PPB May 2016

68 •

PPB

• MAY 2016

THINK

better, then that’s a great thing for our

industry.”

The scenario then begs the question, is

there an optimum number of supplier and

distributor companies? That’s an unknown

entity, but most agree that the market itself

is the best determiner and will dictate the

eventual outcome.

HALO’s Simon thinks the industry

will continue to adapt to meet the needs of

the marketplace. “As a result, the industry

will become stronger, and our powerful and

compelling value proposition will become

clearer to our potential customers,” he says.

Will the industry be better off? “Any trend

that makes our industry more competitive

is good for our industry,” he adds.

Bruno also believes the industry needs

to adapt to the changing market. “The

industry as we know it is much too frag-

mented to be able to invest in new tech-

nologies or in compliance in order to face

new competitors in the future. Whether it

is better or not, I don’t know, but it’s a

necessity,” he says.

The future that Graham sees offers

plenty of opportunity for the industry to be

better off. He predicts the continuation of

acquisitions as producing an interesting

mix of big suppliers who fill their role effi-

ciently matched with a growing number of

small, niche suppliers. “It introduces an

environment where other players can grow

up,” he explains, likening the potential sce-

nario to a fallen log on the forest floor.

“When a tree dies, it becomes a nurse log

where other trees grow out of it. The exact

same thing can be applied to the industry.

As companies merge or acquire, it opens up

an opportunity for a more nimble competi-

tor to take market share from the larger

player and you’ll have players that will

move into the areas left vacant by the com-

panies that have been acquired.”

Other distributors see the result of

aggregation and consolidation among sup-

pliers as potentially limiting their resources

for products—a trend some are already

experiencing. Debbie Abergel, senior vice

president, marketing/sourcing at Los

Angeles-based distributor Jack Nadel

International, has noticed that when she’s

in a client-bid situation, other distributors

vying for that piece of business are sourc-

ing from the same suppliers. “Suppliers are

not as aggressive on pricing as in the past,”

she says. “One basically told me that he

was going to get the order one way or

another anyway. We used to have five or

10 suppliers that had the same item and

we could get a better price, but we don’t

have that advantage anymore.” She is also

concerned about the increase of me-too

products and the loss of innovation as sup-

pliers aggregate. “We like telling our

clients we have 5,000 suppliers in our

database. Suppliers want all of our business

but we don’t want to tie in all of our busi-

ness with a handful of suppliers. We like

to have choices.”

And while she doesn’t see a lot of

product innovation currently in the indus-

try, she is seeing it in the services arena in

areas such as decorating, new processes,

smaller runs and quicker turns. Still, the

potential for limited product resources is

cause for concern but she believes distribu-

tors will be resourceful and willing to dig a

little deeper to find fresh ideas to serve

their clients’ needs. Abergel also likes the

idea of suppliers that can create private

label lines and believes it’s important for

suppliers to give thought to the positioning

of their product brands when one company

acquires another. Examples are the retail

brands Banana Republic, Gap and Old

Navy. All are owned by the same parent

company but through careful positioning,

each brand is distinctive and stands on its

own. “It will be up to suppliers to show the

lines they bring on as boutique lines, and

to continue product development for those

lines as well,” she adds. “It’s all in the exe-

cution.”

While there are upsides and downsides

for suppliers and distributors, savvy sales-

people are most likely to be the ones to

find the bright spots in the scenario. Those

who are let go because an acquisition creat-

ed a redundant sales force are expected to

be snapped up by another company inter-

ested in harnessing and leveraging their

talent, skills and experience.

“After the dust settles, there are defi-

“Thoughtful,

controlled

consolidation

will make

us better

off

but if

consolidation

means that in

five years

we’ll have 10

distributors

and 10

suppliers, I

don’t think

that’s good.”