Distributors and manufacturers describe their relationships with their channel partners in positive terms, but theres room for improvement. So say the results of an exclusive joint survey between Progressive Distributor and the National Association of Hose and Accessories Distributors (NAHAD).

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While 91 percent of manufacturers and 76 percent of distributors say their channel partner relationships are either good or excellent, both sides would like to see greater cooperation in information sharing and in marketing support.

Sixty-two percent of the distributors who answered the survey want manufacturers to provide them with more information about the intended markets for their products. Similarly, 64 percent of manufacturers desire more point-of-sale (POS) information from distributors about who is buying and using the manufacturers products.

For that to happen, however, channel partners may need to learn a lesson in trust.

Its a battle thats been going on as long as there has been a distribution channel, says Joe Mika of Goodall Rubber. Manufacturers always feel the distributor isnt doing the job. Distributors feel the manufacturer doesnt know what its talking about and is out to sell direct.

He says distributors and manufacturers need to do more work to understand the value of their relationship.

Manufacturers are faced with having to do a much better job of calling on consumers and of tracking the products end-users consume, says an executive with a major hose supplier. Often, however, distributors wont part with POS information about their customers.

What distributors fear, of course, is giving away information that manufacturers could share with other distributors.

The executive says manufacturers want POS information for two reasons. The obvious reason is to sell more products to those customers. But manufacturers also want it for product liability issues.

If we make a change in crimp specifications, we want to be sure we get that information to people using the product, he says. Quite honestly, some distributors dont want us to know who those people are.

Some manufacturers require their distributors to provide them with point-of-sale data in order to be an authorized distributor. Most manufacturers, however, lack the muscle to make distributors conform to such a stringent requirement. Even when theyre big enough and powerful enough to do so, it requires tremendous systems capability to capture, store and transfer such data.

Dan Weitzel, hose and connector marketing manager for Gates Rubber Company, says manufacturers want to work closely with distribution to keep abreast of the end-user marketplace.

What we want to do is try to maintain the contact and knowledge of what the consumers and OEMs are doing in the marketplace, so we can adjust our products and marketing programs to fit distributor needs, Weitzel says.

Stronger marketing skills
Marketing is one area where there is a wide divergence of opinion between channel partners. Sixty-five percent of distributors believe they provide good marketing assistance to manufacturers. Just 34 percent of manufacturers believe distributors are effective marketers. That puts distributors in the position of defending their value to suppliers.

Our suppliers are trying to determine the value we bring to the supply chain and whether or not the customer is willing to pay for an additional channel partner, says Steve Gray, vice president of Pittsburgh-based Lewis-Goetz & Co. Its a very complicated world today. We see a repositioning of manufacturers trying to figure out their value equation and whether or not were still in that equation.

The market is forcing everyone to look at what value they offer the customer, Gray says.

Ultimately, you want to be partnered with the suppliers who understand your value, he says. If youre partnered only with manufacturers whose products are considered to be commodities, thats not going to help you.

Many National Association of Hose and Accessories Distributors members agree that in order for them to maintain their viability, they must do a better job of carving out their value as a niche supplier.

Most NAHAD members are specialty houses, says Mika, whose company is headquartered in Aston, Pa. We focus on a very small area. The future for this business is to make sure the end-user values that and understands the value that companies like ours bring them.

Mika says distributors must recognize that their value equation starts with applications knowledge and service to customers.

If distributors dont know how to sell value, they wont survive, he says. If small specialty distributors dont understand what value they bring to the table, they will find themselves pulled into the commodity war with the big, general-line houses, and thats a battle they cant win.

Brand is king
One subject on which distributors and manufacturers agree is the importance of building a strong brand. Asked which is most important having the strongest brand or having the lowest price 72 percent of distributors and 64 percent of manufacturers say brand is more important.

You need a competitive price, but it doesnt have to be the lowest price, says Jack Kacsur, president of General Rubber Co. in Milwaukee. I would rather position myself in the market as having the strongest brand, and get more for it, than try to be the low price wherever you go. If thats all there is to selling, I can get a sixth-grader to do that.

Keith Anderson, vice president of Anderson Metals in Kansas City, Mo., agrees that building a strong brand is the key to success.

Theres always going to be someone with a cheaper price. But price isnt what keeps you in the door, he says. As long as manufacturers, distributors and manufacturers reps are always adding value to the product or service, there will be a place for them. But guys that are selling strictly on price and adding no benefit, those are the ones in the long run that wont do too well.

Two of the biggest threats to their business, say manufacturers, are offshore competition and product standardization making their products look like commodities. Together, those trends make it more important for manufacturers to develop strong brands. Thats a difficult challenge, says one hose manufacturer who believes the partnership between channel partners isnt as strong as it used to be. Power in the channel has shifted to the end-user consumer.

There used to be a strong alliance between manufacturers and distributors, he says. Today, the alliance is between the distributor and the consumer. Those two together wind up beating up the manufacturer for price concessions.

This article originally appeared in the March/April 2001 edition of Progressive Distributor. Copyright 2001.

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