Distribution channels are undergoing a shakeout
Symptom: Chronic low demand means that distributors are under increasing pressure as they compete for more demanding end users who offer less volume. Dealers are undergoing a severe shakeout.
Implications for the market:
Profit dynamics are changing as more channel conflicts occur and as larger dealers increasingly encroach on other dealers.
Average unit prices are falling for all competitors as the smaller dealers, who pay notably higher prices than the larger dealers, leave the market.
At the same time, costs are rising as all suppliers are under pressure to provide higher levels of service and as share movement becomes scarcer.
If a company stands to lose share, then it must evaluate its opportunities either to increase penetration with growing channels or gain more new customers in the shrinking channels.
As the volume in the market shifts among the channels, some competitors stand to lose and others to gain, depending on their mix of channel customers.
As a result, each company must reexamine its channel customer mix.
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Perspectives: Conclusions we have reached as a result of our long-term study and observations.