© 2015 United Parcel Service of America, Inc. UPS, the UPS brandmark and the color brown are registered trademarks of United Parcel Service of America, Inc. All rights reserved.

Can Distributors Compete With Direct Purchasing?

Can Distributors Compete With Direct Purchasing?Rapid growth of direct-from-manufacturer purchasing signals that fewer buyers see the value of purchasing through an intermediary. Distributors who want to disrupt that trend must understand what’s driving the changes and find ways to deliver on their customers’ new definition of value.

in partnership with

© 2015 UPS Can Distributors Compete With Direct Purchasing?

Direct Purchasing: New Normal or Treatable Symptom?Direct-from-manufacturing purchasing is widespread, according to the UPS Industrial Buying Dynamics study, which looked at the buying preferences and behaviors of 1,500 industrial products buyers.

Figure 1 shows that more than two-thirds of those surveyed are already buying direct, Figure 2 shows that 88 percent expect to increase their direct buying and Figure 3 shows that 66 percent expect to start direct buying.

Figure 1: Purchase direct from manufacturer (DFM)When it comes to buying direct from manufacturers, which of the following best describes your company?

Among the next generation of purchasing leadership – buyers between 21-30 years of age – only 1 percent have not considered buying direct.

Is direct buying an unstoppable force? Not necessarily.

Although the push-pull between manufacturers and end-users is real and growing, direct-buying may be less a foregone conclusion than a symptom that distributors are not meeting buyers’ needs in important ways.

Figure 3: Likelihood to start purchasing DFMFigure 2: Likelihood to increase purchasing DFM

© 2015 UPS Can Distributors Compete With Direct Purchasing?

Further study findings show that buyers will gravitate toward vendors doing the best job meeting their increasing demands throughout the purchase cycle.

• Nearly three-quarters said they’d switch spending for a more user-friendly website• More than one-third have gone outside their supply base to buy online from

someone for the first time.

Loyalty driven by personal relationships, long a driving force in the distributor sphere, has lost much of its power with today’s empowered buyers. People are loyal to those who de-liver the buying experience they need – whether distributors or manufacturers – or anyone who best delivers on a buyer’s new definition of value.

Key Takeaway:Buying direct from manufacturers appears to be on the rise, but it’s too early to know the long-term impact. There are factors that manufacturers may not want to address or be prepared to address in a way that suits buyers, such post-sales support, customer service, product selection, returns or offering physical locations. Distributors have an opportunity to reconnect with their customers’ changing needs and find ways to reinforce their value to the purchase process.

To learn more, download the Industrial Buying Dynamics Study at ups.com/insights.

Figure 4: Most critical challenges with distributors Select the top 5 most challenges of working with a distributor today

Case in point: Industrial products buyers said that, after price, service-related issues are the biggest challenge to working with distributors today, as shown in Figure 4 below.

These issues include poor customer service for resolving issues, lack of knowledge-able support and lack of post-sales support, among others.