Alterrnative Channels – A Virtual Distributor – AutomationDirect.com

Over the past couple of months we’ve been speaking with a number of electrical distributors and manufacturers about the changing market. Some of these discussions have been in concert with other client projects seeking to better understand their market positioning.
 During these calls some of the things we were hearing are that manufacturers are

• seeking new distribution channels
• differentiating amongst “transaction-oriented distributors” and “demand creators”
• wondering who will “survive / thrive”

Distributors are seeking

• suppliers who are willing to support them
• more profit efficienct ways of handling their inventory
• new sales channels / venues
• additional suppliers to use when price is a key customer decision driver or where they believe they can capture incremental profit
• companies that are easy to do business with.

As you know, we’ve commented that, looking forward, a growth area will be ecommerce. Contractors are more apt to research product online than ever before, Trade Service’s Supplier Xchange is generating opportunities for connected distributors and large national distributors and niche sites are racking up sales.
 In our conversations, AutomationDirect.com has been mentioned as a potential model. They sell to end-users, sell to distributors (at a discount) for resale to end-users (and offer a stocking distributor discount program), represent many manufacturers and product categories, offer service guarantees to distributors and end-users (overnight delivery) and are an e-commerce model that could be applicable for many distributors.

• For a manufacturer, they represent a new channel or way to get product to market (albeit they are territory agnostic.)
• For distributors they represent an outlet for products, especially if your customer is not too concerned about brand, at significant discount; a tech support resource, and a robust cross reference tool. Additionally, and perhaps most importantly, they offer essentially a virtual warehouse … no need to stock product, easy ordering, and a signficant profit potential.
• For end-users the competitive advantage is simple … quality product at a “fair” price, when they need it.

We’re not advocating Automationdirect.com but were wondering:

• If you use them, why?
• What comparable companies are serving other product niches?
• Does this business model of an online “store” or an online “master distributor” represent an opportunity for you?
• If there were online “master distributors” (or distributors), would you buy from them? Do you think your customers would by from them?
• Is this a viable business model for manufacturers to support? For distributors to support? For distributors to emulate?

David & Allen