Wholesaler, Solution Provider, Logistics Driver or Knowledge-based Distributor?
When Frank Hurtte founded River Heights Consulting back in 2005, he had a vision:
“To provide a resource for distributors seeking to better position themselves for their territories, their suppliers and their future.”
While Frank’s vision was crystal clear in his own mind, others wondered. The term distributor was an intellectual stumbling block. The word distributor applies to so many different business models; ranging from Fortune 500 companies like Genuine Parts ($16B) and Grainger ($10B) down to some interesting sub-$5 M specialty distributors with an owner and a six-person staff. Clearly, a better term was required.
Early on Hurtte coined the phrase “Knowledge-based Distributor” to better describe the kinds of people he calls “our kind of distributor.”
What is a Knowledge-based Distributor?
Quoting a 2014 article from The Distributor Channel blog, Knowledge-based Distributors could be characterized by “Deep product expertise, product specialists, customer-centric engineering and solution selling is their mode of operation.” Stating it differently, Knowledge-based Distributors don’t sell an assortment of little brown boxes, rather they sell products that are surrounded by their own veil of special know-how and expertise.
Knowledge-based Distribution is Different
While sharing many similarities with their brethren in other forms of distribution, Knowledge-based Distributors have some marked differences:
- Selling is an active verb – While both logistics distributor and Knowledge-based Distributor organizations “sell” products, there is a difference in the approach. Distributors operating in the logistics model tend to view selling as the processing of orders. Think of Walmart. America’s number one retailer “sells” Coke products, but they do nothing to encourage a customer to buy Coke over Pepsi, RC Cola or even their house brand of Sam’s Choice. Knowledge-based Distributors take an active approach; partnering with a smaller group of suppliers to purposefully convert business from competitors or find new applications.
- The cost of selling is higher – This active selling described above extends even further. Knowledge-based Distributors invest heavily learning not only products but the application of products. Extending further, Knowledge-based Distributors spend the time and effort to understand the nuances of their customers’ processes. One such distributor noted, “It is our goal to know more about some very specific slices of the customer’s manufacturing environment than their own internal people. Only when we reach that point can we provide the greatest value to our customers.”
- Expertise is a rare commodity – Engineers, or those with qualified experience, are becoming more difficult to find with the passing of each year. Further, the kind of expertise required for the Knowledge-based Distributor is not found with first-year engineering students. Similar demographics impact our customers so the demand for the distributor’s expertise is continuing for the foreseeable future.
- Service provided to the customer is more extensive – It’s hard to find a distributor of any kind who does not tout some kind of value-added service. For the logistics company, this may come in the form of expedited deliveries, put away services and stock replenishment programs. Knowledge-based Distributors, however, provide services which often interact with the customer more extensively. In the case of automation and technology products, the distributor may provide services that supplement or replace those once provided in-house. The more complex and mission-critical the products, the greater the likelihood that distributors are involved long before and after the actual sale is made.
- Services are often fee-based – The cost of providing extensive technical services has come to the point at which the Knowledge-based Distributor must recoup dollars tied to the services. Knowledge-based Distributors have discovered there are few others in the market space with their unique understanding of products, applications, and customer needs.
- Smart Supply-Partners realize savings too – Many years ago River Heights Consulting developed a matrix outlining who did actual work tied to serving customers both pre and post-sale. Hands down Knowledge-based Distributors absorb many costly activities conducted during the sales cycle.
