If you had to explain the value of two-step distribution, could you? Two-step distributors buy products from the manufacturers and then sell the product to independent dealer businesses. The dealers, in turn, sell it to the end user, thereby earning the two-step definition.
For those of us in the OPE industry, it is the way we do business so we do not think about the inherent value. It just is. Many times the simplest and easiest way to explain something is to just list some of the benefits for the dealers; explaining why they would want to use distributors, and then do the same thing for the manufacturers.
So if you are an outdoor power equipment dealer, why would you want to buy from a distributor?
Your distributor can provide:
- “Just in time” delivery allowing you to order on an “as-needed” basis, which improves your cash flow, increases your turn and increases your ROI (return on investment).
- More productive use of your square footage by becoming your warehouse.
- Catalogs and Web sites where ordering can be done 24/7, with delivery usually the next day.
- Marketing and dating programs that allow you to have the most impact on your market by increasing store traffic and building sales.
- One-stop shopping for product with exceptional seasonal assortments.
- Merchandising assistance, flyers and signage to help bring customers into your OPE dealership.
If you are a manufacturer, why would you want to go to market through distribution?
Here are a few benefits:
- Selling through distribution saves you from invoicing hundreds of customers for small shipments; the distributor takes care of that.
- Credit risks are reduced by dealing with reputable distributors.
- Having a nationwide network of distributors eliminates the need for the manufacturer to manage regional warehouses.
- Storage and delivery costs are reduced, and factories can be used for production of equipment rather than warehousing.
- Distributors provide market feedback, allowing more accurate production planning.
- Shipping five pallets of outdoor power equipment to a distributor instead of 500 individual shipments reduces transportation costs and the need for logistical oversight.
- Stronger, positive relationships can be developed by concentrating on fewer customers.
- Promotions, flyers and signage by distributors increase the number of manufacturer “impressions” and help build awareness and market share among OPE dealers and end users.
The outdoor power equipment industry often gets referred to as an industry of relationships. And it is the people who make up the relationships. It is the people who are at the heart of the distribution system, and it is the people who provide the service. Service is what distribution is all about.
It is their reason for being; it is the key to success.