Going direct? Is selling direct to the public the way ahead for small distributors?

Going direct?

Making predictions is a fool’s game – but almost irresistible at this time of the year. It’s not easy, when you are in the middle of a business, making out its changing patterns but if one thing characterises the past year, or maybe the past two, it’s the worrying position in which some small distributors are finding themselves – and what some are going to do to stay afloat.

The problems facing small distributors are simple but numerous. They are just as much at the mercy of fickle brand owners as their big counterparts, equally subject to the price cutting of the major EU discount retailers, suffering from the rapidly escalating costs of keeping reps on the road, losing money when retailers go bust or outlets when they simply close down, battling fluctuating exchange rates and the latest diktats from eco-activists and EU bureaucrats. And they’re doing all this without the economies of scale that the big boys enjoy. If you thought you had problems in this industry (and who doesn’t?) spare a thought for the small distributor!

A few years ago, Amazon looked like offering one way round their problems and many began supplying the behemoth. In the past year, though (and always off the record) several have told me that they are now pulling out. Amazon may have a great reputation among its users, but some suppliers complain bitterly about its small print and a returns policy which, it is said, among other things, can simply dump blatantly misused product back at your door, with a more or less unarguable deduction from your account. There’s more they grumble about, but that’s enough to have put some off having any more to do with the all-consuming online retailer.

So what’s left for them? Well, they can hardly take the route favoured by bigger distributors: starting or acquiring their own brands. Which leaves them with only one option – selling direct.

This has traditionally been a red rag for retailers but, curiously, it is almost a return to the MI industry’s roots. After all, once great names in distribution like Rose-Morris, Selmer, Rosetti and Arbiter all had retail shops at one time and more than one distributor started out as a retailer, gradually expanding into distribution over the years and often abandoning retailing altogether.

Providing they don’t undercut the retailer (and none that I have encountered have been so daft) it’s hard to see this as being too much of a problem, particularly as most retailers today simply cannot afford to hold large stocks of all but the fastest moving lines, so that moral objection is largely outdated.

So far, I’m told, many retailers have shrugged and accepted it when they have been told that a distributor is starting to sell direct to the public and in any case, the traditional shop still has all-important advantages, such as the ability to offer impartial advice, demonstrate a product and offer instant handover of the purchase, so it’s not as if the direct to the public distributor holds all the cards.

Do we actually need small distributors? Emphatically, yes. They often have the exciting products that open up new areas of business (often only to suffer at the hands of their bigger brethren who cherry pick their successful lines once all the hard work has been done) and they make it possible for manufacturers who simply aren’t large enough to self-distribute, to have representation in our market. The alternative, let us not forget, is to do what several US brands already do and regard the likes of Thomann as their distributors for the whole of Europe!

So, distributors selling direct as a trend for 2017? I think it may be on the increase. Will it lead to more retailers trying the same thing in reverse and branching into distribution? That’s harder to say and there are few signs of it yet, but why not? One thing is for sure. We are all of us (the Press very much included!) constantly having to re-examine our business models and if the distribution channels we have in this industry are to survive, they are going to have to make changes, too.

Finally, a note. I wrote this before the announcement that Porter & Davies has decided to sell its products direct from now on. Move over, ‘Mystic Meg’.

Ernie Ball - Slash
Ernie Ball - Slash
Ernie Ball - Slash
Ernie Ball - Slash