Are the basic 'hygiene factors' for distribution really that basic?

Delivery facilities, good stock availability and competitive pricing have for the longest time been considered the 'hygiene factors' and proverbial tickets to the game for goods distributors and wholesalers.

Few of the players in the local market (including resellers and retailers) have realised, however, that the presence of delivery facilities, stock availability and competitive pricing are not in themselves the only hygiene factors that count - the hygiene factors for distributors and wholesalers consist of subsets of these.

Let's delve a little deeper into each of these areas as a starting point.

Instead of the 'hygiene factor' being whether or not a distributor or wholesaler has some form of delivery facility, issues such as can customers reach a representative with the knowledge of their delivery; whether that delivery facility can be trusted to be accurate and on time; and whether or not the facility is available at regular enough intervals for the customer to forego stockholding. These are the real differentiators.

These are such differentiators that it often makes sense for a reseller to deal through a slightly more expensive distributor or wholesaler that offers these services, than one who doesn't.

Let's break this down into a real-world example. If one compares two hypothetical suppliers, one delivering more quickly and reliably than the other, but charging slightly more, the distributor that offers better service delivery will be the more cost-effective route.

The quicker deliveries (provided the reseller can count on the delivery to take place as promised) will be more cost-effective since it will allay the need for the reseller to hold any stock.

Conversely, if the reseller cannot count on the distributor to deliver on time and accurately (with the full complement of stock fulfilled), it will require some form of backup stockholding - this stockholding ties up the reseller's working capital and essentially costs them more.

Deliveries are also closely tied to stock availability. While most resellers consider a tick in the 'stock checkbox' as the distributor's ability to maintain an adequate stock level, in reality the 'hygiene factors' are much more than this.

Important factors include what stock items the distributor has readily available and what spread of products the distributor carries in its portfolio.

Our experience has shown that resellers also rate ready access to the distributor's internal sales team extremely highly. Logically, how would resellers be able to gauge stock levels if they weren't able to reach the internal sales team, who would, in turn, check on stock levels?

Furthermore, if stock was not readily available, it would be the internal sales team that resellers would call on to check if some alternative existed. Incidentally, the distributor's ability to find stock in the channel (assuming they didn't have stock themselves) is another vital differentiator and 'hygiene factor'.

Lastly, price is the proverbial wildcard and 'floating hygiene factor'.

We have found that price is generally only an issue if the distributor is not making good on delivery and stockholding commitments.

I'm not for one second suggesting that distributors are at liberty to charge the price they would like to if their delivery and stockholding services are superior. I am, however, suggesting that customers will (and should logically) be prepared to pay a little more to deal with a more professional organisation that saves them money by offering reliable and accurate deliveries; and everything required from a stockholding perspective.

There is far more to the market than price. And we should also not forget, the concept of price doesn't always stop at the basic upfront purchase price of the product - resellers should take into account incremental costs, like managing stock issues if distributors aren't able to, footing the bill for deliveries and, to a great degree, operating in a vacuum with very little input from the distributor's internal sales team, before they can arrive at an accurate total cost.

Only in dealing with a distributor that offers all of these 'hygiene factors' - and does so reliably - can the reseller take the upfront purchase price at face value.