Discovering that it is not the distributor’s fault.

By Bill Scott, founder of StoreReport LLC & Scott Systems Inc.

In 2004, I was forcefully ejected from a place of business. I believe that this was the first, and only, time I have experienced such a thing.

I had been asked by my convenience store customer to visit a beer distributor as a representative from his company, to tell the distributor about our plans to begin ordering the products we needed through a process of carefully analyzing sales, thereby ordering only what we felt we could sell between delivery cycles.

What the distributor heard was:

Presales people would no longer be required to come to the stores and look for places to warehouse the supplier’s mistakes

No, of course I didn’t put it like that, but understandably I had irritated a nerve, and that is the way he chose to perceive it as he proceeded to show me the door. He then called my customer and told him that I was never to reenter his establishment for any reason whatsoever.

I can’t say I was totally surprised, because I had sensed the practice of employing pre-salespeople had evolved from its beginnings of being a service to assists the retailers, into a carte blanche invitation to use the customers’ stores for warehouses, in order to over report the distributors’ quarterly financial statements.

Needless to say, I quickly developed a strong dislike for all distributors, and considered going on a crusade to expose their dictatorial habits to the entire industry. But a strange thing happened along the way. I cultivated a strong empathy for distributors, and I’ll tell you why.

It is not the distributor’s fault
Looking back to the late 70s, when I began writing software for the industry, most of my customers owned gasoline stations, or had customers that owned gasoline stations and convenience stores. In fact, large convenience store companies were not that common in those days. There were a few large companies like 7-Eleven and Circle K, and some lesser sized regionals, but the spurt in the industry started when wholesale fuel distributors, seeing the success of companies like the Southland Corp., decided to seek out additional outlets for their gasoline and diesel sales.

When Shell Oil started selling oil to Walmart in the early 80s, wholesale fuel distributors fell upon hard times, and many were desperate to stop the bleeding in their financial statements. The wholesale oil and fuel industry began going through a process of consolidation. Most of my fuel oil customers from the 80s have either died or gone for other reasons. The ones that are left are considered convenience store owners today.

Clueless about retail
Knowing little to nothing about the retail industry, those fuel and oil wholesalers approached grocery distributors for help.

“Hey, we don’t know anything about the grocery business,” they admitted. “Can you help us?”

Reluctantly, the distributors agreed to provide a means of assisting these new retailers in stocking their stores, and to keep them stocked. Having no way of knowing what their retailers were actually selling, most of them just resent the same items that were sent on the last delivery, and that’s why you will find 2-3 YEARS worth of some items decaying in convenience stores this very minute. Most convenience stores have twice the inventory needed to meet customer service levels, but the bulk of the industry is clueless as to how to solve the problem.

What my experiences have taught me
There is one lesson I have learned during my 37 years as a provider of software and services to the convenience store industry. If you do something for someone more than once, they will continue to expect you to do the same thing until they have delegated their jobs away completely. Then the business is faced with having no one in the company who understands the process.

Through the process of evolution, these grocery suppliers were expected to provide more and more services than they agreed to at the onset, and the relationship between grocery distributors has all but collapsed into a finger-pointing situation.

Few convenience store companies have taken the initiative to manage their own inventory properly, and their distributors are incapable of providing the services really required to keep their retailers happy. Sixty-five percent of supplier invoices are in error, and each error cost as much as $400 to reconcile. One little disagreement can cause a retailer to swap grocery distributors, and result in the loss of millions of dollars a year in revenues for the distributor. Of course, the retailer rarely gains anything by changing, because the new supplier is going to overstate his capabilities to get the business, and the vicious cycle goes on forever.

Back to my story
Consequently in 2004, as the distributor was in the process of showing me the door, he pictured the loss of control he had somehow managed to acquire over the past three decades from being expected to do things he was incapable of doing well, and when I suggested he would no longer be required to perform that part of his services for his customer, he suffered a complete emotional meltdown, and decided to make his stand. The distributor felt abused, and the retailer began to see the faults in the distributor’s service, but both the distributor and the retailer were wrong in their assessment of things.

I learned a lot from that experience, but the most important thing I have learned is the resistance to change comes from the fear of losing control, and the resulting reaction can be both destructive and totally unpredictable.