Distribution Is Not Dead

Nov. 1, 2003
Rock is dead, they say! Remember that line from a song by The Who years ago, which they answered with the refrain Long Live Rock? Twenty-five years later

“Rock is dead, they say!”

Remember that line from a song by The Who years ago, which they answered with the refrain “Long Live Rock?” Twenty-five years later thousands of bands, from teenage garage bands to the over-60 Rolling Stones are proving “them” wrong, whoever “they” were.

A few years back, people were predicting the imminent demise of the independent dealer-distributor and the marketplace is proving those pundits wrong as well. Although the age of consolidation and a fierce recession has led to upheaval in the ranks of distributors and forced many dealer-distributors to take a long look at their business models, the answer is that there is still a need for many of the services they offer.

As this issue illustrates, for many distributors, the answer has been to become very active in rentals. Others found holding true to traditional paradigms and making sure their service, warranty and parts support was up-to-date and structured according to customer needs was the answer. Others found that just as economies of scale became a factor among manufacturers and rental companies, it became more efficient to merge with others. Size often does matter, in distribution and manufacturing as well as in rental.

Clearly dealer-distributors — and I use the two terms almost interchangeably because I found that most dealers did the same and rarely could articulate a clear difference between the two words — have had to reexamine the effectiveness of their operations. The business conditions that caused the most recent crucible for so many distributors were in play long before rental consolidation made their discounts seem insignificant, before the glut of equipment of this decade dulled demand, and before a double-digit slump in nonresidential construction sent the economy into a greater tailspin than most people expected. If there is any lesson to be learned, it's that any business segment must continually analyze the effectiveness of its services. Just as Wayne Gretzky said he skated to where the puck is going to be, rather than where it is now, dealers — just like rental companies and manufacturers — must continually make sure that their offerings are what customers really need or are likely to be needing a few years down the road.

I recently heard from one rental company owner about why dealers were very important to him. He said he could easily go to a manufacturers' Web site and read about its latest products. He knew that some manufacturers would be willing, if he insisted, to sell direct to him and cut out the distributor middleman. But he liked buying from the dealer, he told me, because he knew the dealer would facilitate financing, would offer unparalleled service and warranty support, and would always have the parts he needed.

I asked him, candidly, if he wasn't living in the past, when all of that was true. He thought about that and added that while a lot of things in the industry have changed, and there weren't as many dealers around as there used to be, but for the most part the importance of the dealer-distributor was very much present tense.

The research we did for this issue makes me think he is right. The dealer isn't dead. But its profitability is still a big question mark as we try to climb out of a tough recession. The dealer is a partner to rental companies, to end users, to manufacturers. But it has to make sure it is current with new technologies and aware of the technologies and business patterns and relationships that will matter in a few years.

I thank the many distributors who took the time to speak with RER about the changing realities of the distribution business. There isn't space to mention you all or to discuss in depth the many vital issues you raised. We'll do our best to continue to follow these important issues in the months to come.

RER recently redesigned its Web site, www.rermag.com. We recognized the need for an upgrade and I believe we are providing it. It won't change the world, bring about world peace, or guarantee that all visitors will find the perfect key to economic prosperity. But, we tried to listen to our readers and offer a Web site that is easier to read, more functional and will help our readers to benefit from the products and services we offer. Take a look and let us know what you think.