Distribution Industry Acts in Today’s Economic State

How Should the Distribution Industry Act in Today’s Economic State?

In our August 2022 webinar with Modern Distribution Management, Your Data Doesn’t Lie: How CRM and BI Drive Growth During Uncertainty, we ran a poll gauging our audience’s expectations for the next 12 months. The general sentiment among the distribution industry is that there will be a downturn, but not a drastic one.

Today’s Economic State

The webinar ran amid Q3 earnings reports and demonstrates that there is some softening of demand. However, it’s not going to be that painful. Interestingly, it’s also possible that the drop in demand may coincide with steep supply-chain-disruption-induced price hikes. In those cases, pricing may negate the demand pull-back.

So, why should you care? After all, the goal remains to sell as much as possible and be as profitable as possible. Yes, however, we tend to see that in times of uncertainty, economic forces amplify your choices. If things are really good, good choices become great choices. If things are rough, bad decisions might be catastrophic.

Worse, as the economy downturns, most businesses may have less safety net, especially as they bleed some cash while weathering the storm.

Act with Intention: Different Approaches

There are three different approaches for businesses in the distribution industry to take today.

Turtle Mode: This is where you pull in your arms and legs, wait out the storm, and arrive out the other side ok because you haven’t taken any significant risks. You reduce costs and focus on protecting your customer base. Perhaps the business shrinks a bit with the economy.

Business as Usual: Economy what? You can continue to charge ahead like everything is just fine and operate with your intended plans. You maintain focus and ignore trends or hype.

Expansion: Or, you might choose to take advantage of the chaos and aggressively target new markets. Maybe you use this as an opportunity to compete with the distributors operating in turtle mode. While the upside is considerable, so is the risk.

These approaches boil down to being a disruptor or guarding against disruption. In sports, some teams have great offense while others have a great defense. When they play against each other, sometimes a strong offense prevails, and other times the offense prevails. There’s no right or wrong answer. What’s most important is picking a direction and working towards that end.

Fail Fast

No matter which approach you decide to follow, these concepts will be relevant to you and your business. This is a way of exploring an opportunity without risking any more than you have to, and there are three steps.

  1. Make incremental changes—as small as you can and limit your risk while you do it to test your theories.
  2. Measure often. You need to know what impact those changes are making because if they’re not working, you need to pivot. A CRM and BI tool combined will enable you to monitor how your customers are doing, your dying stock, opportunities for a new products, activities and bookings, and much more.
  3. Pivot fast. Knowing when to pivot is the tricky part. The key is to decide the metrics for success or failure before you implement the changes. Set your milestones ahead of time before you’re in the middle of it all and susceptible to emotional decisions.

For the distribution industry especially, failing fast is vital during uncertainty because you can hemorrhage a ton of money failing over a long period of time. Do not get caught up “just trying to make it work.”

Be Decisive

In today’s economic state, the distribution industry can’t afford to do anything other than act with intention and be decisive. Use CRM and BI to measure and understand what’s going on in your company wherever you can. Tie behaviors to results. Otherwise, you’ll always be stuck looking in the rearview mirror.

If you’re interested in any of the concepts in this blog, take a look at this webinar recording. In it, White Cup’s VP of Business Development Brian Friedle and MDM’s Executive Editor Mike Hockett explain and demonstrate all of the concepts above in more detail.

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