What is wholesale distribution 2024: Definition, examples, benefits
Wholesale distribution is a vital link in the global supply chain. Learn the basics of wholesale distribution and get examples of top distributors in the industry.
As distributors continue to reset and recalibrate in a constantly changing market, what are the 2023 wholesale distribution trends ahead?
From all indications, the intense pressure on wholesale distributors to transform during the pandemic isn’t going away. Economic turbulence, an influx of new competitors, and a talent shortage will force them to find new ways to remain competitive and drive growth.
As they tackle the challenges ahead, they’ll be applying lessons learned from the past three years.
For example, distributors that invested in e-commerce before COVID saw their e-commerce activity grow significantly as sales moved online, according to a Modern Distribution Management (MDM) report. Those that had been slow to adopt e-commerce had to catch up fast.
Now, nearly 21% of distributors say e-commerce sales account for 20% to 30% of total revenues, a trend that’s likely to continue and even expand, the report found. Many wholesale distributors also overcame their conventional ways and accelerated investments in technologies like data analytics and artificial intelligence to grow their business.
Wholesale distribution trends: 7 factors driving change
Looking ahead to the next year, wholesale distributors will face disruption on a large scale. Digital transformation will remain the name of the game.
Major wholesale distribution trends in include:
- New competition
- B2B personalization
- Global disruption impacts supply chains
- The drive for differentiation
- Rapid tech evolution
- Tackling the talent crunch
- Sustainable distribution
1. D2C & B2B marketplaces bring more competition
Wholesaler distributors now face stiff and game-changing competition on several new and unexpected fronts. An increasingly competitive landscape will be one of the top wholesale distributor trends in 2023.
The rise of direct-to-customer commerce has put them in competition with many of their own suppliers. D2C grew 45.5% in 2020 making up 14% of total retail e-commerce sales, according to eMarketer, which expects this trend to continue through at least 2023.
The growth of B2B marketplaces, fueled by online giants like Amazon and Alibaba, have also disrupted the wholesale industry. In 2020, B2B marketplaces grew at seven times the rate of overall B2B e-commerce.
All this competition means distributors will need to double down on e-commerce and digital transformation next year. According to a Gartner study, 83% of B2B buyers prefer using e-commerce for ordering and payment.
In order to boost their e-commerce capabilities, many distributors are focused on improving online search capabilities, including SEO, product pricing, and AI-driven personalization, the MDM study found.
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2. B2B personalization will be a wholesale distribution trend
With e-commerce, mobile devices, and quick access to information, the modern B2B buyer is vastly different from years past. They expect the same kind of convenient, fast, and personalized experiences that they have in the consumer world.
Today’s B2B customer expects the company they buy from to understand their individual preferences and needs. In fact, Forrester says personalization has shifted from a nice-to-have to a necessity in B2B sales.
A Forrester study found that 52% of marketing leaders plan to invest in personalization.
Next year, distributors will focus on providing tailored customer experiences by:
- Communicating with customers on their preferred channels and providing a unified experience
- Offering customized pricing, rebates, and discounts
- Boosting experience management as a discipline within the organization
- Actively managing the segment of one
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3. Economic woes, global conflict, and the supply chain
Like all businesses, wholesale distributors are grappling with rising prices and a looming recession. Shipping costs are soaring faster than they have in more than a decade and were up more than 77% in August compared to a year ago.
Inventories are rising as over-ordering during the pandemic is coming back to bite manufacturers in their collective tail ends. Shipping delays, supply shortages, and transportation delays seem to be the rule rather than an exception these days. And labor costs and shortages are mucking with everything.
Add in the war in Ukraine, global political tension, and tariffs, and distributors face tremendous supply chain challenges.
Many companies are wisely trying to get ahead of this wholesale distribution trend by implementing intelligent business process management capabilities that not only help them design greater efficiency into their supply chains but allow them to move product around the globe more sustainably.
This technology enables them to plan more strategically and be more resilient, meaning they can adapt to unanticipated changes in supply and demand more quickly without sacrificing cost or quality. They’re focused on real-time supply chain visibility for better decision making and improving logistics.
Gartner says this drive toward resilience is a big deal for supply chain professionals with 87% of them planning to invest in technology to enable it in the next two years.
In 2023, expect to see changing logistics models with the evolution of transportation as a service and new fulfillment models such as warehouse-as-a-service and micro-fulfillment centers.
Supply chain challenges can make for a wild ride. Get advice, best practices, + predictions from top experts HERE.
4. Standing out from the crowd with
In such an intensely competitive market, wholesale distributors can’t afford to stand still. They need to find ways to add value in ways that their peers and online players can’t, which makes innovation is a top wholesale distribution trend for 2023.
There are four main ways distributors are transforming their business to meet customers’ changing needs and gain competitive edge:- Offering high-value services – The standard product catalog doesn’t cut it anymore. Wholesaler distributors need to offer services around their products, based on customer needs. Examples include kitting, pre-assembly, packaging, and IT services such as web design.
- Perfecting delivery – By adding digital channels and streamlining warehouse and logistics operations, distributors can provide the speed and convenience that customers expect today.
- Becoming trusted advisors – Distributors can rise above by collaborating with their customers throughout a larger project’s lifecycle. Project management and coordination services are value-added services that can built trust.
- Optimizing business operations – Using automation and intelligent technologies, distributors can reduce manual tasks to increase efficiency.
Breaking out of old ways of doing business by taking an innovative approach helps distributors differentiate themselves to win customers, find new revenue streams, and increase customer loyalty.
Wholesale distribution industry: Imagining new possibilities
Innovation in the wholesale distribution industry has become table stakes for survival, meaning wholesale distributors must find new ways to run their business on multiple fronts.
5. Keeping up with rapid tech evolution
The pace at which technology changes is only accelerating. With innovation a priority, wholesale distributors will have to make keeping up with technology trends a core part of their operating model.
The cloud, e-commerce, automation, artificial intelligence, and the internet of things are transforming every industry. Distributors have a reputation for being traditional, but any of the time they thought they had to change evaporated in a flash during the pandemic.
In 2023, distributors will need to prioritize:- Building up expertise and skill sets in new areas such as IoT, AI, and machine learning
- Establishing a change management practice
- Standardizing business processes and interfaces
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6. Adapting to changing workplace trends
Like many other industries, wholesale distribution is struggling with an ongoing labor shortage. Last year, 47 million US workers quit their jobs as part of what’s known as the Great Resignation, with wholesale among the most-impacted industries.
While front-line workers like truck drivers and warehouse employees are harder to find, the competition for for customer-facing sales and support staff is intense. Distributors can find themselves struggling to attract the expertise they need as workers increasingly look for high-profile, purpose-driven brands.
Employee recruitment and retention must be a priority in 2023. One way to do that is by improving the employee experience, starting with listening to employees to gain insight and identify areas for improvement.
Take their expectations for work-life balance into account, and look for ways to streamline their workday:- Offer collaboration tools to foster engagement
- Use embedded analytics, machine learning and automation to reduce manual, repetitive tasks like keying orders into an ERP system
- Implement tools like chatbots for less complex customer service calls
When employees aren’t bogged down in routine tasks, they can focus on higher value activities that give them more job satisfaction. When employees are happier in their work, they’ll more likely to stay.
In order to attract new talent, distributors need to focus on growing their brand value and showcasing their social and environmental efforts.
How does employee experience impact business performance?
A positive employee experience helps drive the success of a company, from both a financial and social point of view.
7. Wholesale distribution will trend towards sustainability in 2023
In an industry accustomed to operating under intense margin pressure, sustainability hasn’t been a priority. But that’s changing as a growing number of distributors find ways to help the planet.
Examples include:- BayWay Group — Green initiatives include developing solar panels and satellite imagery technology that help farmers increase their profits while reducing their impact on the environment. The distributor has been recognized as a global leader in sustainability.
- United Natural Foods Inc. — UNFI retrofitted more than 50 of its diesel-powered refrigerated trailer units with electric engines, saving approximately 135,000 gallons of diesel fuel each year while reducing greenhouse gas emissions.
- High-tech distributor Bechtle effectively designed a set of reusable shipping and packaging materials.
With sustainability impacting how their customers operate, distributors that focus on it can differentiate themselves to stand out in a crowded market and drive growth.
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Paving the way: the future of wholesale distribution
Successful wholesale distributors invest in a variety of technologies to ensure a fluid purchase process from start to finish. They also embrace tools that help them track, understand, and analyze every customer touchpoint with their companies to maximize customer experience.
Wholesale distributors are at a crossroads unlike any they have ever faced. But they’ve already made great strides in adopting technologies to help them rise above any adversity coming their way. By sustaining that momentum, they can not only survive, but thrive in the coming year and beyond.
