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Business Builder: The Value of Commitment in a Distributor-Retailer Relationship

Posted: Jan. 23, 2013, 4:30 p.m. EST


In the ever-changing relationships between distributors and retailers, the constants are dedication and communication.
By Don Jergler

As with the ever-evolving pet product marketplace, the distributor landscape is in a state of change. While there’s always something new—a new way to sell, a new way to market, a new way to display—one thing remains constant, and that is the value both retailers and distributors place on commitment.

In general, smaller, regional distributors have been replaced with fewer but larger distributors, reported Steve King, president of the Pet Industry Distributors Association (PIDA), in Bel Air, Md.

“It is a changing environment out there,” he said. “We’ve had a fair amount of consolidation on the distributor level, and that changes the relationship that dealers have with distribution partners. And in terms of the services that distributors supply to retailers—that has had to change.”

This trend is reflected in PIDA’s membership numbers. In the mid-‘90s, PIDA had 140 distributor members, and today it has 55, King said.

“It’s been a pretty steady trend for the last 15 to 20 years in the pet industry,” said King, who attributed this reduction to consolidation, not a lack of interest in the association.

Product selection is an important factor pet stores look at when choosing a distributor.
With 12,000 square feet to fill, Theresa’s Country Feed & Pet, a full line pet store located in Simi Valley, Calif., uses eight distributors to keep its shelves stocked. Courtesy of Therea’s Country Feed and Pet
The average PIDA distributor reported $40 million in annual sales, twice that of the average PIDA member 15 years ago, according to PIDA’s 2011 membership survey. This trend toward consolidation is beneficial to pet retailers, King said, because the larger distributors typically have larger product inventories and more resources to assist their dealer partners.

“Distributors today have more resources available for retailers, and larger companies can often provide more brand availability and merchandising assistance,” he added.

One player in this consolidation trend is Phillips Feed and Pet Supply. The Easton, Pa.-based pet supply distributor acquired Super-Dog Pet Food Co. of Leola, Pa., in 2010 and Mike’s Feed Farm Distribution Co. of Paterson, N.J., in 2012.

The growing company is constantly working to provide its customers with the best possible service, reported Fred Schober, COO of Phillips Feed & Pet Supply.

“We’re working to make doing business with us easier,” Schober said, noting that one way Phillips Feed & Pet Supply is working toward that goal is by offering as much interaction and convenience as possible via electronic means.

“We have multiple methods for customers to order,” he said, adding that point of sale and customer order forms on its website are two methods preferred by a majority of its clients.

In addition, Phillips Feed & Pet Supply is aiming to beef up its product offering. The goal is to amass a large, diverse catalog in the dog, cat, small animal and bird categories, Schober said.

When it comes to what products to offer, uniqueness is key, said Kurt Hansen, owner of Coast 2 Coast Wholesale Pet Products in Garden Grove, Calif.

“Even more important than price, it’s fresh, new, unique products that retailers are looking for,” he said. “We carry the brand that you might not see in the big box. We’re constantly bringing in new vendors.”

Product selection is an important factor in determining what distributors to work with, retailers reported.

Theresa’s Country Feed & Pet, a 12,000 square-foot store in Simi Valley, Calif., works with eight distributors and buys direct from three manufacturers.

“In order to carry some of the major brands, we have no choice,” said general manager Steve Shalhoob. “Some distributors have exclusivity—good for the distributor but it leaves the retailer at a disadvantage, without competition. It is taking away our freedom of choice of suppliers. In my opinion, it inhibits competition.”

In addition to product selection, Theresa’s factors in delivery days, terms, pricing, relationships, value and services, Shalhoob said.

Sue McCulloch, owner of Sue’s Pet Depot, a 3,500-square-foot pet store in Sudbury, Ontario, Canada, works with 10 distributors.

“You get a wider choice of products, you get to buy at better prices and you get to give better prices to the customers,” she said, adding that she spends approximately 25 percent of her work week dealing with her 10 distributors.

It’s worth the time, though; especially since all that communication and interaction keeps her well-informed, McCulloch said.

“As a pet specialty store you have to be very, very informed on what’s going on out there,” she said. “If you’re not out there talking to other vendors and people in the industry you can’t keep up with the changes.”

Want more information?
Read about non-traditional distributors here.
One area of the industry that has been experiencing a lot of change is the natural category. With the growing number of natural pet products available, it’s becoming too time consuming for retailers to research and get up-to-date on the latest brands and varieties, PIDA’s King said.

“It’s just more for the retailer to try to take in,” he said. “What it comes down to is how much time the retailer has to invest in researching their own products. Trying to keep track of the growing number of products out there, the changing trends, is a gargantuan task and retailers are going to be better served in having distributors help them make some of those choices.”

While some retailers such as Shalhoob and McCulloch prefer the more-is-better approach when working with distributors, Jim Bradley, president and CEO of Bradley Caldwell Inc. in Hazleton, Pa., has noticed the opposite.

“Retailers are trying to consolidate their suppliers,” he said.

“It increases efficiency, especially with more to do and less to do it,” Bradley continued. “One supplier, one salesman, one invoice, one delivery—everything’s handled in fewer transactions.”

Fontana, Calif.-based United Pacific Pet president Maureen Costello is also hearing from more retailers who like the benefits and simplicity of working with fewer distributors.

“They want to do everything with one distributor to make life easy,” she said.

As a distributor, Bradley tries to tip that changing equation in his favor by offering an expanded and diverse product line and additional services, such as the company’s two annual trade shows.

“I think the more things you can supply them, the better,” he said.

When looking for retailers, stores that get more of Bradley Caldwell’s attention are those that are expanding, putting in new departments, undergoing facelifts and turning displays, Bradley reported.

“They’re not waiting for business to come to them, but they’re doing things to attract it and draw [customers] into their stores,” he said.

A solid commitment is another attribute distributors look for in prospective retailer clientele, Bradley noted.

“I think the more a retailer can commit to a distributor, the more a distributor can commit to a retailer,” he said, adding that while retailers need more than one supplier, he recommends that they focus on ordering from one or two suppliers.

“If they’re buying everything from BCI, we’re doing everything we can to help their store be successful,” he said.

In general, Bradley said, 20 percent of the products generate 80 percent of sales, and 20 percent of the retailers generate 80 percent of the sales. The company spends a lot of time with those 20 percent, he continued, adding that all customers are important, but with limited time, it’s essential to concentrate on those who are trying to grow their businesses.

United Pacific Pet rewards retailers for loyalty, and those who spread their orders out among too many distributors are doing a disservice by being forced to order products at higher prices, or they might be altogether shunned by distributors looking for higher volume customers, Costello reported.

“If they can’t buy enough things from the distributor, that’s a problem, because they have minimums to hit,” she said.

Schober of Phillips also values loyalty.

“We like having a retailer we can have the trust and relationship with that they see the value in your service, so you’re not constantly looking over your shoulder being price shopped,” he said.

In addition to loyalty, Phillips Feed & Pet Supply looks for retailers who exhibit a bit of sophistication. Specifically, those that use “SKU rationalization,” and understand the value of their shelf space, what brands to get behind and promote and market, and what brands give added value to their store, Schober said.

With such retailers, a distributor can go to manufacturers and convince them to dedicate some marketing dollars to help the retailer grow its business, he noted.

“Such a partnership doesn’t work for independents that try to grab dollars and stick it in their pocket and don’t use it to grow the business,” he said. “It works with retailers who partner with a brand through thick and thin and really try to grow it.

“That’s the value of a distributor—that we can go ahead and work on business plans so we can get the resources to help customers grow their business,” he added.

A committed partnership isn’t only sought after by distributors; retailers also stressed the importance of maintaining relationships with their distributor partners.

Theresa’s Shalhoob insists on frequent visits from each distributor representative and keeps open communication with management at each distributor.

“From the driver to the CEO, we must all be on the same page,” he said. “As an independent, we seek all the support a distributor can offer to compete in an ever-changing marketplace.”

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