The Power of Effective Distribution
While the pet specialty channel’s distribution landscape has gotten smaller over the years, the value that distributors bring to manufacturers and retailers continues to grow.
Twenty-five years ago, the Pet Industry Distributors Association (PIDA) had more than 150 distributor members. Most were small, independent companies that serviced a limited territory and carried a relative handful of brands. There were exclusive “Iams Distributors” and “Purina Distributors,” companies that only carried aquatic supplies and those that only handled bird supplies.
Oh, how times have changed. Consolidation has upended the distribution landscape, with national companies competing with regional distributors in nearly every market. PIDA now has fewer than 50 distributor members, although the volume of business those 50 companies represent is more robust than ever. Distributors still add considerable value when it comes to moving products effectively through the pet industry supply chain. Both manufacturers and retailers benefit significantly from their distributor trading partners.
Value to Retailers
Distributors must justify their existence on both sides of the supply chain. Their services to retailers provide manufacturers with healthy retail organizations able to effectively compete for pet parents’ attention and dollars.
“Retailers today are pressed by consumers to have an ever-broadening array of products available to them,” says Todd Shelton, CEO of Phillips Pet Food & Supplies in Easton, Pa. “Having them all available is difficult, but meeting customer demands is increasingly important as there are more places that consumers can get products. Distribution provides ready access to a broad array of products that they otherwise wouldn’t have to meet those consumer demands.”
Some services distributors provide include:
Inventory Management: Retailers can order quantities they can turn, rather than ordering a six-month supply because of manufacturers’ minimums. This makes running lean and profitably a reality. Faster inventory turns lower buying costs and free up cash. The distributor can do a better job of maintaining fill rates. They have products in stock close to the store.
One-Stop-Shopping: The average distributor stocks more than 12,000 SKUs from more than 200 manufacturers. Retailers don’t have to spend time searching for products or ordering from dozens of different sources.
Storage Costs: Retailers don’t have to pay rent on space that is not generating revenue for them. Just-in-time delivery gets them product when they need it, so there’s no need for warehousing.
Market Information: Distributors are in constant touch with market activities, trends and prices. They can offer retailers advice on management issues and keep them apprised of industry news.
Merchandising: Distributors bring in point-of-purchase materials to help retailers maximize sales and efficiently use space in their stores.
Beyond services is the bond between distributors and retailers. Retailers know their success means success for the distributor. There is a level of trust that comes from years of working together to ensure that success.
“We are an educational tool for retailers,” says Mark Smith, president of Frontier Distributing in Oxford, Mich. “We inform them about products and help them understand what might work best in their store. We can tell them what’s having success in similar stores in our market or what may not be a good fit for them. Just because we sell a product does not mean we think it’s the right product for every retailer. We are cognizant of their resources and demographics.”
“Distributors support their customers as consultants as well,” adds Michael Baker, president of Pet Food Experts in Pawtucket, R.I. “We can tell retailers how their peers are doing with certain products or categories or what’s new in the industry. Really, we’re their eyes and ears and the back office support most of them lack. The distribution piece is really a bonus.”
Distribution by the Numbers
PIDA recently conducted a survey to determine the impact distributors have on the pet marketplace. Here are some of the important statistics that came out of that survey:
• Total sales at wholesale by PIDA-member distributors are $3.3 billion each year. That translates to a retail value of roughly $4.45 billion.
• PIDA’s 50 member distributors operate 104 distribution centers with 7.5 million square feet of warehouse space.
• PIDA distributors host 51 regional trade shows each year attended by 21,000 retail accounts.
You Can’t Avoid the Cost
You can avoid the distributor, but you can’t avoid the cost of distribution. From the manufacturer’s standpoint, you can prepare to deal with small, fragmented shipments as well as collection problems and transactional costs. But can you be in thousands of retail locations, keep them stocked and get them product when they need it? Can you serve as consultant and confidante on a broad spectrum of industry issues? Can you duplicate the bond that distributors and retailers share from years of mutually beneficial relationships?
In the end, distributors can do all of these things more efficiently and more economically. That’s the value of distribution. To view a series of short videos that describe in more detail the advantages of working with distributors, go to www.pidapowerofD.org.
Steve King is a 35-year veteran of the pet industry. He is currently president of the Pet Industry Distributors Association and executive director of the Pet Care Trust.