Global Fastener News

1999 FIN – Roseman: Strong Future for Small Distributors

May 18
00:00 2012


April 6, 1999 FIN – Small distributors will have as much opportunity in the future as they want, Joel Roseman told the Los Angeles Fastener Association March meeting.
And instead of the future toughest competition for small distributors coming from consolidated multinational distributors it may be trucking companies, Roseman asserted. The president of Bell Fasteners cited several pluses for small distributors: “Hands-on operation, don’t have levels upon levels of management and can change quickly. These are significant advantages,” Roseman declared.
“A small distributor can respond to a 150-page quote before the request is even opened by the right person in the large organization,” he remarked.
“The small distributor doesn’t have to bring people from 27 locations to talk about goal setting and the direction of the company,” Roseman added. “You simply stand in the middle of the office and say, ‘I’d like to talk to you for a few minutes,’ Everybody is right there.”
Another distributor advantage is the relationship with the customer. Despite the increasingly electronic commerce-based market, “the distribution business is built upon relationships, and nothing is going to replace that,” Roseman assured distributors. “Nothing will replace the people necessary to develop relationships with customers.” Those relationships are why distributors are generally more successful with end-users than manufacturers, Roseman ventured. “The manufacturer mentality is that ‘we manufacture it and we are great, so you have to buy it from us.’ That is no reason to do business.”
There may be 50 distributors in the Los Angeles market with essentially the same product and same costs. Success depends on “convincing the customer that ‘you want to do business with me.'”
Defining Small
Roseman defined the “small distributor” as one with under $10 million in annual sales.
Five years ago the small distributor would have been under $2.5 million. And the list of distributors with sales over $25 million “wasn’t too long, Roseman added.
Now it is the $100 million distributor list that isn’t too long and “five years from now it will be the billion dollar distributor.”
Will there be room for the small distributor five years from now? “Big is not always better,” Roseman emphasized. “In some cases it is not the size that matters. What matters is one simple thing-and that is service. It doesn’t make a difference if you are large or small.”
“Yes, in some markets the large distributor will completely overshadow the small distributor,” Roseman acknowledged.
Small distributors will need to identify their market. “There are OEMs that deal with $100 million suppliers,” Roseman noted. “Those OEMs won’t let someone in the door to talk unless they feel distributor is a major player in the industry.”
“Those are customers who say they would rather marry for money than for love,” he reasoned.
It is difficult for a $10 million distributor to take care of the multinational or national end-user.
But there is an opportunity through small distributors grouping together for the Los Angeles customer with plants in Houston and Providence, RI. Through geographic alliances, small distributors can “come to bat and fight on a level playing field” with the $500 million distributor.

Managing Change
One of the most important words in the successful distributor’s vocabulary is change. “If you can’t look at your business in the future differently than we do today then, large or small, you won’t be here,” Roseman forewarned.
“In the last five years it has become less about moving the boxes of nuts and bolts to the customer and it is more about moving information,” Roseman said. “Collect information, understand it and manage it.”

New Competition
Roseman predicted trucking companies have the potential to be competitors in the near future.
“I said at fastener meetings five years ago the competition for small or medium-size distributors wouldn’t be from the large distributors but from outside the industry,” Roseman said. “Trucking companies interact with your customers and your suppliers every day. It isn’t going to be too long before they put everything together. They are picking up the product and delivering it. In the next five years logistics companies could spring up out of trucking companies.”

Roseman’s Suggestions for Distributors
• “The worst thing in the world that we can do is deliver what we think the customer wants.” Find out what the customer wants and needs.
• “There is nothing wrong with being a distributor whose business is built on price,” Roseman maintained. But if you are selling price, “don’t try to sell customers the perception of value. Conversely, don’t try to sell price to a value customer.”
• Manufacturer Roseman urged distributors to be “proactive customers to your suppliers. Suppliers are not the enemy. Distributors and suppliers need to be partners.”
“Those distributors that give us report cards are our best customers,” Roseman said. “You’re only as good as your supplier, so let them know. If suppliers don’t know you are measuring them, they won’t do a better job for you.”
• Set high standards for your employees and your business. “It is very important to articulate your standards to your employees so that everyone has a common goal,” Roseman explained. “The purchasing department can’t have a different goal than the sales department.”
• “We have to create desire with our customers. There is nothing wrong with creating guilt in the customer’s mind because they didn’t award you the contract. I have seen customers feel so guilty that the contract was re-awarded shortly thereafter.”
• Small distributors should not be a one-person business. “There are many successful small distributors where that person on the phone can make the decision about an air shipment or whatever has to be done to take care of the customer’s needs,” Roseman pointed out. “In many big distributorships you have to go through 47 layers before somebody will okay the air shipment for that customer.”
• Employees need to be accountable for their actions, and empowerment is not a bad word.”
• Use outsourcing. “Small distributors can’t always afford to put engineers on their staff to provide technical support or have a quality lab. There is nothing wrong in using the supplier for these.”
• Find creative ways to sell more products to existing customers. “Every interaction with the customer is an opportunity,” he pointed out.
Roseman cited one Los Angeles distributor where Will Call customers must walk 50 feet through the showroom to get to the counter. Along the way they see products their company also needs.
• Sit down with the right suppliers and the right customers and talk about how to solve a problem and take costs out of doing business. ©1999/2012 Fastener Industry News
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