Due to slim profit margins, wholesale distributors can’t compete with Amazon on price. To stay in the game, they must improve efficiencies and customer experience.
The gross margin for building materials and construction wholesale distributors is 13.5 percent. With such slim profit margins, whole distributors under pressure to turn over inventory quickly. If it sits for too long, the carrying costs and interest rates eat into your profits. Analysts predict that the Federal Reserve will hike interest rates over the coming year – after almost 10 years of historically low, long-term rates. As the cost of borrowing increases, it will be more important than ever to optimize your operations so that you can control your costs and ensure that cash coming in is available as quickly as possible.
This includes taking a hard look at your AR inefficiencies and finding ways to streamline your processes – while simultaneously giving customers a higher level of service.
Small businesses have plenty of choice when it comes to where they can buy wholesale goods. With just a few clicks, they can get whatever they need on Amazon. Not only is the Amazon online shopping experience convenient, but the products are often priced lower and delivered faster.
“By 2020, the customer experience will overtake price as the #1 brand differentiator”.Walker
As a distributor with thin profit margins, you may not have the option to compete with Amazon on price. Instead, your corporate performance depends on cost advantages based on operating scale, efficiencies, and productivity.
In an industry where switching costs for the buyer are low, the customer experience can make or break your profit.
Interested in learning more? Download your copy of the Finance Leader’s Ultimate Guide to Digital Transformation in Wholesale Distribution now.