by Jim Gould
Distribution is how a product moves from manufacturer to consumer. For decades the North American model used regional distributors to reach local retailers who sold the consumer. While traditional distribution has been scrutinized and demonized, it has largely held its ground. Now that ground is shifting, creating a new landscape with a plethora of pathways for mills to serve a new kind of consumer. What is the impact on distribution and retail?
Manufacturers must reach consumers through the most efficient and effective pathway, which may be forced to change when consumers shift to a new shopping landscape. The landscape 20 years ago included Sunday supplements and full-page ads, shopping trips to local flooring stores and customer loyalty toward hometown retailers. Times have changed, giving way to a digital age and bringing the mill and consumer closer together.
Is there a threat to traditional distribution and retail? Yes, from a number of directions, the biggest being complacency. Believing business will continue as usual is not an option. Retailers and distributors must ask, “Are we the best vehicle for our suppliers to reach the market?” and “How do we remain essential to connecting the supplier and consumer?”
Is there one right way to serve the consumer? No. Different channels have developed in markets around the world and they all work. The common denominator is they use methods to reach the consumer in the most efficient, effective and economical way possible.
A recent article from the McKinsey’s Quarterly Report, “Building the Supply Chain of the Future,” describes how supply chains of the future must be nimbler and configured for the landscape ahead; monolithic models of the past will not survive.
An example of creative distribution is in Brazil where Nestlé is experimenting with supermarkets on barges to sell directly to customers along two tributaries of the Amazon River. What’s the corollary between North America and the jungle’s of Brazil? Our jungle consists of the Internet, Lowe’s, Home Depot, Costco, Direct Buy and others. At the same time, specialty retailers are being challenged by the increasing convenience of digital connections that can divert the consumer away from traditional retail.
During the recent Domotex asia/ChinaFloor in Shanghai, I arranged a tour for the international press to see the Chinese retail market first hand. We visited a spectacular, multi-story builder mall with escalators and glassed-in elevators, a rival for any shopping mall in America, but devoted only to building products. Customers shopped floors dedicated to product categories where each manufacturer had its own showroom with product displayed in creative ways. The plumbing floor had showrooms from Kohler, Toto and others. The flooring floor was filled with brand names and magnificent show- rooms. Here consumers purchased from the manufacturer who provided material, installation and anything else needed to ensure a satisfied customer.
Many years ago Shaw tried getting into the retail market. Was the concept wrong or the vision simply before its time? Many on our tour came away thinking we might need to challenge our ideas and be more creative with our solutions.
The best path to the consumer is determined by the landscape in which she shops and our landscape has definitely changed dramatically already and will continue to change. Rather than justifying the existence of our traditional channel, it’s time to examine how and if each link in the chain can remain an essential part of the path from mill to the new consumer. The manufacturers’ dilemma is getting its products to the consumer where the consumer wants to buy, and balance that with their loyalty to retailers and distributors. It is incumbent on every member of the supply chain to question how they can contribute now and in the future.