Domestic Appliance Distributors, also known as D.A.D., is UK’s largest domestic appliance distributor who sells thousands of washing machines and tumble dryers each year.¹ Due to changes in the past few years, the company and its customers are facing threats from the rising number of internet dealers who are slowly taking over the market. D.A.D. is losing out on sales to its customers who mostly sell their products face-to-face in retail stores. The end-consumer seems to buy more and more products online, against much lower prices than the prices offered by the traditional retailer. D.A.D. and other distributors in the domestic appliance branch need to come up with a new business model to adjust to the major changes in the market and to survive the coming few years of doing business.
“The wholesale distribution industry is experiencing rapid change, where new business fundamentals are key to capitalizing on evolving challenges and opportunities.”² Some of the larger distributors are trying to buy themselves some time with cost-reduction methods, bringing the selling price down to an absolute minimum. Unfortunately the overhead costs per sold item of customers of distributors like D.A.D. are on average much higher than the overhead costs per sold item of internet dealers. Internet dealers do not have to deal with the costs of operating a store or paying a mark up to middle men such as D.A.D. The larger internet dealers, such as Currys, get most of their products directly from the factory and can sell these products at a very attractive price.³ This means that the distributors are losing customers at increasing speed and something has to be done – preferably yesterday!
Some might say that there is no future business in being a distributor and that distributors will eventually bleed out because they are being defeated by online competitors and it is already too late to adjust. Others might say that a distributor like D.A.D. needs to turnaround as quick as possible by adjusting its business model and starting its transition towards becoming an online dealer that can offer ultra-low prices and at the same time knows its customers and how to please them. What do you think?
References:
¹http://www.dad-online.co.uk/
²https://www2.deloitte.com/us/en/pages/consumer-business/articles/wholesale-distribution-trends-disruption.html
³https://www.currys.co.uk/
