ian heller distributionstrategy,inc....amazon, walmart.com, google, ebay stihl recently franchised...
TRANSCRIPT
Ian Heller
Distribution Strategy, Inc.
• Artificial intelligence is driving a revolution in distribution• Assortment, availability and delivery are being
commoditized• The rise of B2B marketplaces is inevitable
Conclusions
Raising customer expectations & requirements
Emissions and noise regulations:Driving adoption of electric products.
“The OPEESA group is pretty seasoned but the millennials are moving in.”
Lawn and garden shops: Kids don’t want to take over the business.
New competitors: Makita, Milwaukee, DeWalt, etc.
Young people don’t want to be small engine technicians.
Substitute Technology Generational Change
10% of customers do business by fax and don’t have email addresses.
Parts for sale at mass retail and Amazon, Walmart.com, Google, eBay
Stihl recently franchised Northern Tool
Manufacturers want to go direct
Dealers want to go direct.
Tariffs were huge in the past year.
Dealers are going to consolidate.
Dealers won’t hold inventory.
Dealers used to make 30% and distributors made 15% and we’re all doing about half of that now.
“Once I start talking to you – shrinking margins, shrinking customer base, hard to find mechanics – it seems pretty discouraging.”
Channel Evolution Financial Trends
What’s going on?
What’s should I do about it?
New technology revolution
Artificial Intelligence
Current State of AI
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Information SuperhighwayWorld Wide Web
Network Effect
Clicks and MortarUsenet
Web Browser
Surfing the Internet
EthernetHTML
Windows 95Pentium
TCP/IP DotcomDial Up
URL
1995
>IndustrialRevolution
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5G Networks
ChatbotsMachine Learning
Artificial Intelligence
Deep Learning
Augmented Reality
Big Data
Autonomous Vehicles
RoboticsData
ScienceVirtual Reality
Turing Test
Image Recognition
Neural Networks
Natural Language Processing>Internet
Revolution
Smart Speakers
2020
2020: Strategy without AI
1995: Strategy without Internet
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Copyright 2007, S.M.S.I., Inc. - Owen Williams, The Kasparov Agency.James the photographer
1997
“It is not an artificial intelligence project
in any way.”
https://ww w.ibm.com/blogs/think/2017/05/deep-blue/
-Joe HoaneIBM Deep Blue Programmer
2016: AI Leaps Forward
Rhododendrites CC BY-SA
Chess Go
2.08E^170 Moves2E^155 Moves
1,040,840,996,909,890x
There are more Go moves than atoms in the
known universe.
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“Dazzledits opponent with
creative movesone of which overturned
hundreds of years of Go wisdom.”
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AlphaGo taught itself.
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AlphaZero• Current champion at Go• Best Chess player in the worldü Four hours / rules onlyü 20 million gamesü Both sides of the board
Survival Reflexes
SWERVE LEFT!
SWERVE RIGHT!
HIT THE BRAKES!
• Saw the deer coming
• Knows: Everything
• Decides and acts instantly
AI Drives Better Than You Do
• Can’t see in the dark
• Data = Eyes & Ears
• Slow to decide
• Slow to act
Mitigating Factor:Venison for dinner!
Autonomous AIYou
AI Will Make it Safer to Sleep Behind the Wheel than Steer It
A Simplified AI System
Model Developed by Dr. Michael Wu, Chief AI Strategist at PROS
Big Data
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Machine Learning Algorithms
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Decisions
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Actions
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Measurement and Feedback
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Data source : https://jcmit.net/memoryprice.htm Copyright 2001, 2017, 2018 John C. McCallum
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Mobile Data Downlink Speed (Mbps)
• The world's most knowledgeable product expert
• Who knows you.
• Super-human knowledge of every product ever made
• Always available
• In a store that sells everything.
Amazon wants to remove the keyboard from the buying process
Our vision is that Alexa will be:
40 WPM
20 WPM
130 WPM
Alexa – figure out what these cutting blades are
and send a dozen, pronto.
Technology
Merchant
Technology + Merchant
Wins voice war• Product sales• Search revenue
Loses voice warLoses search revenue
Loses
Walmart.com
Google Shopping
BofA, Merrill Lynch: • 2023: $34B in Sales• 2029: $125B - $245B
Morgan Stanley: Third Party Sales: 20% EBITDA
Amazon Business Financial Estimates
• Carry almost everything• Reach almost everyone• Make ordering easier• Muddy B2B vs retail• Are addictive
Marketplaces
The rise of marketplaces is inevitable
2020: Strategy without Marketplaces
1995: Strategy without eCommerce
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Availability and delivery are being commoditized
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Ian’s Retail / Wholesale
Hundreds ofManufacturers
Thousands of Customers
Retailer or Distributor
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Hundreds ofManufacturers
Thousands of Customers
Retailer or Distributor
Mfr RepsMaster Distributors
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Ian’s Retail / Wholesale
• Core value prop is commoditized• Marketplaces growing rapidly• Multiple, well-capitalized new entrants
Disruption
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All is not lost.
1. Become a technology “fast follower”2. Surround customers with services3. Develop a marketplace strategy
Your Next Moves
Inventory
Asset Protection
Product Data
Warehouse Operations
Profitability Customer Data
Product Data
Marketing
Accts Rec
CRM
Get the right talentGet your technology readyGet educated
Technology Fast Follower
Strategic planningTech stack evalIT vendor meetingsAI expert positionConferences
Strategies Right Now
Surround customers with services
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Service Development
• GM led profit center• Stop bundling• Same rigor as product mgt• Home page “Services” tab
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24 hour pickup lockers24x7 service24x7 tech supportApplication EngineeringArc Flash EvaluationsAsset Tracking Automatic bin replenishmentAward tripsBack-ups at distributorBarcode reorder labelsBearing testing/reconditioningBearing vibe/temp monitoringBespoke flangesBid reviewBid/tender automationBulk RecyclingBus Bar AssembliesBusiness formsBusiness mgmt software/services Cable cutting and assemblyCable testing & troubleshootingCalibration serviceCar registration geo dataCatalog quick online orderCatalog software integrationChain cutting and assemblyCustomer needs analysisCoating
Drop shippingE-ProcurementEDIElectric motors sealed to IP56Electrical distribution assembliesElectrical EngineeringElectrical harnessesElectrical usage analysisElectronic invoicesEmbroidery Emerg generator tank testingEmergency serviceEnclosure BuildsEnergy efficiency consultingEnergy eff. incentive programEnergy savings calculatorEnergy savings tax docEnvironmental testingEnv/reg compliance assistanceeProcurementEquipment financingEquipment rental Export servicesExpress deliveriesExtended credit termsExtended warrantiesExtruded beltsFacility design assistance
Linear shaft/rail cutting & assyLock Out / Tag OutLogistics managementMaintenance agreementsMaintenance/monitoring servicesMajor accounts programMfg/Alter bearingsMarketing automationMarketing collateralMaterial usage trackingMechanical seals overhaulMerchandising supportMobile appsModule assemblyMotor rewindingMotor-control-center bucketsNew mover programOil disposal & recyclingOil fillingOn-site repairOnline bar code label generatorOnline calculatorsOnline account managementOnline marketplace connectionsOnline order trackingOnline orderingOnline repair databaseOnline technical library
Project financingProject review/mgmtProperty sales & leasingPump and gearbox repairPushbutton stationsRecommend contractorsRegulatory notifcationsRemoval serviceRepair hotlineRepair partsReplacement PartsRFP developmentSafety Risk AssessmentsSame day shippingSample evaluationScholarship programSeal production serviceSoftware installationSoftware/firmware controlSourcing for special productsSpecial / bulk packagingSpecial Billing & PaymentState tax formsSteam trap measurementsStockroom/trailer mgmtStockroom design & set upSupplier auditsSupply contract management
Develop a marketplace strategy.
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• Track exposure to marketplaces• Meet with marketplace leaders• Learn from experts• Develop a strategy• Watch out for THE TRAP…
Marketplace Strategy
• Net Income 3Q19 v PY:
Amazon Can Manage Its Valuation via Growth or Margin
+$1.3B
• 3rd Party Sellers, ‘19:
• Take +5% 3rd Party Direct (est):
$160B
+$2.3B
“Your margin is my opportunity.”
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“Third-party sellers are kicking our first party butt. Badly.”
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What if it’s not really about Amazon?
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Business model substitution?
• Capabilities• Expectations• Business models• Paradigms
New
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Digital Film
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2010 2018
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40M
121M
19M
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What if it’s about marketplaces?
One Company eCommerce Site
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A Call to Arms
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“No distributor can beat Amazon”
But maybe we all can.
3rd Party Marketplace
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Distributor Marketplace
YesNo
YesYesYesYesYesYesYes
NoNoNoNoNo
Product SalesDeliver ServicesBuy through any channelOutside salesMaintain relationshipsLocal stocksCost advantage
Distributor-Owned Marketplace
• Electric vs. Gas• New competitors• Hard to recruit
• Services• Technology• Marketplaces
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New Challenges New Ideas
Developing a Winning Strategy is the Opportunity and the Challenge for Great Leaders
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Will you rise to the challenge?
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Kodak Bankruptcy
