Chemical/Ingredient Distributors - Are you headed for extinction?

2020 for me is starting to feel like I'm in an episode of Survivor or the Hunger Games. For business globally this year has certainly proven to be a tale of "survival of the fittest".

The fittest as described by Charles Darwin's theory would not be the biggest, not the strongest, but the one that could successfully adapt the quickest to their local environment as having the greatest chance of survival.

There is no doubt that COVID-19 has had a devastating impact on the world both for the individual, communities and business. Seemingly overnight the world changed. It was no different for the manufacturers and distributors of chemicals and raw materials used in so many different products we all need every day.

Being sympathetic to the environment, I can't help but wonder what the impact will be to an industry that shows very little innovation in the way things are done. Typically the model works like this -

• Global manufacturers align with local distributors.
• Local distributors have sales teams that promote their products face to face, trade shows, industry events etc

Yes I have simplified and acknowledge that there are teams of logistics, QA, R&D, Customer Service behind the scenes to make things happen.

The model above worked best when it was difficult to find information. Yes I'm talking about pre-internet times. Where knowledge was definitely more difficult to come by making the keepers more powerful.

Today though, one simple Google search and you can find almost any information you want in under a second. Looking for an ingredient? Manufacturer? Formula? Freight Forwarder? It's all there. Websites like UL Prospector, Knowde, Specialchem, Alibaba are just some examples of sources of information that make life simple.

Will the chemical distribution industry become like these companies? Once giants and now either extinct or a fraction of what could have been?

We have seen in other markets the impact that digital disruptions can have. Did I ever think that I would use a stranger to drive me around? Hell No! Enter Uber and now I have a cheaper alternative and much higher level service than taxi's. Every market has been touched as you can see here.

Online Marketplaces

A summary produced by Bain & Company of the current online chemical marketplace shows that there are three main streams - producer owned, distributor owned and independent.

As you can see change is coming from all sides and will continue to further evolve over time. With technology advancing at a rapid rate this will happen sooner rather than later.

End of the distributor as the middle man?

With businesses under financial pressure, cost reductions will once again be in the spotlight. Conversely, the attraction for the manufacturer to go direct to gain lost margin will also become more appealing.

Combine this with online meetings becoming the norm, 3PL logistics/warehouse readily available, AI technology simplifying processes and becoming more intuitive, there are some real threats coming.

The Distribution Model Of the Future

I've said before there is a lot that we can learn from the B2C market on making transactions simple, efficient and most importantly customer centric. Online sales have grown exponentially as processes are designed around the consumer.

The future of distributors will rely on internal processes that must be designed with your end customer in mind -

• What is it that customer most values most? Self service? Speed? Out of hours support? Sample speed? Is it market specific?
• Are there steps that can be reduced in processes to increase efficiencies?
• What can be automated? Are you using the technology available to free up time for your sales teams? eg Calendar booking apps for meetings slots, modern CRM.
• Are your online tools such as websites updated regularly? Easy to navigate? A go to resource that is interesting? Search and filter options?

Stop hiding who you represent!

Chemical distributors are renowned for hiding information on the manufacturers whom they represent. Yes it makes the information more difficult for a competitor to find, but at the same time you do this to your customers.

Yes it will mean that sometimes you have difficult conversations with the manufacturers you represent. Maybe there are conflicts or politics involved but realistically they are there anyway. Again, all that is happening is you are making life difficult for those that want to buy. Maybe the transparency will build more trust and benefits outweigh the risks.

The world we live in is one where information is available instantly. Having to wait or search is for information is nothing but frustrating and time wasting. You don't have time to waste and nor do your customers.

It's time to focus on the customer and not your competitor. Focus on finding ways to meet or even better exceed their expectations. Evolve with them and add value to their business so you become a valued extension of their business.

Focus on Inbound Marketing Strategies for Growth

The team at Hubspot have put together this great diagram on the "how to" achieve sales growth in the modern world. As you can see there is a movement away from hunting sales to attracting opportunities.

Embracing new technology can be daunting and a big change. Often my clients will say "I know I should but I don't know where to start". We sit down together and analyse based on skills, budget, time constraints which piece of the puzzle we can attack first.

It's a big thing to do things differently to your competitors, but the opportunity is there to stand out in what is a very crowded market place globally.

If you are wanting to learn more on these methods to help avoid extinction please don't hesitate to contact me on michelle@goodtradingco.com.au