Home > Uncategorized > The Emerging Power Struggle Between Distributors and Retailers

The Emerging Power Struggle Between Distributors and Retailers

Editorial

Prior to September 2008, the distribution of major Christian publishing lines in Canada — with the exception of Zondervan — were concentrated in a single distributor. Taking their cues from store owners of a previous generation, retail buyers were relatively compliant when it came to respecting Canadian distribution rights, and though the option existed to “buy around” existed with Spring Arbor, Riverside-World, and Anchor Distributing, it was neither practical nor practiced except in dire cases of rush orders for consumers, or stores that found themselves on credit hold with the Canadian distributor. Besides, the distributors were the place to get the knowledge necessary to move ahead into the next selling season. They had the inside track with authors and publishers. Knowledge was power. But that was changing.

The changes brought about that fall split Canadian distribution into two branches — again not including Zondervan or Thomas Nelson, which opted to serve the market direct — and by the spring of 2009, it was business as usual for both wholesaler and retailer. But there was four problems.

First, online ordering brought a “need it yesterday” mentality among consumers.  Canadian distributors had to compete with Spring Arbor, and later STL, who would pack and pick orders almost within minutes of receiving them.  For stores in Ontario, where the two new major distributors were located, differences in delivery time were often small, but in Western Canada, buying around suddenly became more attractive.

Second, the recession caused a slowdown in new author signings, a cutting of author rosters, a major down-scaling of the Christian music business, and a general pessimism among many in our industry.

Third, online buying and the emerging electronic book industry meant that print books were under threat, which added to retailer’s concerns and produced a cautionary approach to buying.

Finally, the internet allowed ordinary people to ferret out obscure books and authors and contributed to a market which had always been subject to denominational fragmentation. The Top 50 Books list was still viable, but did not tell the whole story of what was being purchased by consumers.

Still, as a group of distributors and retailers, we survived but survival means often ordering six copies of a book that might have produced a case-lot order in earlier times. A check of supplier inventories on a given title might reveal that you have more copies of that book than they do on a given day.

While we need each other, the balance of power is shifting to where the suppliers need the retailers more than the retailers need the suppliers. Unless you continue to place orders, to support the domestic distribution network in Canada, the distributors’ businesses are a house of cards that comes crashing down.

But distributors need to make you want to place those orders.

I’ve written this so far deliberately excluding mentioning names, and I’ll continue in that vein, but one example I’ve used here before involves the distribution of Christian music to radio people in Canada. Much money is spent on marketing individual CDs, and radio people receive perks such as novelties or collectable CDs created just for promotional purposes. During the summer, I went through my own files of press kits that I received when I was part of the promotional machinery.

But as I’ve written, unless your music buyer places an order, the CDs don’t sell through and the system collapses. The money should be spent nurturing relationships with those people as much or more than press and radio people.

Another concern is the issue of speed of delivery. Despite their two-day service system, Send the Light and Spring Arbor have secondary warehouses in other parts of the U.S. that reduce wait times for customers there from two days down to just one day. I’ve asked a few times over the past years why the two largest Canadian distributors don’t have a secondary warehouse in Alberta containing copies of the top 100 books, top 30 music items, and top 20 DVDs.

Then there’s power of arrangement. You should be able to customize your shipping minimums once without having to wonder when the next exception will take place.

For a couple of stores I’ve talked to, there is the problem of direct-to-consumer sales. This probably grates on some owners more than anything else. The suppliers want the retailers to respect their rights to distribute product wholesale, but disregard the other half of the bargain: That it’s the retailers who then market to the consumer. Distributors can try to have it both ways, but that leaves them with no recourse to insist on their distribution rights.

And you may have an issue or two of your own.

But the greatest threat to distributors is their own attitude. Historically, it was the wholesale companies that had the inside track on information, upcoming titles and release dates. Today the internet makes all types of knowledge available. While some gift lines are not otherwise available in Canada, books and music can be purchased anywhere. Savvy business owners can work out all kinds of alternative options, including the dealer who simply printed his own music club loyalty coupons, or the store that simply bought an American Christian bookstore about fifty miles to the south; and younger store owners often benefit from a business education their parents never had, which offers them a broader view of possible models for inventory acquisition.

Wholesale distributors simply don’t hold all the power they once had.

If you, the retailer, don’t support the system, or you greatly temper your buying, their system is in trouble. Wholesalers need to find ways to work together with you, not offer you arrogance, indifference or non-cooperation.

And they know it.

And you know it.

Instead of getting product “sell sheets” that say, “If you buy X number of units to ship by Y date we will offer you Z percent;” you can say, “I’d like to cut that minimum back by about 30%, still get the same discount, but have the product ship a month later.”  If they offer you 90-day terms, you can say, “That just messes up our bookkeeping; I’d rather have free shipping.”  If they say you get a free endcap display with the number of units you’re buying, you say, “I’d like you to keep the display but give me two extra product units.”  If they say your shipping minimum doesn’t apply to street-date product, you say, “I want that minimum to include street date product.”  If they say, “We’re marketing this product to churches across Canada;” you say, “We won’t take this at all if you’re also selling it to churches across Canada.”

Because increasingly, you, the retailer, hold a greater balance of power than you did four years ago.

And if they all want to keep their jobs, they have to find a way to support the remaining few retailers that are left, or attrition will simply eliminate the need for their distribution system altogether.

~Paul Wilkinson

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  1. landoklassen
    September 7, 2012 at 3:52 pm

    Great stuff Paul.

  2. September 8, 2012 at 5:57 am

    Fantastic report and very well put, I’m not in Canada but the UK but think much of what you say has relevance over here too!

  3. Darryl Drover
    September 10, 2012 at 6:52 am

    I’ve thought a lot about this the past few months as well and although I (a retailer) agree with your line of thought, sadly, it would seem distributors fail to see it this way. I say that based on recent experiences in all-time low standards of customer service, delivery times, returns and an outright disregard to do anything creative with margin, freight, etc.

    So I conclude they must not see it they same way, or, they have are intent on self destructing, either way, it’s made doing business frustrating, and sad.

    • September 10, 2012 at 11:44 pm

      I’m just old enough to remember an era when publisher and distributor staff would spend a day in various retail stores around Christmas. I think an exercise like that would be helpful again this year. Plus some type of reciprocation that makes sense in January.

  4. September 10, 2012 at 9:34 pm

    I really appreciate what is being said here, especially the word about attitude. The retailers of this country have done well over the last 4 decades to supply good books and Bibles to individuals and Churches. Now when we have our suppliers trying to sell direct because they say sometimes that ” we aren’t doing a good enough job” its a real slap in the face and increases the tension between suppliers and retailers. I thought we were supposed to work together as a team to reach our country with the good things we sell.

    • September 10, 2012 at 11:39 pm

      I think, if nothing else, this blog post brings that tension out into the open. The issues will be different for some of us, but the underlying attitude has been that the book world is a kind of hierarchy, with publishers, and then distributors and then the retailer as a kind of bottom feeder. I want to challenge that notion.

  5. Jack
    September 12, 2012 at 6:16 pm

    Are you aware that our biggest supplier in Canada is currently undercutting us by 20% on everything? Just check out their website. Very supportive of them.

    • September 12, 2012 at 6:27 pm

      There’s been a change there, because originally, they were just having discount prices on selected items, but now it seems to be broader.

      I’ll write about this later, but our music department is indicated by two large laser discs and in the center, where the label would be, we’ve used signage that directs people to Your Music Zone. Obviously, that’s going to have to change. It’s a great source for customer information, but I can’t have people going there anymore.

  6. Darryl Drover
    September 13, 2012 at 7:12 am

    I have always suspected this the end play, so, from Day one, I’ve eliminated any and all signage, stickers, reference to YMZ…. Your Church Zone is the same BTW, it wasn’t that long ago that our partner/distributor would help us match the prices of our competitor (strangely enough, in this case, one in the same) but based on my recent experiences this is no longer the case.

    It takes an already strained relationship to a whole nother level.

    • September 13, 2012 at 9:53 am

      This is partly why when I find an independent project in the recesses of Ingram or Send the Light, I stick out my neck and “go long” to try to promote those books, or CDs or DVDs or whatever; though I am risking that customers (and staff) will take my recommendation as there’s no marketing or promotional machinery to back up those titles. I’m no longer interested in having depth of stock from the major distributors and besides, I can always top up as needed using a just-in-time type of inventory on their publishers. Our core strategy has always involved remainder books; as a percentage of inventory intake we’re probably much higher than most stores reading this. But it’s both an art and a science to know what to take, since every remainder was, at one point, another store’s trash.

      It’s really become an “us versus them” situation with the major distributors, though; and I don’t know where they can begin improving on that, but obviously their solution is to simply bypass us and try to sell into our markets, and hope we go away.

    • September 13, 2012 at 3:00 pm

      While we’re on the subject, where did this nonsense of charging $1.00 for album flats originate? Since we’re too small to have sales calls — never have, either — we don’t get the freebies that sometimes the rep is driving around with; nor does anyone ever offer to key them in at 100% discount for us.

      Honestly, the pictures in my music department of David Meece, Benny Hester and Whiteheart are getting old.

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