The biggest disruptors are the digital leaders and big-box retailers who are looking to expand their share of the customer wallet - eBay, Target and Walmart, to name a few. Technology-driven new entrants are challenging the status quo in wholesale distribution and setting the bar for the competitive landscape with digital marketplaces.
Retail and consumer products companies are increasingly embracing the D2C model, making them a direct competitor to wholesale distributors. In fact, Nike’s share price jumped 5% based solely on its announcement. With direct-to-consumer sales margins reported at 62 % vs 38% achieved via wholesale sales, it made sense to cut out the middleman. As part of its new direct-to-consumer model, Nike announced that it’s planning to reduce the number of distribution partners from 30,000 to just 40.
Nike made a surprising decision in January 2018 when it announced plans to “go direct,” electing to cut out wholesalers in favor of selling via its own stores and selected retailers. Suppliers are also finding ways to disintermediate distributors fully or partially by adopting direct-to-buyer and direct-to-consumer business models, to improve margins and become “stickier” with customers at the expense of distributors. This partial disintermediation allows suppliers to select those customers and value-added activities that are most profitable based on their growth strategy. Rather than deciding whether to go direct or sell through distribution, suppliers are focused on determining which customers and products to serve direct, and which to deliver through other distribution channels. Through such advanced segmentation techniques, suppliers can partially disintermediate distributors by taking a tailored approach to sales and fulfillment. As such, many apply data-driven segmentation based on size, growth potential, and cost to serve priority buyers. Given the sophistication of today’s buyers, serving customers across all product lines and geographies remains an expensive proposition for suppliers. Year-over-year growth in the wholesale distribution category has slipped from the 16% achieved in 2006 to just 3% in more recent years, and this trend has crucial implications in terms of financial performance and consolidation. Now, it’s being actively disintermediated by companies like Amazon and eBay. As an industry, wholesale distribution has historically benefited by providing manufacturing partners with fulfillment services and the ability to reach a large set of customers through capital-intensive networks. Instead of going through traditional channels such as a distributor or wholesaler, companies serve consumers directly. However, the industry today faces a number of difficult challenges, ranging from COVID-19 complications, Chinese tariffs, rising shipping costs, the growth of e-commerce, and the increasing desire of manufacturers and retailers to completely bypass the wholesale distribution channel, and instead do business directly with one another under a direct-to-consumer business model.ĭisintermediation is the process of removing the middleman or intermediary from future transactions. wholesale distribution industry is massive, with annual revenues of $6 trillion, consisting of over 300,000 companies, employing 6 million people, and accounting for 28% percent of GDP.
0 kommentar(er)
