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04/15/2021

The DTC Model: 3 Steps Wholesalers Can Take for New Revenue Streams

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In recent years, manufacturers have embraced a direct-to-consumer model for distributing goods, bypassing the traditional wholesale distribution model. This process, where the “middleman” is cut out by the supplier, is called “supplier disintermediation.” In addition to all the supply chain disruptions over the last year, supplier disintermediation has become a growing issue for the $6 trillion wholesale industry.

Wholesalers have historically lagged in digital adoption, and B2B purchasers now expect capabilities such as omnichannel interactions (website, mobile, in-store), easy access to product information, online ordering, order tracking, and inventory management. Today, wholesale distributors’ businesses will suffer without investing in digital strategies that accelerate sales growth, expand customer reach, and improve customer retention.

Three steps that wholesalers can take to create new streams of revenue include scaling strategically with mergers and acquisitions, delivering more value-add services, and transforming to run as a digital enterprise.

1. Wholesale Distribution Companies Must Transform to Operate as Digital Enterprises

To keep up with digital-first DTC marketplaces such as eBay, ASOS, and Amazon, digital transformation needs to be a top priority for wholesale companies and their leaders in 2021. The most resource-efficient way for wholesalers to complete their digital transformation is by deploying a strategic, ecosystem-driven integration approach that expands market opportunity, gives wholesale distributors a competitive edge and enhances customer outcomes.

Modern hybrid cloud and on-premise integration increases business agility and allows wholesale companies to minimize complexity without losing control. This allows them to expand market reach and enable e-commerce and digital marketplace channels.

Wholesale distributors must implement an API-led ecosystem integration solution to tie together five critical end-to-end business processes that most distributors depend on to run the business. The five essential processes where API integration can create economic value for wholesale distributors include end-to-end visibility for transactions, rapid onboarding of customers, order-to-cash enablement, e-commerce and omnichannel enablement, and backend application integration.

2. Build Scale Through Strategic Mergers and Acquisitions

Mergers and acquisitions may also help shift the wholesale distribution industry and create new opportunities for revenue. Wholesale distributors in numerous industries may need to scale up to survive and prosper in the coming years.

When accurately assessed and executed, strategic transformational M&A can often serve as a powerful engine for much needed growth and value creation. For example, Wesco’s recent acquisition of Anixter has created a $17 billion company with tremendous scale and cost synergies to compete in the market more effectively.

3. Value-Added Services Beyond Product Distribution

It is critical to understand and monetize value-added services in wholesale distribution to compete smarter in today’s wholesale distribution industry. The opportunity for long-term sustainable competitive advantages for distributors does not lie in logistics, competing with Amazon Business and others. Wholesalers must instead look into providing information services and value-added processing.

Most wholesale distributors have already begun to offer value-added services such as credit financing, inventory management, and product expertise. Sometimes theses additional services are offered to customers at no cost. However, to increase revenue streams, wholesalers need to become more intentional about delivering, marketing, and monetizing these value-added offerings. The turn-on-a-dime flexibility of a single-platform ecosystem integration solution enables them to augment their integration approach to map to business strategy without disruption.

Thinking Ahead to Maximize Wholesaler Value

Like many other industries today, the wholesale distribution is evolving rapidly due to the advent of disruption brought on by the pandemic. By being mindful of the trends that are reshaping this category, wholesale distributors can remain one step ahead of the competition and position themselves for success in the never-ending journey to become more efficient, more competitive, and ultimately more valuable to stakeholders.

Mahesh Rajasekharan is CEO of Cleo.

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