The Independent Distributor – Alive & Well
After the opening session at HDAW10, you might have been reminded of Mark Twain’s famous quote: “The rumors of my death are greatly exaggerated.” Our good friend, Stu Mackay presented a series of pie charts which he claimed supported the theory that the aftermarket business is trending away from the independent distributor toward the dealer. Although it is hard to argue against the accuracy of the data, unfortunately, Stu has made the wrong conclusion. In actuality, the change in market share is due to a one time shift, and not a trend.
There were two main events in the 1990’s that caused this shift. First, dealers gained access to relined brake shoes at competitive prices. This came about because friction suppliers like Haldex and Meritor became reliners, which enabled dealers to source these parts through their PDC’s at competitive prices. Prior to this time, brake shoes were for the most part, exclusively relined by distributors, and they owned the shoe business along with the related parts. The second change was the increase in awareness at the OE level of their advantage in providing sourcing programs to large national fleets because of their central computer capabilities and their national footprint. In addition, during this period, there was significant consolidation of fleets which shifted buying decisions from local and regional to national. Also, truck manufacturers produced large quantities of new trucks lowering the average age of the vehicle population. Most fleets will use the OE as the source for most of their parts during the warranty period.
Unfortunately, independent distributors have been slow to mount a counter strategy for business at national fleets. Some successes have been accomplished by the rollups and marketing groups, but not one of these entities has the prerequisite national footprint to compete with the dealers. But distributors are catching up. Marketing groups and rollups are growing locations and reaching out to each other to solve the footprint issue. Recent successes indicate that some of this business may be returning to the independent distributor. Requisite software is being acquired and integrated into the marketing groups. Some consolidation of marketing groups is occurring, although more work needs to be done to offer the best footprint. Many fleets are becoming disappointed with the absence of services that have been available in the past from the independent distributor and are increasingly adding marketing groups, rollups and even individual distributors to the roll of approved vendors.
Stu further contends in an article he wrote for the February 2010 issue of Truck Parts & Service, that distributors are only focused or capable of going after business that comes from other distributors. The perception he casts is that distributors either don’t want to or cannot compete with dealers. Nothing could be further from the truth. The truth is that in most individual markets in North America, the independent distributor has the primary market share and the best people. Independent distributors offer the widest array of products and services and can offer these at prices to serve different customer requirements. Distributors usually have more knowledgeable personnel and offer superior services like technical selling and deliveries than most dealers. In fact, the very nature of their independence enables distributors to tailor a superior value proposition to the customer. Another positive sign for distributors is that the average age of the vehicle population will be increasing. Even Stu recognized that distributors have a bigger percentage of market share on vehicles after they pass their warranty period.
Although independent distributors have many advantages over dealers, they do have one disadvantage. The very nature of their independence can affect the speed at which they come together in a coordinated marketing response to a threat to their industry. To counter the loss of business to dealers at the national fleet level will require independent distributors to place higher priority on this business. In addition, distributors must be more engaged in the fight for access to information.
CVSN and HDDA recognized that we would have a better chance of success if we work together to deal with challenges to our industry. Examples of this collaboration include working to find a viable solution to the issue of right to repair. The two Boards of Directors have found that there are other ways, like education, where we can work together to get a better result and will continue to explore other opportunities.
We believe that the future for the independent distributor is very bright. Every independent distributor is by definition an entrepreneur. He or she feels every success and failure and will do whatever is necessary to win in the market. CVSN applauds its members and features the successes of its members in its quarterly publication, the Insider. We are never short of material. As it was 30 years ago, and will be 30 years from now; someone will be predicting the end of heavy-duty independent distributors. Perhaps some younger CVSN member can pull up this article and update it when the next “rumor of our demise” is incorrectly predicted.
Respectfully submitted by CVSN (Commercial Vehicle Solutions Network) on behalf of the independent distributors in our industry.
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