Managing wholesale distributors - Sales Management

For every one salesperson a company has servicing market there are probably several wholesaler salespersons or other types of trade dealerships covering the same market base of customers. This is an enormous resource available to help us build our businesses if we can develop and exploit it to mutual advantage – that is, to the benefit of both the supplying companies and the wholesalers or other trade distributors.

The role of the wholesaler or trade distributor

In most market sectors wholesalers exist at two levels:

• as traditional order taking and delivery wholesalers, calling on a network of customers in a geographical area or particular trade sector
• as cash and carry warehouses, where customers call to select and collect their merchandise.

The typical key functions of the wholesaler or trade distributor in the distribution chain include:

• to carry stocks of a supplier’s products so that the products are available to the trade customers not covered directly by the supplier’s own sales team
• to extend credit to the customers serviced by the wholesaler
• to generate volume sales through the multiplicity of smaller customers in the various market trade channels
• to cooperate with the supplier in
  
  • maintaining market distribution;
  • introducing products to suitable trade customers (where the brand’s target consumers match the outlet’s typical customer profile);
  • generating a regular pattern of orders from the trade customers covered by the wholesalers;
  • promoting the brands through local promotional activity developed and organized by the suppliers.

In some market situations it might be advantageous for a supplier to form special relationships with a few key wholesalers who can act as sub-distributors, supporting your efforts to develop the brands and the market,including:

• providing display and merchandising support for products in the retail outlets hoer she covers
• working to achieve agreed objectives in respect of:
  
  • sales volumes
  • brands distribution
  • market share
• providing you with competitive market intelligence reports
• providing period sales performance and stock data reports
• training their staff in your product knowledge and professional skills in sales, marketing and management
• participating in the annual sales and marketing planning process, providing local expertise and input, and subsequent performance reports on their progress
• providing an organization structure, bo thin quality and numbers, capable of working to achieving agreed objective sand implementing agreed plans
• running the business efficiently, including using modern technology and management systems to develop a high standard of customer service (since the trade customers buying from your distributors will associate their quality and standards of service with your good name).

If the supplier expects his or her key wholesalers to match this outline of their role, then his or her first priority will be to address the main concern of most wholesalers that the supplier is in direct competition with the wholesalers in supplying products to what they see as their traditional customer base. When working through a network of wholesale distributor or trade dealers who you expect to support your products, complement their activities rather than compete head-on for sales to the same customer group.

Auditing the wholesalers

Since it is highly unlikely that all wholesaler swill add value to the product development and distribution activities in the market, the supplying company should start by auditing the wholesalers, with a view to identifying:

• how many wholesalers are in the market?
• how many outlets does each cover?
• What are their particular strengths in supplying geographical areas or trade niche sectors?
• how many salespersons does each of the wholesalers have?
• how are their sales teams rewarded?

And to this we should add one more key question:

• how do our competitors service and develop wholesalers?

The sales manager can use the earlier principles of trade channel mapping to help him understand the wholesale structure for his or her market. Table illustrates a scenario for a supplier of electrical products into various trade channels in the two main market sectors of retail and trade sales.

In this example, the company is looking to expand sales and distribution in its southern area, which has 40 per cent of all national outlets(according to the company’s best information).

The company, in turn, only covers with direct selling calls some 1198 customers from 2707 in the southern area, i.e. 44 per cent outlet coverage. The objective is to increase that by developing relationships with a number of specialist wholesale distributors. Data could be collected by direct contact with the distributors, and asking for cooperation.

Obviously, there would normally be a significant overlap with often more than one distributor servicing the same customers. That aside, the overall information did show just how important the wholesale sector was in terms of the outlet universe it served, and highlighted some key wholesalers worth special attention to develop cooperation.

The analysis shows the supplier’s sales manager that the 10 wholesale distributors covering the southern area have a total of 63salespersons, and the 2707 outlets in the southern area are receiving a total of 8764calls from the various wholesalers – meaning an average of 3.2 wholesalers were calling on each outlet.

Since the supplier covers only1198 outlets (those he views as the more important outlets) with his eight salesperson sin the southern area, the opportunity to expand distribution and outlet coverage by working more closely with some of these wholesalers is apparent.

The example analysis also shows that some wholesaler distributors are relatively stronger in servicing particular trade channels,and that kind of knowledge is useful toga supplier’s sales manager in deciding which wholesalers to focus his or her attention on and in developing programmers to support individual wholesalers.

In this example, since the supplier covers all the DIY superstores, and is strong in covering the category A and B outlets in the other trade channels, he might want more supporting covering high street multiples (smaller,local chains), independent hardware stores,and the multiplicity of small trade dealers who supply trade electricians.

With that objective, while he might decide not to restrict the sale of products to any creditworthy wholesaler, he might focus on developing special relations and customized support activity with wholesalers B, E and I, but Cand G might be worth some additional effort to develop as they have some niche trade channel strengths. The sales manager looking to improve his or her market distribution and management through wholesale distributors and trade dealers can:

• develop a similar table that will help analyses the structure and importance of the wholesalers, and understand the opportunities to develop in partnership with some, or all, of them
• clarify how competitors work with and through the wholesale trade to supply their brands to the various market sectors and trade channels
• study the relative strengths and weaknesses of each wholesaler.

Problems in managing wholesalers

The problems a supplier normally sees in managing wholesalers arise at two levels:

• the attitudes of the wholesalers to the supplier
• the limitations on the supplier’s ability to manage the wholesaler because of the nature of wholesalers’ business.

Attitudes of wholesalers

The main concern of most wholesalers – that the supplier is in direct competition with them – is usually expressed in two ways:

• that the supplier, in supplying direct to customers, is reducing their opportunities to generate additional sales volume and profits and eroding the loyalty of their traditional customers
• that the supplier is only interested in supplying higher volume, more credit-worthy outlets, leaving the wholesalers to supply the lower volume outlets who often are also more of a credit risk.

Any programmer to develop and manage wholesalers must address these wholesaler concerns, and we will look at ways of doing this in a later section.

Limitations on the supply company’s ability to manage wholesalers

Wholesalers in general will have limited resources and a lower level of management and selling skills than supplier operation sand sales personnel. Some of the typical problems encountered by suppliers in managing wholesalers are given below.

• Suppliers do not have direct control over the wholesaler’s staff and operations, and have little scope to influence their activities.
• Wholesalers stock and sell a very broad range of products, and cannot be experts in all of them.
• There are conflicting pressures on wholesalers from other suppliers who are also seeking a dominant share of time and mind.
• Wholesalers frequently distribute their own agency brands, usually smaller and less well-known brands (some of which they may be importing), and which they see as their priority and main opportunity to make a larger profit margin.
• Wholesalers are reluctant to disclose any sales and market information to suppliers,usually keeping details of their sales volumes and customer base to themselves.
• Wholesalers’ salespersons are normally more interested in collecting orders than in brand selling. This results in part from lower level of selling skills than in manufacturing supplier organizations, and in part from reward systems that normally relate earnings to sales turnover.
• Wholesalers often have a lower quality of management personnel, and may be less sophisticated in using modern technology in their businesses.

For manufacturing suppliers to progress their relations and develop their business through wholesalers they must recognize and tackle these problems.

Developing the partnership and motivating distributors

Suppliers will only achieve their objectives for the brands in the wholesale sector by directing efforts to helping wholesalers achieve their own business goals. Both supplier and wholesaler have a common interest in developing sales volume. The supplier is well placed to help the wholesaler generate more volume, and also has the expertise to contribute to the other areas of wholesaler interest.

In many markets, where a manufacturing company does supply wholesalers, the traditional relations between supplier and wholesaler is largely based on long-term familiarity with each other, what we might term ‘personal relations’, but the wholesaler’s feeling that the supplier is also the ‘competition’ is not reduced. In large part this is because the supplier sells products to the wholesaler, but then does little to support its products through the wholesalers, but does have it sown active sales force out promoting direct.

We can build on traditional personal relationship sand focus on an adding-value approach to developing and managing wholesalers (see Figure ). This is the partnership approach to motivating and managing wholesalers. Supplier and wholesale reach focus on what they can do best in the partnership.

The focus of value-adding activities

The manufacturing supplier’s sales team should focus on those selling activities that add most long-term value to trade development and management, and therefore require greater skill and product knowledge, such as:

• developing outlet presence
• selling in new brands
• building brand images consistent with brand positioning and brand communication messages
• working to gain an increased share of mind in trade customer outlets
• developing customized promotional activity for key outlets
• building trade customer loyalty to the supplier’s company and products.

The wholesalers can focus on those activities that may seem to require less specialist skill and add less long-term value, but are very important in building the market, such as:

• acting as the order takers and order processors to satisfy the volume needs of the multiplicity of smaller customer outlets,both those called on by a supplier’salesperson and those not receiving a call from the supplier
• meeting the trade needs for credit, and managing the process of collecting payments from the numerous outlets in the market
• maintaining and expanding brand distribution (particularly in outlets not receiving direct calls from the supplier’salespersons)
• communicating product knowledge to nondirective
• supporting brands in non-direct outlets by implementing manufacturing suppliers’promotions (giving the many smaller customers a change to pass on benefit down the chain to their own customers).

The focus of activities with key wholesalers must be aimed towards building trust, commitment andcooperation. The manufacturing supplier will do this by:

• demonstrating an understanding of the wholesalers’ business and trading environment, supporting them and not treating them as ‘competition’
• developing specific wholesaler development strategy plans
• developing a trade marketing structure within the supplier’s organization that can focus on trade development
• ensuring the seniority of the salesperson calling on any wholesaler matches the importance of the account
• sharing information on customers and markets.

Practical ways to add value to wholesaler relations Once you have taken action to demonstrate this commitment to developing your wholesalers,there are some specific activities you can take to add value to your relationships with your wholesalers. These include:

• developing an active transfer order system
• passing new outlet leads to wholesalers
• letting the wholesaler supply some of the better volume accounts, so that he has some of the ‘cream’, and they will become his key accounts
• providing training to wholesaler’s sale steams covering
  
  • basic selling skills
  • product knowledge
  • product merchandising
  • using point of sale material effectively
  • selling in brand promotions
  • telesales training
• improving management information systems and order processing systems within whole saler organizations
• improving journey planning for wholesaler salesmen
• matching the calling cycle of supplier’salespersons to the delivery cycle of wholesalers, so that transfer orders can be delivered promptly
• supporting wholesalers with promotional packages that build outlet loyalty to them
• developing sales incentive schemes to encourage effort and loyalty amongst wholesaler sales teams
• developing preferential support packages for key cooperative wholesalers that can additionally motivate and bind them to the maniac