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In many ways, the reasons behind the shrinking of the distribution channel during the past two decades are based on common sense.
Industry, business and environmental trends have shifted the role of a jan/san distributorship as well as its sales reps. Therefore, many supply house owners have elected to sell, become acquired or simply give up. Throughout the 1990s, less than 30 percent of all jan/san distributors survived during turbulent and, for many, opportunistic times.
These enduring companies were able to thrive by bringing more value to the end customer. While market reach and broad product offerings are the strength of many larger distributors, small- and mid-sized distributors must bring something to the table that the bigger firms have gotten away from — personal knowledge-based service.
Changing industry trends
While merger and acquisition activity is prevalent throughout the entire jan/san supply chain, the distribution channel remains the most active. Distributors looking to sell or become acquired have plenty of options. Distributorships are interested in acquiring or buying supply houses for obvious reasons, such as increasing their service radius and deeper market penetration.
For buyers or even newcomers to the market, this industry is still attractive. While it is true that travel and economic conditions can affect the supply chain's profitability, the jan/san industry is robust. The cleaning and maintenance industry continues to steadily grow and current estimates indicate that revenue generated in this industry is between $100 billion to $200 billion.
However, industry trends have also challenged the jan/san distributor's role. Several manufacturers now sell direct to larger or local building service contractors and in-house professional cleaners. Industry trade shows, which were once exclusive to distributor attendees, are now open to end users as well. Additionally, end users have shifted their buying trends, now utilizing such methods as e-commerce and procuring products at big box stores.
These industry trends force distributors to be more creative when looking to increase or maintain market share. Through knowledge-based service, distributorships can compete against manufacturers that sell direct and big box stores that offer little more than a cheaper price.
Business trends
Operating a successful jan/san supply house is more expensive today than at any other time in the industry's history. For instance, the oil crisis affects more than just a distributor's fuel costs, even though these costs have become unbearable in recent years. The cost of products has also increased.
The critical raw materials that manufacturers need to produce or package products have risen. These increases have forced manufacturers to pass on price increases that ultimately crunch the distributor's profit margins. Distributors have to either absorb these price increases or pass them along to the customer and risk losing the account.
In addition to surging gas prices, highway tolls have increased in major metropolitan U.S. cities. The gap between profits and delivery expenses is slowly closing for many jan/san distributors. This has led some distributors to charge fuel surcharges to the dismay of end customers.
Another trend is the high cost of health insurance. Providing this insurance for employees has contributed to lower profit margins for distributorships. All of these business challenges force distributor owners to cut costs, including distributor sales rep (DSR) compensations.
The results of these cost-cutting measures are employee retention rates have decreased and the experience for a sales rep in this industry is low. Since 1980, there has been a 40 percent decrease in DSR sales to commission dollars.
Here again, distributor owners must be savvy to compete and secure talented employees. By showing the respected sales eagles in this industry that your company firmly believes in knowledge-based service, employee retention and staff quality can soar.
Environmental challenges
The role of the jan/san distributor sales rep has also been impacted by environmental trends. Unlike past decades when every supplier had a "piece of the pie," today's end users expect one-stop shopping. However, unlike industry and business challenges, environmental changes offer an ideal opportunity for jan/san distributors.
One-stop shopping goes beyond offering various products at different price points. End-user demands for a one-stop shop also calls for product and market training. This personal value-added training is still a benefit that only distributors can offer, unlike manufacturers that sell direct or popular big box stores.
Industry trends, such as the emergence of Green cleaning, are perfect opportunities for distributors to get their foot in the door — and stay there to service the account — with knowledge-based service. Today, end users know that Green cleaning goes beyond just using Green-certified products. Green cleaning is about products, talented employees, systems and knowledge-based service.
Jan/San distributors have the informational means to obtain this knowledge and bring it to the end-user's table. The role of today's distributor is no longer just an order taker. Challenges from industry, business and environmental changes are seen by many successful distributors as a gateway to future prosperity.