I have worked for several large industrial supply distribution companies in my career that never manufactured a single thing. When I would tell people what I did for a living, I would often get the same question: “Why do customers buy from you instead of going to the manufacturer?”
It might be rude to answer a question with a question, but I would usually reply: “Why do you go to the grocery store instead of going to the baker, the butcher, the dairy, the egg farmer, the orange grove, etc. on a weekly basis?” The answer becomes apparent when they consider their own time and convenience. Distributors exist to select the best products from an ocean of manufacturers and consolidate many small transactions to make the process efficient and convenient for the customer.
If you run a parts distribution business, the question you have to ask yourself is “Why do customers choose to do business with me instead of my competition?” If you are in the parts distribution business, you and your competitors are likely selling the exact same products. You likely all represent the same manufacturers and are selling the same parts off of the same parts price list.
Unless you have some unique advantage that somehow makes your operating costs significantly less than your competition, you cannot profitably compete on price without creating a race to the bottom.
You and your sales team might own some uniquely deep relationships with a few key customers. However, this is not a strategy that is economically scalable for capturing the hundreds or thousands of small to medium sized customers that you need to grow.
To beat the competition, you need to have the correct answers to the two biggest questions your customers ask:
Question 1: What part number do I need?
The first major value that you provide to a customer is the technical knowledge to help them identify the exact part that they need to fix their machine. The customer may have identified that they need a new starter to fix the car they are working on, but they need you to help them identify the particular part number of the starter that they need for a ’76 Chevy Malibu. You can provide this at a basic level by hiring and training technically competent people to answer the phones, reply to customer emails, and provide technical support. However, it is easier said than done to find technical support folks with the necessary skill. When you do find them, they can only handle so many calls or emails per day, so it is difficult to scale and grow a technical support operation.
The most scalable way to help customers find what they need is to build website search capabilities and a product data strategy that enable customers to serve themselves. A well designed website also allows less technically savvy customer service reps to handle more customer requests that would have previously gone to the technical support team as well as get new employees up to speed more quickly.
Equipment manufacturers rarely invest time and effort into quality descriptions, images, or categorization of their replacement parts. You are lucky to get an electronic copy of their parts price list with the part number, a 30 character description, and the list price. Any company that is selling finished goods on Amazon or on their own website have teams of marketing people dedicated to capturing lifestyle images of people using their products and writing flowery prose for their product descriptions that Google and the customer will find desirable. This depth of product data does not usually exist for replacement parts. This is the void you can fill to provide unique value to your customers and make your website the must-have resource for everyone working in your industry.
No one feels confident that they are ordering the correct part off of a website with a “No Image Available” placeholder where the product image should be. If you are holding the old part in your hand, you want to visually confirm that the picture of what you are ordering matches what you just pulled out of the machine. When considering the effort involved in taking pictures of your products, remember that you only have to take pictures of your faster moving products to get started. Once that picture is taken that it works for you 24/7/365 for free. Hiring a product photographer to take pictures of your top 100 parts will likely take a day or two. Your top 1000 parts might take a week or two. Once the product images are on your website, they operate as an unpaid sales and technical support resource all day, every day.
After product images, make your manufacturers equipment manuals available electronically on your website. If technicians in your industry are carrying around 3-ring binders full of equipment manuals in the passenger seat of their truck held in place by the seatbelt, you can provide a better solution that contains every manual that matters via a quick manufacturer and model search. The advantage of an electronic equipment manual over the paper copy is that the electronic manual can be quickly text searched for the page or diagram that the technician needs.
No one feels confident that they are ordering the correct part off of a website with a “No Image Available” placeholder where the product image should be.
Within those manuals exist the parts lists for a particular model. Manufacturer parts price lists rarely categorize part numbers by the equipment models in which the parts are used so there is no way to tell which starter goes in a ’76 Chevy Malibu. If you invest the time to pull these lists out of the equipment manuals and use them to create searchable categories of products within your website, you will create unique search capabilities that will allow your customers to search by manufacturer, model number, and item description (Chevy-’76 Malibu-Starter).
Executing your product data and search tools strategy requires a top down approach where the most popular parts and equipment models are done first. You want to be the first mover to create the customer habit of coming to your website first. Continuing to add to the depth of your product data over time will make it harder for the competition to overcome you. Competitors will have to massively leapfrog your parts search capabilities in order to change customer habits. Matching you is not enough. The most important thing is to get started.
Making your website the best parts search tool in your industry will promote your brand to everyone who matters. If you do it correctly, every time you visit a manufacturer, service company, dealer, or competitor in your space, you will see your website open on the desktop of their sales, purchasing, and warehouse folks.
Question 2: Do you have it in stock?
Having the best content strategy, search capability, and product data will make you the first stop for customers looking to identify the part they need. Having the part in stock and available to ship is what wins you the sale.
When the part has been identified, the next question is not “How much?”. It is “Do you have it in stock?”. If the answer is “No”, then you are likely to hear “I’ll call you back.” A customer with a piece of equipment that is down is much more likely to call around to try to find someone who has a part in stock than they are to call around to find someone who will give it to them for 10% cheaper. The speed of delivery is what creates unique value to the customer that can be reflected in your price.
Even your most loyal customer will buy from your competitor on the day that they need a part that your competitor has but you do not. Even if you offered to sell the part at cost, the customer will choose the part that is a day away instead of a week away.
You can easily do your own stick tally study to confirm, but I would expect that you would find that if you have a customer on the phone you are 3 times more likely to have them hang up without placing an order if the part they asked about is out of stock rather than in stock.
What is harder to measure but probably more impactful is the lost sales due to customers finding the part on your website but seeing that it is out of stock. Those folks never place a call or abandon a shopping cart to let you know they were serious about purchasing. They just move on to the next parts distributor.
Your inventory management around your fast moving parts needs to be sound so that you are never out of stock. However, it is table stakes for you and all of your competitors to stock the fast movers. The way you can differentiate yourself is in the breadth of medium to slow-moving parts that you stock.
You likely have some inventory management rule based on financial inventory turns and cash flow that says something like “We stock an item when it sells 6 times per year.” However, do you really understand the amount of sales you have lost by not having a part in stock? Are you sacrificing sales for inventory turns?
Even your most loyal customer will buy from your competitor on the day that they need a part that your competitor has but you do not.
If you have a part that sells 5 times per year when you did not stock it and decided to stock one on the shelf, would it sell 5 times per year or 15 times per year? This is an experiment that you can design to measure the ROI of every dollar invested in inventory. (Hint: Because of the value of speed of delivery in the parts industry, the answer is probably closer to 15 than it is to 5.) There is a specific breakeven point of inventory investment that maximized sales. You can grow your sales without adding sales or marketing resources by seeking this breakeven point. You are missing out on sales every day that can be won simply by having your website show that you have “1 in stock” instead of “Out of Stock”.
The combination of search capabilities to attract potential customers and stock availability to close the sale is a powerful sales building engine. The additional breadth of in stock inventory will allow you to capture more product images for your website and create a flywheel effect between these two actions and create further differentiation between you and your competitors. The best part about this plan is that you can start small and measure the impact at any point along the way to validate the strategy.