There might not be a recession in 2013, but don’t expect explosive growth, either.
The reality for wholesale distributors is that slow growth is projected this year followed by a moderate 2.9 percent contraction in 2014, according to Andrew Duguay, senior economist with the Institute for Trend Research.
An article on the Modern Distribution Management website offers five tips from Duguay on navigating the ups and downs over the next two years.
1) Stay positive: It can be hard to stay positive when you know what’s coming is a year of boring growth followed by Duguay’s prediction of a nearly 3 percent contraction. There’s not much good news out there. Generally speaking, pessimism tends to breed a downward spiral, so it’s important to stay positive, especially when dealing with people in the company, such as sales associates and support staff.
2) Don’t put on the brakes yet: Duguay acknowledges that it’s too early to base decisions on another possible recession in 2014. Managers must fight the urge to do that.
3) Avoid excessive hiring: Managers should not stop investing in the business, but they should avoid excessive hiring. For the most part, that’s not an issue, since few distributors are interested in hiring. They’re interested in technologies that enable them to get more work done with fewer people. There’s a very low risk of over-hiring these days.
4) Emphasize your competitive advantages: It’s important to resist the urge to compete on price. Don’t allow salespeople to use price as a way to gain business. There are no profits to be gained from doing that. Have discipline on pricing.
5) Avoid long-term purchase commitments in late 2013: Price decreases are likely in 2014. Distributors should invest in technology that makes them more cost-effective and productive. The emphasis should be on margin control and order-size control. Those efforts may require purchasing technology such as an ERP system or some similar software solution. The capital expenditures in wholesale distribution are going toward technology.
Source: Modern Distribution Management, Jan. 4, 2013