Times really have changed in our industry. It is hardly necessary to point out that COVID and the commercial Armageddon that followed were merely nasty accelerating agents in an already challenged sector. We were already in trouble from attacks through a whole raft of technological developments and the flood of online competitors led by the biggest tsunami of all: Amazon.
As independent dealers emerged from the national lockdowns – bloodied and bruised but still alive – the pre-existing issues were still present. And that core, traditional market – well, it got smaller still.
It is time for a new strategy – one that accepts these changes are real and permanent. One that recalibrates our thinking, positively changes our expectations and mood and embraces the unique benefits that dealers possess in their ability to adapt and evolve to seize opportunities.
This article is the first instalment in a four-part series aimed at identifying the fundamentals of creating a new future. Before I get into the bones of this initial discussion on strategy, it’s important to highlight that TSP’s contribution to this debate is built on a foundation of both successes and failures in driving diversification in our respective businesses and shared experiences. We’ve had some planned wins, stumbled upon surprise successes, hit the occasional road bump and, of course, faced one or two abject failures – all accompanied by a healthy degree of trial and error.
These articles will have a decent sprinkling of realism and it will come as no surprise to learn that there is no clear-cut way of achieving the endgame you seek (or think you seek).
What is strategy?
I’ll start with the term itself: strategy. In business, ‘strategy’ is a word used frequently, often out of context and, if we are honest, rarely given the time or execution it deserves by the dealer community. However, in the ever-changing landscape of the workplace supplies reseller market, a compelling and innovative strategy is crucial to give your company a chance to win business, sell at the prices you want and grow profitably to survive and prosper. Perhaps more so now than ever before.
The first natural advantage of a good strategy arises because most businesses in our industry don’t have one, and your competitors don’t expect your company to have one either! Simply having a strategy puts you at an advantage straight away.
Many common strategies are based on outdated assumptions that businesses today have the same choices and purchasing behaviours as they did in the 1990s. This assumes that customers need dealers to help them navigate the process of sourcing and purchasing products backed by a range of service options, with the dealer being the only company capable of providing this.
True: for a long time, dealers had a significant advantage – the good old days! – with the knowledge and supply chain relationships to give customers access to all the products they needed. Additionally, they could advise on sourcing all the products outside of the core. But, as we know, a business today doesn’t need a dealer to help with purchasing.
One great yet simple example of this worrying change is when a start-up opens its first office. In the past, these companies would turn to the Yellow Pages (yes, I’ve been doing this for a long time) to find a business supplies reseller and call them. The rep would arrive and sell desks, office stationery, paper, etc. This initial interaction would likely lead to another order, some repeat business and, voilà – you’ve got yourself a customer, possibly for five years or more. If they grow, you grow. Lovely. Rinse and repeat.
By comparison, a start-up owner nowadays takes great pleasure in preparing a new office by shopping on the internet for everything and at no point thinks they need anyone to actually help. All this stuff can be bought from anywhere, can’t it? The upshot is the company never engages with a dealer and takes advantage of all that wonderful knowledge and advice at their fingertips. This presents a serious challenge: how do dealers become wanted and valued again?
And that’s just for new customers. What about existing clients? Let’s be honest, resellers have done an amazing job for customers over the years – achieving such a broad standard offering of thousands of products, available from multiple sources with pretty much the same levels of service. This makes it relatively easy for a customer to change suppliers if they really want to.
A dealer’s core offering of next-day service, high stock availability, simplified ordering and competitive pricing has become ubiquitous and commodified. It has led to dealers being unable to sell at the prices they want (or need) to. With the customers in control and holding all the buying power, they can dictate the prices they pay and where they buy their goods.
Resellers struggle to create a differentiated offering that customers feel offers value and are happy to pay for. As a result, price becomes the ultimate decision factor in the absence of differentiation, leading to the inevitable ‘race to the bottom’.
So now more than ever, to survive and thrive in the workplace supplies industry, it’s crucial for dealers to develop a compelling strategy that distinguishes them from their competitors and creates value that customers deem worth the price.
The first step in making a strategy real is working out the win in order to gain a sustainable competitive advantage – or, in other words, a significant, meaningful idea about how to win.
Why is strategy important?
A well-crafted strategy should provide a guide for growth, competitiveness and success, but it needs to be sustainable to give a business an advantage. Strategic decisions are typically associated with issues such as:
- Long-term company direction: Decide on the type of business you think it should be or want it to be.
- cope of company activities: Should your business concentrate on what it is doing today or expand its offering by diversifying to added value services?
- Advantage over the competition: Build a strategy that is better or different from those of rivals to give you an advantage.
- Strategic fit with the business environment: Work out what clients need and their business problems and ensure your solution provides the answer.
- Resources and capabilities: Can skills and knowledge within the business be exploited to expand the offering or is an investment required to boost additional capabilities?
The challenge for dealer principals is to build a sustainable long-term strategy that will provide a ‘protective moat’ through a differentiated offer. It is not about being unique – this is not important and in fact can be deemed as high risk to a buyer – but rather about being different relative to the buyer’s other options. This is achieved by creating both real and perceived value for the customer.
For dealers, the pivotal question is when to start looking at strategic options and choices. Below is a simple framework – a favourite of mine – that serves as a guide in making the decisions necessary to create a sustainable strategy.
Determining a strategy for your business is not an easy process; nor should it be created alone (if possible). Yes, there has to be a decision-maker at the end of the day, but a collective strategy – one invested in by as many people as possible – represents that crucial first step. While the vision for the business may originate from an individual, the strategy to execute that vision necessitates wider buy-in. Securing that buy-in creates purpose, which in turn leads to higher motivational levels; and there are many soft benefits to a good strategy.
I’ve found the above model stimulates debate and discussion and is worth the time, as it will lead to clarity and that all-important buy-in.
It’s about choices
An often-misquoted statement attributed to Henry Ford about sales goes as follows: “Selling is simple: find out what your customer wants and give it to him.” Ford actually said: “If I asked my customer what they wanted, they would have said faster horses.”
There is a clear lesson to learn from this when deciding on strategic options. If you ask your customers right now what they want, they will say better prices or faster/better service – but at no extra cost! If you base your future strategy on this, you will continue to be part of a very big field of like-minded suppliers in that race to the bottom.
Ford was simply advising that rather than concentrating on what your customer wants, you should focus on what they need – but don’t expect them to know what that is. As the late Steve Jobs famously remarked: “People do not know what they want until you show it to them.”
The starting point for determining a strategy lies in gathering information from multiple sources. To truly differentiate, it’s essential to gain input from customers, employees, investors (if you have them), suppliers and even competitors. Ask them what they think. I promise you will see some interesting variety (which is good, as it proves there is no one-size-fits-all solution everyone can copy), but you will also spot some common themes on which to base your decision-making.
When a good strategy is in place, it must be turned into a compelling and straightforward sales message – one that your client (and salespeople) understand and that makes it easier for them to choose you… and harder for them to leave. Ultimately, it should deliver a proposition relevant to your target customers and provide the benefits of a car, not a faster horse!
What’s next?
The goal of this first article on diversification is to stimulate thinking – even action – on the important need for dealers to create a value proposition. I’m afraid the bad news is there is no silver bullet solution. But the good news is there is no silver bullet solution. If there were, everyone would do it and the race to the bottom would begin all over again – and the danger is, eventually, everyone would win!
The next article in this four-part series will see TSP Director Gary Naphtali take a closer look at the sales and customer proposition (read Who ya gonna call…? for an interview with Naphtali).
