March 17, 2022

Why Wholesale Distributors Should Accelerate Digital Transformation to Survive?

Written by:
Zoe Cooper

Change is the only constant. Everything needs to adapt and evolve to survive in its changing environment. The same applies to wholesale distribution businesses as well. Shifting global economic, political, and environmental factors can lead to sharp changes to customer demands and purchase behavior overnight. Events that have a global impact like the COVID-19 pandemic can permanently alter the course of industry trends. Aside from the pandemic, several other market factors are causing an effect on the wholesale distributor industry and will continue to shape it long into the future. The wholesale distribution industry thus needs to adopt tools to better adapt to a more rapidly changing market to survive.

The trends that are shaping the future of the wholesale distribution industry today…

While several factors are currently affecting the wholesaler market, there are primarily three trends that the industry must consider moving forward.

The rise of the digital marketplace

Online digital marketplaces are slowly taking over the market share of traditional wholesalers. With the development of online technologies, marketplaces can provide customers the convenience of shopping straight from their homes. Moreover, as marketplaces do not need to focus on managing a physical store, they can instead focus those resources on providing a better-customized experience to customers.

Traditional wholesale distributors fall short compared to online marketplaces when it comes to providing the personalized buyer experience that customers today are looking for and thus fail to stay competitive.

Dysfunctional supply chains

With COVID waves still popping up at various places globally, the worldwide supply chain is still in disarray. The disrupted global supply chains caused by the pandemic and international regulatory restrictions have crippled wholesaler-distributors from procuring their materials through exports. Another issue brought on by the dysfunctional supply chain is longer lead times for delivery by the distributors. Thus, distributors need to put in resources to establish reliable supply chains and invest in tools that can better help them provide their customers with reliable insight into when their orders will be fulfilled. While there may be an increased lead time for deliveries, providing a better customer experience and frequent updates regarding deliveries can ensure long-term customer loyalty.

Lack of talent in the industry

One of the main difficulties the wholesaler industry is currently facing is the lack of new talent. The new-age talent pool, both in the technical and managerial roles, is more inclined towards working in companies that take a social stance or aim to serve a greater purpose. The wholesaler industry has traditionally only focused on managing supplies and profits without any larger long-term goals. The wholesaler market also suffers from a poor social media presence. So, even if they have a social purpose, most of it is not communicated well enough through social media, which acts as a platform to educate and drive interest in potential talent. Without new talent coming into the market, the wholesale distributor industry is becoming stagnant and is unable to incorporate innovative ideas and technologies to stay competitive.

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The pandemic behind the paradigm shift

It is no new news that the COVID-19 pandemic has left a permanent mark in the marketplace. From broken supply chains to the global economic crunch, businesses in all walks of the industry had to adapt and evolve overnight to survive in this new era. The COVID-19 pandemic became a massive restraint to the growth of the wholesale market as supply chains got disrupted due to international trade restrictions and consumption declined due to lockdowns imposed by governments globally. All the primary sub-sectors that the wholesale industry caters to, like the Healthcare, Industry Goods, Technology, and Food Services industries, faced severe setbacks due to these global changes.

Healthcare

The healthcare industry was at the brunt of the COVID pandemic and faced the most impact of it. In the beginning stages of the pandemic, the pharmaceutical supply chain saw massive order surges. With the increased panic buying of medicines, the manufacturing hubs of pharmaceuticals like India and China faced severe logistical difficulties. With initial waves of the pandemic subsiding, the demand for medical supplies has begun normalizing, yet in many regions of the world, demands still exceed supply.

In the short and mid-term, the medical manufacturing industry will impose mandates to manage demands. Wholesale distributors will need to adapt to meet these demands by restructuring their supply chain. Only through the adoption of agile and intelligent technology can the wholesale industry manage these demands.

Industry Supplies

The industrial supplies distribution industry was the worst affected of all the wholesale distribution segments. While the healthcare sector faced difficulties in managing demands, the industrial distribution sector suffered from dwindling orders. With the economic crunch, many industrial supply plants are either shutting down or laying off employees, and the ones operating are running out of supplies to continue manufacturing.

Prices had to be reduced by several distributors to accommodate the declining demand while logistic costs rose simultaneously. Technologically enabled industrial wholesale distributors that could cater through eCommerce platforms are the only ones able to increase their revenues, while distributors that depend on traditional sales processes are encountering a decline in business. Investment in competitive technology solutions will be necessary for industrial distributor wholesalers to stay operational until this sub-segment recovers.

Technology manufacturing

The wholesale distributor in the technology sector had faced some effects of the pandemic but managed to ride out the pandemic with minimum issues. With lockdowns being imposed globally due to the pandemic and businesses shifting to remote work models, the need for an infrastructure to support this massive shift escalated the demands within the technology industry.

With the rise of cloud-based business processes and work-from-home technology, the industry saw an exponential increase in demand, especially for silicon semiconductor chips. The surge in demand for personal electronic devices such as cell phones and laptops that use these chips led to a point where production could not keep pace with demand. The sub-sector is held down only due to its inability to fulfill customer demands. Ironically, the technology distribution sector needs to invest in technology to improve lead time and supply chain logistics management for a quick revival.