Insight

Distributors haven’t responded effectively to market disruptions

Facing shrinking profits and margins, distributors need to adopt business models that can thrive in a new dynamic marketplace.

Alex Miller

Alex Miller

Principal, Strategy Lead, KPMG US

+1 312-665-1325

David Roszmann

David Roszmann

Principal, Corporate Strategy, KPMG US

+1 858-956-9160

Rick Harpster

Rick Harpster

Advisory Managing Director, Strategy, KPMG US

+1 312-665-5133

Matt Crimmin

Matt Crimmin

Director Advisory, Strategy, KPMG US

+1 212-997-0500

Distributors have come under pressure from disruptive market trends, resulting in shrinking margins and declining profitability. Consolidation among suppliers and customers has limited their leverage to negotiate contracts and prices, and the entry of new e-commerce competitors has increased pricing transparency while further disrupting the marketplace.

Distributors haven’t effectively balanced investments needed to stay relevant and grow their business with cost take-out programs to sustain profitability. Moreover, some were initially slow to evolve their business models because they have large fixed costs and organizational structures focused on winning in traditional ways—typically on price and delivery.

To reverse this trend and become successful, distributors must be willing to put aside outmoded thinking and adopt new business models that can thrive in today’s dynamic market and be agile enough to adapt to the emerging market realities of tomorrow.