Key Challenges in the Wholesale Distribution Industry

The industry has been under major disruption from factors ranging from Chinese tariffs, rising shipping costs, the growth of e-commerce and the increasing desire to bypass the wholesale distribution channel entirely.

The industry has been under major disruption from factors ranging from Chinese tariffs, rising shipping costs, the growth of e-commerce, and the increasing desire of manufacturers and retailers to bypass the wholesale distribution channel entirely and instead do business directly with each other under a "Direct to Consumer" (D2C) business model.

Faced with these myriad disruptive forces, the industry is aggressively embracing technology — for data-driven decision-making, more flexible supply chain management, and better overall visibility — to thrive.

Also from the perspective of data and application integration, which is a critical supporting technology in all of this, there is also a growing role for APIs to streamline the wholesale distribution ecosystem to quickly create significant economic value as the entire industry undergoing rapid digital transformation.

Based on these technical trends, plus the ongoing disruptions to Chinese tariffs, the war in Ukraine and COVID-19, the wholesale distribution industry faces several difficult challenges.

Navigating Challenges

First, suppliers are finding ways to avoid splitting margins with the distributor and building direct relationships with their customers.

Second, there is an inability to meet customers' ever-increasing expectations for delivering end-to-end supply chain visibility, 24/7 customer service, order tracking, and real-time inventory management.

In addition, technology-driven newcomers such as Amazon Business and eBay are disrupting the status quo in wholesale distribution, causing a noticeable increase in competition intensity.

Wholesale Distribution Growth Factors

Given the prevailing competitive and technological conditions, here are three ways wholesale distribution companies can strategically drive growth:

  1. Building scale through strategic mergers and acquisitions
  2. Completing smart acquisitions and mergers can create huge economies of scale and cost synergies to compete smarter and more effectively.
  3. Deliver value-added services beyond product distribution
  4. Most wholesale distributors offer value-added services such as credit financing, inventory management and product expertise. Building differentiated value-added services is the only way to fend off competition from both traditional players and online distributors.
  5. Going digital
  6. Wholesalers are still lagging behind most logistics companies in terms of digital adoption. B2B buyers expect omnichannel experiences (website, mobile, in-store), easy access to product information, online ordering, order tracking and inventory management. Distributors investing in digital strategies accelerate revenue growth, increase customer reach and improve customer retention.

ECS solutions are used by multiple wholesale customers and these are the things we see. Digital transformation is necessary to remain relevant and above all competitive!

Would you like to know more about how implementing the right solution can lower your costs and increase your customer satisfaction? Then contact us today to find out how.