Distributors Need to Retool for Relevancy with Millennials

As millennials — members of the demographic cohort born between 1981 and 1996 — now increasingly join the industrial procurement industry, traditional distributors of parts, products, and supplies – and the sales reps they employ – have been the big losers in terms of market share.

In the past two years alone, established distributors have seen their split of overall sales to industrial buyers fall 7 percentage points to 38% in 2019, from 45% in 2017, according to new research from UPS.

And that buyer shift away from distributors and toward original equipment manufacturers and online marketplaces is predicted to accelerate. In the UPS report, part of the 2019 Industrial Buying Dynamics Study, a growing number of industrial buyers say they are likely to cut their already reduced reliance on distributors in the next three-to-five years.

Among their critiques? Buyers perceive performance weaknesses in the shipping and insurance practices of large-and medium-sized distributors, according to the survey. And fewer than half of the buyers who responded said they associated the large distributors and wholesalers with product excellence.

As a result, distributors find themselves at a critical crossroad. They can either invest to overhaul their businesses and to meet the expectations of the technologically focused, comparison-savvy, risk-averse millennial buyers who are rising fast in the industrial buying business. Or they can adhere to a business-as-usual approach and watch their once central role in the sale process erode as their business model recedes into irrelevancy.

That’s the worst-case scenario. The good news? That future doesn’t have to be so bleak for distributors and wholesalers. Millennials don’t run the whole show just yet. Boomers (born 1956- 1964), like their Gen Xer colleagues (born 1965- 1980), are more likely to pick up a phone to talk to an old-fashioned sales rep, and they continue to exercise a lot of power in their organizations.

So distributors have a small window of time to raise their game and to meet the new buyers’ expectations. They have a lot of items on their to-do lists: They need to jump with both feet into the digital ecosystem of social media channels, mobile apps and internet blogs that the Millennials rely on to research suppliers. They also need to take a hard look at their businesses and ask themselves s where their sales and fulfillment operations and their post-sales services and support offerings can be optimized. And if they don’t have the in-house firepower to do all that, they need to find outside partners and solutions to help.

But while they grapple with all the challenges, distributors and wholesalers should not lose sight of the distinct advantages they bring to this test.

Buyers believe distributors excel in areas like customer knowledge and customer service, product expertise and quick delivery, according to the UPS report. These areas will always matter and distributors should explore opportunities for leveraging these existing strengths.

The report makes clear that distributors can’t take Boomers for granted as they scramble to meet the expectations of the Millennials. Many buyers from the Boomer generation aren’t just sleepwalking through the day as they wait for retirement. They’re working alongside Millennials, watching their fresh ideas deliver fresh solutions, and increasingly the Boomers are adopting the younger buyers’ mindsets.  Two years ago, only 22% of Boomer buyers said they were likely to shift business to get better post-sales support. In 2019, that number shot up to 52 percent. Expectations are evolving across the board.

The takeaway? Millennials are definitely becoming the face of the industrial buying business and they’re looking at the business in different ways, ways that will challenge many traditional distributors. But if those distributors adopt new practices, approaches and technologies to meet the challenge while not neglecting the evolving needs of their Baby Boom and Gen Xer customers, they can to continue play a central role in the sales process.

2 comments on “Distributors Need to Retool for Relevancy with Millennials

  1. RituGupta
    July 18, 2019

    I was just reading somewhere that the more of these young people start joining the work force, the more we are going to see the way things in organizations change. It's just their mind-set of doing things has become so “politically correct” in a certain way. I'm just interested to see what sort of ideals that  they are going to put in place when they start to run things around here…

  2. MarkSindone
    July 22, 2019

    I feel that businesses need not be reminded of a change that they should have already adopted awhile ago. They should already know the importance of catering to the different target audiences available in the market today. Whichever is relevant to their products and services, they need to engage the latest tools to be up-to-date. This way, they won't fall behind their competitors and risk losing their clientele to them.

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