibility into ORS Nasco’s content database. He says it’s another example of how master distributors must continue to fine tune their business model to keep up with customer demand.

This article originally appeared in the November/December 2004 issue of Progressive Distributor. Copyright 2004.

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