How Jan/San Distributors Will Handle Future Challenges

Ten years ago, only a small percentage of jan/san distributors operated a website, and even fewer offered online ordering capabilities. Back then, big box stores were much more of a threat than the e-tailers invading the jan/san space today. Even something as straightforward as hiring salespeople has changed drastically.

A decade can feel like an eternity for business owners looking to grow their operations. Challenges pop up quicker than they disappear, and jan/san distributors must adjust.

To help distributors combat challenges that have invaded the marketplace over the last decade, Sanitary Maintenance tapped into our editorial advisory board. These experts offer perspective and advice, as well as an outlook of what they see for the future of jan/san distribution.

Respondents:

Ailene Grego
President & CEO, SouthEast LINK

Chris Martini
Director of Marketing, Central Sanitary Supply Co.

Bill McGarvey
Director of Training & Sustainability, Philip Rosenau Co., Inc. – A Division of Imperial Dade

Nick Spallone
CEO, Tahoe Supply Company

With giant e-tailers and large big box stores growing in the jan/san space, what will be the role of the independent jan/san distributor?

Grego — In order to compete, independent jan/san distributors have to be able to offer something different — something those large organizations can't. Education plays a large part in all of this. Smaller companies have more flexibility and the ability to hold training classes that allow an individual to see, touch and feel the tools and equipment needed for the job. They also have the ability to be more creative in their problem-solving solutions and can get approvals faster by not having to go through so many layers of management.

McGarvey — The independent distributor will continue to be challenged by this shift. Pricing will be a full-contact sport and independents will have to serve in more of a consultative role. They will have to be more knowledgeable about their customers' business and not just product features and benefits. They will have to demonstrate their value beyond just providing an item.

Spallone — If you look at other wholesale distribution channels, it is clear that there will be fewer independent distributors in the future. Those left will most certainly have unique value propositions. I believe the independent distributor will need to find additional profit centers away from traditional box moving. By developing revenue models based on consultative and service strategies.

How will innovations such as robotics and Internet of Things affect distributors?

McGarvey — Distributors who have not been paying attention to the emergence of these trends better get on board soon. Robotics and IoT are not going away. In fact, they will become a larger portion of our industry as the technology becomes more refined and more affordable.

Martini — There is a big push for smart equipment that reports data back to a software platform. However, I think there is a learning curve when it comes to the data, how to read it and how to use it. That's where we fit in and are able to offer value-added services. We can help identify what works for our customers and how to interpret and use the influx of data.

Spallone — These systems will need to be serviced, tested and people will need to be trained. These are all areas to develop new and exciting revenue opportunities for distributors.

Grego — Robotics are just beginning to make a mark in our industry, however, I think we still have a long way to go before it becomes mainstream. They are expensive and you really have to have the right application for it to be beneficial.

Distributors have been busy with acquisitions over the last couple of years. Do you see this activity continuing into the next decade?

Martini — I feel like it's something that is going to continue to happen. There has always been acquisition activity and some that have been strategic and bold. Over the last few years — and I expect for some time moving forward — there is a great capital market and eagerness. Some of that comes with an economic cycle of positivity.

Grego — I believe this will most likely continue. There are so many owners approaching retirement age who don't have a clear and concise succession plan. Making it more challenging, it's been difficult to appeal to the younger generation. McGarvey — Distributor consolidation is likely to continue. Independent distributors will continue to feel the pressure of non-traditional competition. The big players will continue to look for opportunities to become larger. This, combined with the increasing cost to serve customers, will continue to drive many to consider options once thought unimaginable.

A lot of M&A activity means local distributors become regional players and regional distributors go national. How does this impact the local distributor?

Grego — I still believe that the smaller distributor can capitalize on what they do differently. Those small distributors who sold will eventually be swept up into the large distributors' policies and procedures that are now very corporate. There will be a new set of rules to live by. Small distributors have more flexibility and can provide more service. They should "sell" that instead of trying to compete on price.

Martini — Local distributors have some very good strengths and provide positive value to customers. Regional players are able to build on that while covering multiple markets and providing some unique services to their customer base. Then, a national distribution company has certain advantages that even us regional providers don't have. This is where it has benefited us to be part of a sales, marketing and purchasing organization. They do a great job helping us compete in that space.

In the end, though, it comes down to the customer base. If it's a national customer, they might want a single provider, so they'll choose a national distributor. In my experience, local and regional businesses prefer working with other local companies when they can, assuming they can be competitive in their offerings.

McGarvey — As one who works for a recently acquired company, I believe this trend will continue. As such, the local distributor will be challenged by new competition, some from familiar sources, but more often from a newly re-invigorated organization that has been given new life. Efficiency will be crucial in order for the local distributor to be successful.

Many customers still order via phone with web orders only accounting for a minority of sales orders. How will distributors need to prepare for a potential demand for e-commerce?

Spallone — I don't know if I agree with that statement. I believe virtually every transaction that happens today is touched by the Internet in some capacity. With that said, it is critical that we give as much flexibility to every customer and know they deserve a buffet of options when choosing how they transact with a distributor partner.

Grego — I think the shift has already started. Large public school systems and higher education have already migrated to online ordering. In fact, many colleges are now using their intranet to create purchase orders through universal software that then generates an order that is sent via EDI (electronic data interchange) or email. As the younger generations move into purchasing positions, they will easily gravitate to what makes them comfortable — that's technology. Their buying decisions will more likely be made based on what they can learn from the multitude of web sites they visit, so having a portal for your customers is becoming more of a necessity.

McGarvey — We have been promoting online ordering for a number of years now. All of the non-traditional competition in the jan/san world are pretty good at it. Therein lies the challenge for the order-taker. Facilities and the people working within them are harder and harder to visit personally. Distributors must develop a robust online ordering platform or risk losing a large portion of their business to e-tailers.

Martini — This isn't breaking news here, but I think every distributor sees a larger stream of orders coming through their e-commerce. It's all about creating product content that is detailed and easily searchable. For us to compete, we have to have that functionality.

Do you see the need to diversify product lines outside of jan/san more in the coming decade?

Spallone — This is a subject that I spend a lot of time talking about with my peers and I can tell you that we don't always agree. My belief is we need to be exceptional at what we do and as we add additional product verticals, it becomes expeditiously harder to be exceptional.

Martini — I see some definite growth in diversification. Just like more traditional service providers are adding jan/san lines, jan/san distributors are adding packaging or food service to their offerings. There will be continued crossover and I don't see this going away at all, but I do believe that to be successful, distributors must become experts in all categories they represent. Selling a paper cup to a restaurant is very different than selling an environmental services manager on a disinfecting program. Having the expertise to speak to each of those solutions you offer will be key.

McGarvey — This shift may be necessary for some, but caution should be exercised. Is the new offering related to what they've been doing over the years? Does the distributor have the knowledge necessary to support a new line? If not, from where will that expertise originate? And, what does the competition for that line look like?

How can distributors make this industry more appealing to the new workforce of Millennials and Gen Z?

Grego — That's the million dollar question! Millennials and Gen Z require a work/life balance. They need to have a clear understanding of what their path to success will look like and what they need to do to achieve it. In some cases, they may require working remotely.

Martini — To be attractive, we have to stress the overarching fact that we are not just selling toilet paper, we are actually selling solutions. We are going into healthcare facilities trying to reduce their hospital acquired infections. We are creating cleaner and healthier environments for the places we work and where our kids go to school. I think that is a very attractive proposition to potential employees. Taking that to the next level is imbedding that mindset into our overall culture — outside of sales in purchasing, customer service or logistics. We need to sell the realization that what we are doing is more than just providing a case of toilet paper.

McGarvey — Newer technology may attract a younger workforce, which may be addressed by the growth in robotics and IoT. Distributors also need to look at their sustainability profile; not just the products they sell, but their own story. How are they helping the future? How are they helping the environment and how are they impacting social justice? These are just some of the questions potential employees want answered.

Spallone — I wonder if there has ever been a time in history when the younger generation was not questioned about their desire and ability. Millennials and Gen Z will, without question, make our industry better than what it is today. Throughout history, all people — Boomers to Gen Z's — have wanted to make a difference in what they do. Our jan/san industry creates one of the best opportunities to do this.

This industry has not received the proper credit for what it really does. We are not just in the business of making the world a safer and cleaner place. We save lives, make workers more productive and help students thrive in the indoor environment. Who wouldn't want to be a part of that?