Wholesale Distribution Key Threat #2: Mismanaged Omnichannel Models

Part 2 of Alexander Group’s wholesale distribution blog series took a closer look at Disintermediation. This article focuses on the evolution of omnichannel sales models and the threats present in creating and managing such models.

Until recently, go-to-market models for wholesale distributors were relatively straightforward. Distributors located branches near customer sites and deployed territory-based generalist sellers to cover all buyers within a geography. Account lists were easy to create, the model was relatively simple to manage and sellers engaged all customers with frequent face-to-face visits. Today, three key changes have altered the distribution marketplace, forcing distributors to reexamine sales coverage models:

• Changes in customer buying preferences – Buyers who prefer purchasing through Amazon to waiting in line at stores are demanding one-click purchasing in the B2B setting. Developed e-channels are table stakes for a growing number of segments.
• Imbalance between profitability and cost to serve – Sales leaders want high-cost field resources to spend time on the most profitable growth-oriented customers. Unfortunately, inertia often keeps sellers focused on buyers with whom they are most familiar and who may not justify seller costs.
• Increasingly complex buying processes – Consider the cast of hundreds involved in a typical hotel construction project: corporate planners, consultants, designers, architects, franchise owners, procurement departments, manufacturer sales reps. Sales leaders have realized they cannot possibly expect territory sellers to manage all influencers on their own.

Actions leading distributors take to maximize profitable growth

1. Incorporate buyer behavior and account-level sizing to segment customers and differentiate sales coverage (see Figure 1).
2. Invest in e-channel capabilities, skilled inside sales account managers and influencer-facing specialists to assign the right cost and skill resource at the right spot in the sales process.
3. Build rules around account assignments, rules of engagement and sales manager accountabilities to ensure complex models result in growth, not customer confusion.

The result is a coverage model that is intelligently complex and delivers differentiated growth by placing the optimal combination of resources against well-defined customers and influencers (see Figure 2).

Figure 1

Figure 2Modernizing coverage models is not without risk, however. Sales manager roles require redefinition and training to avoid botched handoffs and roles moving outside defined swim lanes. Sales compensation plans that pay a commission rate on territory volume can encourage sellers to landlord accounts and undermine the process to promote or relegate accounts to different segments. Failing to train customers to buy in a company’s preferred way can disrupt relationships or create too many exceptions to the standard model.

The risks are real, but they are manageable through well-designed programs, processes and tools. What distributors cannot risk, however, is hanging on to legacy coverage models as the market and competitors embrace change.

Need to reevaluate your company’s coverage model based on the latest trends in wholesale distribution? The Alexander Group can help. Contact a Distribution practice leader for more information about how we help clients redefine and redeploy their sales teams to drive profitable growth and market share gains.

Learn more about Alexander Group’s approach to distributors’ unique challenges. Contact us to schedule a readout of our latest Distributor Growth Study.

Read other parts in this blog series: Part 1, Part 2, Part 4, Part 5.