Blog: Spotlight on Distribution

Jul 23rd 2018 Author:

James Ellis

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A number of trends and economic factors have influenced companies involved in distribution over the past decade, including a shift towards e-commerce and e-business, moves by bigger retailers to adopt private labels, the undisputed importance of big data and analytics and the greater numbers of businesses adopting segmentation and stratification models. These paradigm shifts have led to greater M&A activity in the sector, as organisations seek to benefit from emerging trends in order to grow their business and establish their brand.

E-commerce

With the rise of e-commerce and e-business, distribution has become truly globalised. E-commerce sales in the US grew by 16.9% in the fourth quarter of 2017, according to the US National Retail Federation (NRF). This is compared to overall retail sales, which grew by just 5.7% during the same period. E-commerce pioneers such as Amazon and Walmart have driven investment and innovation in online business, distribution and fulfilment and this has compelled other retailers to follow suit.

Private labelling

Increasing numbers of retailers, particularly those within the food and beverage and clothes sub-sectors, are investing in private labelling in an effort to reduce acquisition costs and increase margins. Higher margins also allow for greater reductions during sales periods – an important tool for increasing website visits. As a consequence, distributors are having to hone their brand identities as their product becomes more aligned with the company image. This is having a knock-on effect on how these organisations view their distribution supply chains, particularly given greater demands by consumers for a high level of corporate social responsibility.

Analytics

Traditional sources of decision-making are being complemented by big data and analytics in the distribution sector. Indeed, the use of technology and data is becoming industry standard for distribution companies as it proves a superior method to ensure operating efficiency is high and operating costs are low. In the retail and sales sectors, predictive analytics tools are being deployed in distribution to better understand customer buying habits and trends, which helps managers to save on inventory costs and improves overall customer satisfaction.

Segmentation and stratification

Tying into big data and analytics is the move by distributors to divide their customer-base into segments, stratifying those customers according to demographics, profitability, order size and frequency. This allows distributors to tailor their value propositions and offerings according to various types of customer groups rather than as a whole. Such practices are enabling organisations to develop greater synergy with other departments, including marketing, sales and finance, which directly benefits the customer and improves the company’s bottom line.

James Ellis, Director and Head of Logistics at Cavendish Corporate Finance, said: “The logistics sector is going through a period of unprecedented change as the supply chain becomes truly global. Already, we have advised on some significant deals this year, including the sale of Cadogan Tate, a major logistics group, on its sale to H2 Equity Partners. We also advised on the sale of Sterling Relocation, once Europe’s largest independent relocation company, to Unigroup, the largest household goods moving company in the USA. With such exciting changes happening in the sector, we expect more deals of this magnitude to take place in the near future.”