Hardware distributors face many challenges, whether they work in aerospace, construction, or any other industry. This is especially true for startups. Here are some of the most common challenges distributors can face.
Concentration and Competition
While there are many companies wholesaling hardware, the bulk of sales are concentrated in a few brands. This means that a few companies are taking a large portion of the industry’s profits, and the rest are fiercely competing for the scraps. The result is that smaller companies don’t get the dispensable income they need to promote their brand, so they go overlooked. To overcome this challenge, companies need to establish a healthier and optimized cash flow. This gives them an advantage in the competitive world.
Inventory optimization is aligning your hardware supply with what customers actually need. In other words, you should only order what you need, when you need it. This is easier said than done. Fortunately, there is optimization software available to help you take out the guesswork of this task. These can alert you to items that have a high demand and when to order them. However, because of the concentration, there is still a chance that these items will not sell. This can make industry optimization challenging. Whatever you do, make sure that you don’t overstock or understock your inventory. By avoiding these mistakes, you can maintain a profitable business.
Because your clients will likely be affected by the weather, seasonality is a big issue. For instance, construction companies operate under mild conditions and shut down during periods of severe cold. Meanwhile, the cold increases the need for HVAC and plumbing supplies. Failing to consider these seasonal trends can cause you to buy the wrong inventory and lose money.
If you want to be successful as a hardware distribution company, you need to embrace competition, inventory optimization, and seasonality. While these can seem overwhelming at first, they can help you keep your cash flow healthy and profitable.