The Benefit Of Group Purchasing Power

The role of the wholesaler is to help distributors manage their working capital. Distributors of all sizes look to wholesalers to provide the purchasing power to step in and negotiate product prices with manufacturers. This mitigates the need to pass down costs to distributors, who already are looking to reduce operating costs and are being pressured to provide favorable pricing.

Wholesalers give distributors access to a breadth of different lines of products, as well as the option of bundling items across sectors (i.e., foodservice disposables, safety products and cleaning supplies can be on one order). And the list of product categories spanning different industries only continues to multiply as wholesalers negotiate deals with more manufacturers. This truly allows independent distributors, no matter the size, to be the one-stop shop that today’s customers are searching for.

This breadth of product offerings allows distributors to step outside of the traditional market and test the waters. As a result, wholesalers say distributors have been able to make substantial gains.

“The expansive digital marketplace puts the world at a shopper’s fingertips. By tapping into a wholesaler’s vast, diverse and continually evolving product assortment, [distributors] can stay competitive,” says Bobroff.

Having more than one product line and the ability to offer products outside of the jan/san market makes it easier to compete with large, national companies, e-tailers and big-box stores, which have been siphoning business away from independent distributors.

“Wholesalers can provide distributors with a larger breadth of products that don’t need to be stocked by the distributor,” says Jerry Boughner, director of e-commerce, RJ Schinner Co., Inc., Menomonee Falls, Wisconsin. “Giving them the ability to compete with big-box and e-tailers without tying up dollars in inventory.”

Often referred to as a distributor’s profit center, the warehouse is where money is made or lost. With distributors stocking a significant amount of inventory in their warehouses, inventory turns are a major driver of profitability. Inventory management continues to be a problematic area for distributors. Instead of tying up capital on slow-moving inventory or test products, wholesalers allow distributors to reduce inventory levels, improve inventory turns and reduce carrying costs, says Quay.

“By using a wholesaler, distributors can increase the breadth and depth of their product lines with a lower investment in inventory,” adds Mike Bohannon, senior vice president, R3 Reliable Redistribution Resource, Elk Grove Village, Illinois. “Instead of buying [a manufacturer’s complete line], they can use their wholesaler’s inventory as their ‘virtual warehouse,’ and have access to the products they need at competitive, market-based prices.”

When working with wholesalers, distributors have the luxury of bringing in products that they need, when they need them. This approach of buying products on an as-needed basis is particularly useful for niche products purchased by a few customers or when testing new products or markets.