Distribution channels are undergoing a shakeout
Symptom: Chronic low demand means that distributors are under increasing pressure as they compete for more demanding end users who offer less volume. Dealers are undergoing a severe shakeout.
Implications for the market:
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Profit dynamics are changing as more channel conflicts occur and as larger dealers increasingly encroach on other dealers.
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Average unit prices are falling for all competitors as the smaller dealers, who pay notably higher prices than the larger dealers, leave the market.
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At the same time, costs are rising as all suppliers are under pressure to provide higher levels of service and as share movement becomes scarcer.
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If a company stands to lose share, then it must evaluate its opportunities either to increase penetration with growing channels or gain more new customers in the shrinking channels.
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As the volume in the market shifts among the channels, some competitors stand to lose and others to gain, depending on their mix of channel customers.
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As a result, each company must reexamine its channel customer mix.
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Analyses: Perspectives: Conclusions we have reached as a result of our long-term study and observations.
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