Change is the name of the game in the industrial distribution business. It’s just not as stable and predictable as it used to be, and this has forced distributors to ask themselves some tough questions, such as: Are you playing to win? Or are you “playing it not to lose”?
If all you want to do is survive, just batten down the hatches and hope that 2025 goes well enough for you to stick around another year. But if you want to thrive, you’ll need to make bold moves and tackle upcoming challenges head on.
Here are some of the top concerns I see for distributors in the coming year and my advice for addressing them:
1. Economic uncertainty, including market fluctuations and inflation.
What’s the most important thing you can do in the face of an uncertain economy? Ignore the noise and focus on the customer. As frustrated as you may be with issues like inflation and supply chain issues, remember that your customers are facing economic challenges too. Talk to them about their economy-related pain points and figure out what your company can do to help address them. As much as it’s a problem to be solved, for savvy industrial distributors, an uncertain economy is also an opportunity to demonstrate and provide value.
>> What’s a Distributor’s Purpose? To Create Value for Customers
2. Supply chain disruptions due to ongoing labor shortages, geopolitical tensions, and transportation issues.
While the B2C channel has mostly recovered since the onset of the Covid pandemic nearly five years ago, the B2B channel is still struggling with supply chain snags. For example, the lead time for an order of 400 KVA transformers, used in many industries to regulate and transfer voltage, can be as long as 14 months.
As a distributor, your move should be to look at your supply chain and turn your most reliable suppliers from vendors into partners. In other words, which suppliers are really worth hitching your wagon to? Once you’ve figured that out, start strategically increasing your sales for those valuable partners. One way to do that is to gather and share data related to new and core products that suppliers typically struggle to get good intel on. The more attractive you can make yourself to your partner suppliers, the more likely you’ll be able to lean on them during times of uncertainty. Even the best suppliers will still occasionally run into supply chain issues, of course. But strong strategic partnerships with suppliers who are good at controlling what they can control will always pay off in the long run.
3. The urgent need to invest in emerging technologies and make more data-driven decisions.
Distributors have greater access to more data than ever before, and it would be foolish to not use that data to transform your sales model to be more efficient and productive. Any technology you invest in should in some way support that new model.
If a distributor still has general line sales reps with a geography that they cover by themselves, they’re way behind the leaders in the industry. In fact, they’re on the verge of becoming a minority. Many distributors no longer have any field salespeople at all, instead leaning on branch managers, assistant branch managers, business development reps, and a team of inside sales reps to own customer relationships and drive efficiency.
The opportunity costs of not investing in new enterprise technology are significant. Geography-based sales teams that work on commission cost too much money and aren’t nearly productive enough. A strategically deployed inside sales team using intelligent selling tools can sell much more than the best outside sales rep, no matter how good the donuts they offer their customers. And with early adopters of such tools already seeing returns, the gap between the leaders and followers is only going to get wider. If you haven’t made a move on tech in 2024, you better get ready to make a big one in 2025.
>> The Four Key Principles of Successful Sales Transformation
4. Experienced workers continuing to retire as younger people with much different expectations enter the workforce.
Baby boomers have been retiring at a rapid rate. All that valuable experience is going, and it isn’t coming back unless you’re really good at documenting everything. Which means that if you want to tap into the current labor market, you only have one choice: Throw out the employee handbook and invest in people and talent. Often the largest change issue is the beliefs of your own managers.
If you continue to operate under outdated policies, when taking leave time was frowned upon, you’ll have no hope of attracting (much less retaining) the best young talent. They value flexibility, opportunity, and work-life balance, and trust me: They don’t think it would be a great privilege to work for you. They’re not “entitled” — they simply know what they want, and they’re willing to wait until a company offers it to them. Cling to your old employee handbook and you’ll watch all your forward-thinking competitors scoop up the most capable candidates.
A friend of mine recently decided to go into consulting and sold his distribution company for a very impressive sum. When I asked him how he got such a great offer, he smiled at me and said, “Mike, I got the very best people. And because I got the very best people, we got the very best customers. And when I had the very best customers, I could have any supplier I wanted.”
And how did he get the best people? It was by meeting them where they are and understanding what they want out of a distribution job.
>> How Industrial Distributors Can Grow: Tech, Talent and Tenacity
5. Shifting customer demands.
Just like with your employees, you won’t get anywhere if you don’t listen to your customers. Do some customer journey mapping by conducting formal interviews with customers and using what you learn to improve your processes. The basic steps of customer journey mapping are:
- Set a goal for what you want to learn and plan for who you’ll interview.
- Create a short list of questions designed around what each customer values.
- After the interviews, build a list of pain points, focusing on the biggest areas of friction.
- Map out the steps for lean processes that will address those pain points.
- Implement your solutions using as much automation as possible.
- Plan to do it all again in the future because customer needs will inevitably change.
Don’t assume you know what the customer wants, even if they told you at some point in the past. The dominance of ecommerce has created a generation of B2B buyers who expect the same level of convenience and personalization they get as consumers, so when their needs change, they expect distributors to be able to meet them. The only way to do that is by asking them (not your sales team) explicitly and adjusting the way you do business accordingly.
>> 6 Steps to Improve Your Customers’ Experience with Your Company
6. Increasing consolidation in the marketplace.
When considering your competitive positioning in a market where larger firms are acquiring smaller ones and private equity groups are adding more distributors to their portfolios, think about the long-term growth of your company. You need to be the right size for what you’re trying to do. Are you too small to scale? Do you need to be a part of something bigger to scale? If you miss your window to grow, you need to pivot, preparing your business for sale a couple of years down the line. Missing your window isn’t the end of the world, but if you do nothing, you’ll arrive at a dead end with a non-investible business.
And don’t forget: Distribution is still a people business
In 2025, define your game plan, be proactive, and avoid “playing it safe.” Recognize that despite all the changes, distribution is a people business. It’s about relationships. And if you’re doing it right, it should be fun. Sure, you might get punched in the mouth and get knocked down, but all you have to do is get back up and fight back. That means creating opportunities for your employees to grow in their careers and your company to grow in the market.
Finally, if you’re reading this, I want you to remember that what you do is essential. The distribution industry touches everything out there, delivering what people need to do everything from building skyscrapers to performing surgery. So, when you play to win, you’re ensuring that the rest of the country wins, too.
