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Distributors must add value to service offering, says INPACS’ Scholes12th of March 2015
Distributors of cleaning supplies are coming under increasing pressure from price competition, and the future of many is under threat unless they add value to their service offering. That’s the opinion of David Scholes, chief executive of the INPACS international distribution group.
“As a sector, distributors cannot simply sit back and only deliver products,” he told ECJ. “We must look at innovation and offer clients solutions in different ways."
“Distributors are under attack from so many different types of business now,” Scholes continues, “such as online, office supplies, Amazon, etc. If you’re not adding value, you’re simply a logistics operation along with everyone else. And we must all examine new market opportunities and maximise them because other types of suppliers are trying to muscle in on janitorial – and many
One of the most serious threats to the sector comes from office supplies companies Scholes believes. “They can afford to operate at a loss on products such as toilet tissue, for example, because of the enormous volumes involved. It’s a reckless business, and there’s no end game.
“I also worry that decisions are often being made by customers for the wrong reasons – they are always driving down prices because they themselves are under pressure. So we must do business differently.”
That’s why, he emphasises, this added value aspect is so crucial to the success and sustainability of a distribution business. With those trends in mind INPACS formed in 2004 with the objective of offering international tailored purchasing solutions. The group is made up of 76 family owned companies in 36 countries that have all signed up to a charter to pledge compliance with the INPACS way of doing business, and supporting its core philosophies.
“We were formed because we could see a need for cross-border service and tendering,” explains Scholes, “and the driver was to service customers to the same high level and with a common standard of product, whichever country they are in.”
Having been founded originally in Europe under the German-based Igefa umbrella, INPACS formed an alliance with the US group Network Services in 2005. This was followed by a tie-up in Australasia in 2013, with the Rapid Clean distribution group. Consolidated turnover in that year was two billion euros, with international business accounting for 100 million euros.
The next targeted markets are South America, Asia and Africa. “There is so much potential across the globe because we have to follow our customers,” Scholes says.
As far as those clients are concerned, Scholes continues, standards, service and reporting must be bundled together – and that’s one of the key benefits of buying from an international group. One of the other most important aspects is data management and Scholes explains why. “Many of our clients do not actually know what they’re spending on products – they don’t evaluate and assess that closely.
“Data transfer can demonstrate to clients what they’re spending on each product on a pan-European level for example. We have found our customers do respond to that kind of service offering, and they really want it.”
In Scholes’ experience many clients are actually looking to their distributors to offer more complete solutions. “They often want advice about budget and quality control, best practice, sustainability, productivity, health and safety, optimum products, or efficiency in their supply chain. These are the areas where we can help them to work smarter.”
He believes distributors which do not operate as part of a larger group like INPACS will find the future tough. “It’s true that many small distributors are surviving and there is no wholesale collapse, but we can’t escape the fact margins are being slashed and they are under pressure from other areas.”
This makes it even more crucial for those businesses to capitalise on the very power of distribution, Scholes concludes, which is: “Selling a wide range of products to a loyal customer base.
“And we must not forget there is a real value to product manufacturers of having a successful partnership with their distributors – an open and transparent relationship.
“We can offer a total solution, supplies are one component.”