The Aberdeen Group published in February a comprehensive report titled “What Has Changed in Wholesale Distribution: 2015 & Beyond.” This interesting look at successful or “Top Performers” across the distribution industry identifies those metrics at which distribution leaders excel. Here are some Report Highlights.
Top performing wholesale distributors:
- Invest in process change & technology at twice the rate of their peers
- Drive down excessive inventory
- Are 1.9 times as likely to segment by customer
- 1.3 to 1.6 times as likely to segment by supplier, partner, and product
- 3.5 times as likely to conduct cost-to-serve modeling at the item, product, and customer level
Full Report Available Here from our friends at Epicor
As pricing specialists, we have also noticed patterns in top performing wholesale distributors and manufacturers.
Top performers excel in these 4 areas:
- Incidental Sales vs. All-Sales Margin – The average distributor has just a 7 to 9 margin point difference between their incidental and all-sales margin. However, companies that have the highest earnings (EBIT) consistently make 12 to 15 points more than their average margin.
- Large vs. Small Customer Margin – The average difference between customers who spend more than $100,000 a year and those who spend less than $10,000 is only 10 margin points. Top performers optimize how they segment customers for pricing enjoy a 15+-point difference.
- Number of Product Pricing Segments – Industry wide, distributors average 700+ product divisions for pricing. Top performers will work in this range while under-performers lump commodities and incidentals together, lowering margin.
- Price Utilization% – Industry-wide, the sales people lower system-suggested pricing 50+% of the time. Top performers see a direct correlation between price utilization percentage and incidental sales margin and work to increase utilization.
See also: Compare How You Price
Are you a top performer? Contact Profit2 for a free pricing analysis and see how you can become one.
