Distributors: Please Quit B***ng About The Online Competition

I read the following post on an industry discussion group  this week and it compelled me to write this tough love piece. All of this has been written from the vantage of someone who started a distributorship 17 years ago and deals with online competitors all the time.


 Offline Distributor/33 Years Industry Experience writes: "It's happened twice today. Lost a small order of beach balls to an online distributor selling them for $.87 each in the 100 quantity with a larger imprint area than I've found for twice the price and with 2-day production and a $20 set-up. Have a request for a quote for 2,000 folding can coolers with a 3-color imprint (one side). The customer says in the past they paid $.60 each for them from a national chain that doesn't specialize in promotional products and they say they received them in 5 days. After 33 years in business I feel completely out of the loop with my Sage, my catalogs, and even my favorite EQP suppliers. Where are they finding these prices? I have a sample of the can cooler imprinted in three colors (sublimation) and it's a really nice one so I can't complain about the competitor's quality!"


My message is plain and simple: The train has left the station on "price is everything/transaction" orders. Please stop complaining about online competitors as if you're the victim. You are better to spend your time focusing on creating a better business model.

If you're the kind of distributor that sells to customers who check online first, chances are you do not have a differentiated business model, nor do you bring any real value to the table. Your business is in real jeopardy as you will not win against the big online distributors (popular whipping boys include 4imprint.com or discountmugs.com). They are hyper efficient businesses, with millions of dollars invested in their web sites. They are exceptionally run and you stand zero chance of competing with them as soon as you get an email like this. Yes, even if you have a cookie cutter SAGE or ESP site - you cannot compete in the online space against 4imprint.

It also doesn't matter that you "have been in business for 33 years," "have relied on SAGE," or "your preferred EQP suppliers." None of this is relevant  in this online segment of the industry. The industry was very straight forward 33 years ago. The only way to buy beach balls was to order them from your friendly distributor who placed their order with their friendly neighborhood supplier. Back then, the value added by the distributor was to find a beach ball (through SAGE/ESP) buy it from your supplier (at EQP) and drop ship the order to your customer. Today, that value proposition is much too quaint for the savvy buyer who can simply buy online.

Let's now pretend you're the customer. You are looking for the hottest book for summer 2015. Chances are you need it fast and cheap. If you are like most people today, you go online and search for the best deal as the product is exactly the same at every bookstore. Why not just buy it from the cheapest place? This is exactly what's happening to this segment of the promotional products industry. It's going online, and it's never coming back. Customers are demanding this and they are voting with their wallets. If the experience of buying online was lousy, they'd be sticking with their distributors. In a free market, the customer is in charge.

Now, the news is not all bad here. Let me take a moment to unpack the two problems here.

Problem #1 - Your Cheapo, Price Shopping Client

You face two choices here.

1. Get rid of this client as they value price above everything else and you cannot - I repeat, you cannot - build a sustainable business by cutting your margins (you can if you are Amazon, but you are not Amazon). If you play this game, you will be stressed out and you will have a client base that will cut bait as soon as you increase your prices. You will also continue to post these "the sky is falling" kind of posts on industry forums and the process will repeat itself again.

2. Sit down with the client and dig deep into what they are looking for. Why do they need this particular product? What sort of event are they planning? What marketing objective are they looking to achieve? What demographic are they serving? What does a successful campaign look like to them? By understanding the answers to these questions, you will figure out whether you can help them achieve a higher goal other than saving 7 cents on a koozie order. Now, if they stare at you blankly after you ask these questions and answer "I know what I need and I just need it cheap. Can you match the online price?"

If this is the case, your answer back needs to be "Thank you for this opportunity. I encourage you to buy the product online." Close the door on this and pursue another client that values what you bring to the table.

Problem #2 - That Pesky Online Competitor With Prices Too Good To Be True

Most of us are familiar with the story about David and Goliath. David was a regular shepherd and Goliath was a huge soldier capable of squashing David with his pinky toe. We all know what happens in the end: David is triumphant as he slings his stone at Goliath's forehead, and the monstrous soldier is beaten. (Side note: suggested reading)

It's the same thing here. If you play 4imprint's game, they will crush you. They are optimized for low prices and the efficient processing of orders and they are the best in the world at this model. As a small independent distributor, or even a distributor working for a national franchise with access to "good, off EQP pricing" you stand little chance, unless you play the low margin game. 4imprint and their ilk are relentlessly efficient juggernauts that have won the price/transaction game. Good for them.

But ....

You can beat the online competition by moving up the food chain and differentiating your business with one or all of the following services.

- Unique design services (not art clean up, but original graphic design services) - Fulfillment and kitting services - E-commerce stores (beautifully designed on demand stores, not necessarily the huge company store programs as they have margin challenges of their own) - Content marketing and social media services - Event planning - Selling complementary product lines like packaging or print products - An incredible experience of working with your distributorship (i.e. delight them with your efficient processes) - A consultative based approach where you dig deep into what they are trying to accomplish. Sell them an ROI on their promotion, don't sell them a cheap widget. - Create a unique brand for your distributorship so you stand out. Make a statement about who you are beyond just offering low prices and good service.

Online competitors can't compete here as these services are not scalable and scale is what they look for in their quest for efficiency and low prices. If you can change the game, you have access to a whole new market.

In closing, I want to draw an analogy between our industry and the travel industry. Expedia put many travel agents out of business when they launched in the late 90s. And I believe that was a good thing for customers. Who wants to call up someone to book an economy flight to Chicago when they can do the same thing less expensively and 100x faster online? Thank you Expedia!

However, look at the segment of niche/agency based travel companies flourishing today. A great example is G Adventures. They offer experience based trips to adventure oriented travelers willing to pay for the experience. You can't buy these trips on Expedia, and even if you could, I suspect most people would prefer G Adventures because they hold your hand through the process as they are experts at this type of travel.

The travel industry has seen huge growth over the last 15 years and two types of companies are growing in parallel - the cheap online players that focus on plane tickets and hotel rooms, and the experience based agencies that provide the hotel rooms and plane tickets along with an experience of a lifetime.

It comes down to this: Know your customer's dreams, understand your competitor's weaknesses and focus on your key point of differentiation. If you stay relentlessly focused on these three areas, you will build a profitable and sustainable business, in spite of the online competition.

Mark Graham is the founder of RIGHTSLEEVE and co-founder of commonsku. You can reach him on Twitter at @heymarkgraham. And if you've ever complained about your online competitor, he wants to hear from you. Ping him: mark [at] commonsku.com