Big Box Stores: How Distributors Can Still Compete
Mention “big box stores” to Randy Bowers and he’ll mention the time his customer announced he could buy the same chemical, for less money, at the local big box retailer.
“I took a drive to the store and looked at the product in question. It was packaged in three containers and they weren’t gallons, they were less,” says Bowers, the owner of Shreveport, La.-based SMS Distributions. “I broke it down by the ounce and the price difference was minimal but we were less expensive.”
Distributors across the board have similar stories to share.
There exists a perception that big box stores always deliver lower prices. After all, retailers such as Amazon.com and Staples are larger and buy products in greater bulk, a savings they can then pass on to their customers. How can the local jan/san distributor compete with that?
“I used to think ‘Wow, that big box store is so big, there’s no way we can compete with their prices,’ ” Bowers admits. “But I’ve seen over the years that many times our prices are quite a bit lower.”
Even in situations where their product prices are higher, distributors retain a competitive advantage, adds Kevin Oldvader, owner of Raytown, Mo.-based Withers-KC Sanitary Supply. Unlike big box stores, distributors offer value-added services, such as inventory management, product training and education, and loaner equipment to their customers. Distributors need to make sure their clients realize and appreciate these extras — and need to make sure they’re differentiating themselves accordingly.
“Every time big boxes make a push, if we focus on our entire product line, try to remain competitive and emphasize our customer service, we usually retain the business,” says Oldvader.
Compare Products And Prices Against Big Box StoresBig box stores push low-price deals leading the average consumer to conclude they are lower in price on everything. But that just isn’t so, and Oldvader points out educating customers on that fact may be all that’s needed to retain their business.
Big boxes offer loss leaders, i.e. products sold at prices below cost to stimulate other profitable sales. For example, Oldvader says, big box retailers are very competitive on loss leaders such as hand soap and paper.
“But they are actually only competitive on certain items,” he adds, noting big boxes typically charge more for trashcan liners and cleaning chemicals.
This, he says, opens a door of opportunity for smaller jan/san distributors to enter.
“If you go to a customer and offer them products from A to Z, the big boxes are often only competitive from A to G,” he says.
Showing this competitive edge requires some due diligence, however. It may be necessary to compare case counts and pricing per ounce to illustrate the pricing differences — something many customers will not do themselves.
“If you break things down to the price per roll, per container or per sheet, a small competitor can compete on price,” Oldvader says. “It’s just a matter of educating the customer to look at what they are actually receiving.”
As an example, imagine a client traditionally purchasing foodservice items from their jan/san distributor but suddenly deciding to buy them from a big box retailer because they perceive a lower price. It may be necessary to take a closer look at case counts and break down cost to the price per plate. A traditional case count is 500 plates, but a big box may sell the same plates in two sleeves of 175.
“You can’t compare case to case in that situation because they are packaged differently,” says Bowers. “You have to look at how they package their goods because the potential to deceive is great.”
Oldvader agrees. “Many times they don’t offer the same case count as distributors. We may offer 20 ounces of product whereas theirs is only 16 ounces.”
Distributors also need to make sure their suppliers adhere to standard packaging sizes. The industry has seen a push to deceptively sell smaller amounts of products for the same price, often referred to as “cheater products,” an area where big boxes often reign as king, says Charles Moody, president of Solutex Inc. of Sterling, Va.
For instance, the standard sheet of toilet tissue used to be 4.5 inches by 4.5 inches; today it may be as small as 4 inches by 3.5 inches. The packaging contains the same 500 sheets but the purchaser actually receives less paper, Moody explains.
The case of smaller tissue will weigh just 25 pounds, compared to the standard size case, which weighs approximately 45 pounds.
“That’s almost 40 percent less paper,” says Moody. “But if the customer only pays attention to price or only looks at the number of sheets, it looks like they’re getting the same product. The price may be five to 10 percent less, but it actually should have been 40 percent less.”
The same thing is happening with trash can liners and chemicals.
Moody is quick to point out, however, that big boxes are not the only ones guilty of passing off products that are not the thickness, weight or size they claim to be. In this economy, he says, he’s seen both suppliers and distributors doing the same thing.
Total Cost Of AcquisitionBesides comparing products and packaging, Bowers recommends distributors help customers take a closer look at their “total cost of acquisition” — that is, looking at all the costs associated with buying goods, services or assets, when purchasing from a big box store.
Often a customer sends an employee to a local big box store to purchase cleaning products. For this reason, it’s important to factor fuel costs, vehicle wear and tear, lost time and productivity into the total product cost. A full-service supply distributor delivers products to customers’ doorsteps and puts them away in their supply closets for no additional cost, Bowers explains.
“It doesn’t take a lot of calculation to see that even if you save money per sheet or per ounce, there isn’t really a savings,” he says.
Withers-KC Sanitary Supply developed a piece of educational literature for customers that breaks down big box purchases into the cost per trip. If the employee traveling to the store makes $30,000 a year, it costs approximately $29 per trip, assuming it takes two hours. If that employee makes this trip twice weekly, their costs add up to almost $700 a year.
“Picking up the phone and calling us and having us bring the products out the next day is free,” says Oldvader.
There’s also liability involved in having an employee do the shopping, a fact Bowers isn’t afraid to point out to customers either. He recalls a client who stopped buying copy paper from SMS Distributions years ago to save $1 a case. Every month they sent an employee to a big box store to pick up 10 to 15 cases of paper and bring them back to the office.
“She ended up hurting her back and filing a worker’s comp claim that cost them thousands of dollars,” he says. “If you send your employees out and they get injured, you’re liable and your company will get sued.”
Distributors Have Innovation And InformationMany distributors worry that Amazon entering the market could potentially be an industry game changer. Online retailers offer low prices, online ordering capabilities and on-site delivery (which is often free). The savvy distributor must counter this by selling “innovation and information,” says Bowers.
When a potential client states they purchase their janitorial and sanitation supplies from a big box retailer, SMS Distributions’ sales representatives are taught to ask: “If we can give you big box value and bring the products to your doorstep, would you be interested?”
Bowers stresses they are not talking price here but value. The firm promises to come by weekly, inventory supplies, order the products needed, and then bring them by and unload them directly into the company’s supply closet.
“When they answer ‘yes’ to that question, the door opens,” he says. “We prove that we can provide them more than just price. We can provide true value and innovation and then we shift gears and talk about things like chemical control, dispensing systems and more.”
Specializing is another means of regaining control, says Moody.
“Don’t just supply everyone — be a leader. Know your niche and what you are strong in and go after that market,” says Moody. Solutex, for example, has a strong niche in the property management industry.
Or, if a distributor sells to veterinary hospitals, sales staff know the specific issues they face, such as pet odors or urine in grout lines, and knows the products that will help them address those issues. If the niche is preschools and daycares, they know babies will be crawling on the floor and putting toys laying on the carpet into their mouths and can spec cleaning products that can maintain the area with little impact on human health.
It’s also critical to emphasize the training and education you can offer, adds Bowers.
“When you are buying products from a big box store, you’re not getting any support,” he explains. “We are there on site working with them and teaching them how to properly apply and use the products and equipment. When you buy from a big box store you are on your own. With a distributor, you get information, you get innovation, demonstrations; far more than just the price of the product.”
Moody illustrates this point when a customer first looks at a piece of equipment, for example. He shows them the machine, demonstrates how it works, teaches them how to maintain it, and then helps them estimate their return on investment. If the customer decides to buy the product, he offers a loaner machine should the tool ever need to come in for repair.
“[Big boxes] wouldn’t do this,” he says. “It takes a lot of trust to lend someone a valuable machine, but if you already have a relationship with them it doesn’t cost that much.”
Big boxes’ rejuvenated focus on jan/san products is adding to the competition of what is already a crowded marketplace. End users have numerous options for purchasing their cleaning products. But just because big boxes are bigger and may offer lower prices, distributors shouldn’t be afraid of competing against these “Goliaths.”
“[Distributors] may be smaller but they have many great attributes that enable them to compete,” says Moody. “Make sure your relationships are strong and take care of your customers. If you put the customers’ needs first, the business will come and the profits will come too.”
Ronnie Garrett is a freelance writer based in Fort Atkinson, WI.