Flexibility is key to independent success
Suzanne Gill finds out more about some of the pros and cons of being an independent during the recession, and what independents must do to stay ahead
It has certainly been a difficult year for the entire electrical market, but I was particularly interested to find out how the independent sector has been coping, and what independents need to do to ensure they survive and prosper.
I asked Andy Gardner chief executive of Associated Independent Electrical Wholesalers (AIEW) what he believed were the greatest tools in the independents armoury at the moment. "It is the service levels and a very real understanding of its customers and their needs that is key to the success of the independent wholesale sector," he told me.
For many independents, the lack of corporate politics will allow for the development of entrepreneurial skills and will stimulate the ability to identify opportunities and then quickly exploit them. It is therefore, important that the independent acknowledge these advantages and use them to best advantage, particularly in the current economic climate. "The larger corporates have a tendency to still be having meetings about an issue, while the independent is in a position to act immediately to changing trends and demands," said Andy. "All the figures and reports I have seen suggest that the independent sector has faired better during the recession than the multinationals. I believe that this is partly due to their ability to seek out new markets and change direction much more easily."
Neal Wilcox at Associated National Electrical Wholesalers (ANEW) agrees with this. He said: "Independent wholesalers, more that many of the nationals, have the ability to react quickly to market changes and to customer demands." If the independent uses these abilities to best advantage he will be better able to manage costs, and adjust stock levels to keep pace with changing buying patterns.
Owners of independents tend to be very hands-on and involved on a day to day basis with all aspects of the business. This also means that the customer will benefit from meeting with and communicating with the real decision maker, which often allows for a faster response to meeting their needs and helps to ensure that the wholesaler is providing exactly what the customer requires at all times.
Buying group benefits
Neal says that the role of the buying group can bring more benefits to the table too. "Our close working relationship with key electrical suppliers has allowed trade to continue flowing through these difficult months."
The function of a buying group is to help provide the tools to allow its members to compete with multinationals on all levels, including prices. "For the AIEW our role in keeping costs down is based upon the collective spend, allowing us to negotiate terms that are equal to or better than those available to our members competitors," Andy told me.
Customers expect more from their electrical wholesalers today, with many demanding a more flexible service, and in some instances a 24 hour service. The independent is in a good position to meet customer demands in this area too. Andy said: "Many independents have been offering out of hours services for many years. Finding a member of staff to volunteer for these duties is not an issue because, generally, the owner would be happy to do it themselves!"
I asked Andy how independent wholesalers are addressing the vital issues of bad credit and debt from customers, which has become a big problem for all wholesalers in the current economic climate. Andy said: "Bad debt and credit control has always been a high priority and in the current climate even more so. Those wholesalers with strong credit control will be the ones to survive the downturn and emerge much stronger. In the case of the independent, because the credit provider - often themselves - is so much closer to the customer they are able to make decisions based on local knowledge. By definition, published accounts and credit ratings are generally at least a year behind. Whereas, if you are talking to your customers on a regular basis, and have a close and good working relationship with them, you would know what they were up to last week… not just last year."
Competing with online retailers
To meet the threat of cut-price online retailers, many independents have also needed to embrace the concept of online ordering, to open up this additional market for them. Commenting on this issue, Andy said: "I doubt that on line ordering will ever replace the personal interaction that happens over the trade counter, and it certainly cannot provide a personal service. Furthermore, the emergency delivery, technical help, and demonstration of new products - all things that happen in a wholesalers premises every day - is very difficult, if not impossible, to replicate on a computer screen. Essentially we are still working in a ‘people business’ and many customers also become friends. It will never be possible to replicate this relationship in an online form!"
For ANEW members too, the threat from online retailers is a very real problem. On this subject Neal said: "On-line retailers bring nothing to the market except an OK service at, very often, too cheap a price. However, in this life you really do only get what you pay for. Online retailers offer no depth or breadth of stock or, indeed, product knowledge. They can offer none of the additional services that you would expect from a wholesaler.
"Some ANEW members have introduced their own on-line service, to counter the threat and they have the benefit of a great wealth of product knowledge to back up the service, so online customers can still benefit from this knowledge – picking up the phone to a real person, if necessary, to get advice."