By Mark Dancer
NAW Institute for Distribution Excellence Fellow
Many distributors are struggling to ensure that their business will remain competitive in the face of disruptive challenges. At a minimum, investing digital capabilities is a necessary strategy for staying competitive. The most important goals involve showing up in online customer searches, building awareness and relationships through social media, and offering customers the opportunity to buy online. Execution is difficult and expensive, and requires creating digital content around products and applications, building social media presence with videos, blogs, and images that tell the distributors’ story, and launching an e-commerce platform to host a credible webstore. Through these investments, distributors hope to transform their business and survive in the digital age.
But there’s a problem. Building digital capabilities alone is not enough. Not by a long shot. Distributors must also shift their cultures to reflect the values of ascendant generations. Distributors have always been about creating local relationships on a person-to-person basis, and this skill is a critical requirement for competing with virtual marketplaces and technology-driven disruptors. Distribution is a people business and distributors create value through human-to-human interactions in the real world. But coming generations, including millennials, want real-world experiences even as they are active denizens of the virtual world. Putting up a webstore and posting videos is just the icing on the cake. To succeed, distributor values must match those of today’s buyers. And in a very real sense, the challenge of changing a culture is much more difficult than spending money on digital technology.
Luckily, there is a solution. Foodservice equipment distributors can learn from their customers that are both part of the next generation and launching businesses to serve the next generation. These customers are the operators of a wide range of craft and artisanal businesses. They come in many flavors, including specialty coffee roasters and cafes, artisanal bakers, healthy food restaurants, craft beer brewers, and distillers of craft spirits. These businesses are small and entrepreneurial and are often overlooked by food service equipment distributors because they do not represent a large revenue opportunity or because they tend to favor used equipment and do-it-yourself installations to save money.
This is a mistake. By going the extra mile to sell, serve and partner with craft and artisanal businesses, food service equipment distributors can learn first-hand about the cultures of millennial-run businesses and the shopping and buying preferences of millennial customers. It’s a perfect twofer for jumpstarting a modern, digitally-powered distribution business that is in touch with changing customer preferences and trends.
To help FEDA’s members, I interviewed the three entrepreneurs and owners of startup businesses —Dan Fuhr of Café Red Point, Sean Buckles of Building Three Coffee, and David McInnis of Nightingale Bread. All three are younger owners: Buckles and McInnis are in their 30s while Fuhr is 42. We talked about their business and personal goals, products and service, community contributions and experience buying food service equipment. These businesses, along with others including a craft brewery, fitness center, paillettes studios, film institute and more, are located in Lincoln Cente—a redeveloped elementary school that once served its community by educating children and now provides gathering space for customers. Their perspectives and experiences offered four relevant insights for distributors that amount to a “back to the future” strategy for distributors, one that is about what it means to be a local and community-centered business in disrupted markets. Moreover, they offer a template for starting programs and policies for transforming any distributor’s culture to compete for years to come.
Update Your Vision For The Digital Age
Before disruption, distributors were the acknowledged masters of local service. Distributors had deep relationships with local customers, understood their product needs, aggregated demand and stocked inventory. And when there was a problem, distributors provided local accountability. Manufacturers couldn’t match the local presence and capabilities of distributors and customers were loyal buyers.
Disruption is negating the traditional value of local presence, and it isn’t coming back. Sean Buckles has responded by engaging local community needs differently. “Some of our customers just want to be in and out to get a cup of coffee on the way to work,” he says. “Others want a specific bean and their coffee brewed as a pour over. This is important, but we are looking to meet other community needs as we deliver our service. We partner with a local rescue mission to run our kitchen. The mission has a catering service run by one of the top chefs here. We have expanded our menu drawing the chef’s awarded-wining skills.”
Dan Fuhr’s restaurant provides tasty entrees for healthier eating and a comfortable gathering space, but views his mission as helping his local community battle diabetes. “I am alarmed by the increasing rates of diabetes and other health issues that can be addressed by better eating habits,” he notes. “At Café Red Point, we give people a better choice for more nutritious and less processed food.”
By serving customer needs beyond product offerings, Fuhr and Buckles build a sense of mission for their employees and achieve a unique reputation and brand in the community. Foodservice equipment distributors may be able to accomplish something similar by helping to enable the community services offer by craft, specialty and specialty customers, or by addressing the direct needs of those businesses. Buckles explains, “I’m am still trying to make it as a business, like many of the others in Lincoln Center. We collaborate with other specialty coffee shops through a ‘disloyalty program’—customers that visit our store are encouraged to try others, and vice versa.”
Fuhr offered, “We are looking for new ways to get people to try us. We’ve tried partnerships with fitness centers and offer our space for group events meetings.”
Can a distributor offer advice or programs to help drive traffic to fledgling entrepreneurs? Can they help with other innovative support to address other needs? By doing so, distributors may help socially active businesses’ and strengthen their own brand in their local community, and perhaps, offer a mission to their own employees.
As distributors race to build e-commerce platforms and virtual transactions, they cannot afford to become numb to the meaningful interactions that can only happen between humans. Millennials may be tech-savvy, but they still want personal service. Just as entrepreneurs gain intense satisfaction by building a successful business from scratch, so should a distributor’s employees feel a personal reward by explaining the value of their products and how they can help the startup business succeed. These interactions and values are the building block of culture. Selling online may help a distributor survive, but failing to nurture human interactions is lethal.
Fight Disruption by Fighting Together
It’s often said that today’s online disruptors, like the disruptive global chains, big boxes, and malls that preceded them, are killing main street. Small local businesses cannot hope to compete on scale. Rather, they must compete on a shared sense of local values, service, and commitment. They must fight together, and they can use help from other local institutions and establishments. Local governments sometimes recognize the value of small businesses and offer training, business advice, and shared resources for basic business needs such as printing and machining.
“We need help with funding and risk,” Fuhr says. “Small organic farms are taking on the community supported agriculture (CSA) model. At the start of a year, buyers sign up for a share of what the farms produce and make scheduled payments. As the crops come in, they come and pick up their share. If bad weather or other problems limit yields, they get less. If conditions are favorable, they get more. Risk is shared, and buyers help sustain growers that are committed to organic, farm-to-table crops.”
Without those relationships, operators are forced to find alternative sources. “I send my people that should be serving customers to Costco and Trader Joe’s because I can’t get the healthy ingredients I need from distributors,” Fuhr says. “Other businesses like mine must have the same problem.”
In fact, Buckles recognized the same need. “We buy our coffee globally and have long-term relationships with growers that offer the beans we need for our specialty coffees, and that have a compelling personal story. For 11 years, we have bought beans from one farm in Guatemala. She’s a single mom and taking care of her mother. That’s a story that is worth telling. Telling her story provides inspiration for our business and the experience we offer our customers.”
There are innovation opportunities in these comments for distributors acting individually and perhaps together. One out-of-the-box ideas is to build something akin to a co-op supply service that could offer a wide range of products for all craft, artisanal, and specialty products in a community. This service might offer foodservice equipment and additional products related to operating in a commercial space. This might include products like light bulbs and janitorial supplies, and services including electricity, water, and waste disposal. Payments could be set up by shares, in a method similar to a CSA model.
By banding together to support the entrepreneurs, the service would automatically align on values and send the message that we are here to supply you with products, delivery, utilities and fair prices, because you help our community with your products, customer experiences, and social contributions. To run successfully, this co-op supply business would require the expertise of distribution and logistics professional and the values based on helping human-focused entrepreneurial businesses succeed. It would not compete directly with online disruptors, but might succeed by enabling an alternative that is community-based and locally run. Farfetched? Maybe. But in any case, offered here as “food for thought!”
Craft, artisanal, and specialty operators will succeed not by defeating Amazon and other technology-enabled disruptors, but by offering a counterpoint. As virtual channels grow, the difference offered by craft, artisanal, and specialty channels will be more and more distinct. They will be recognized and acknowledged, by their customers and communities. They will win by being better at being different.
These entrepreneurs are the natural customers of foodservice equipment distributors—or they should be. For distributors, serving these customers is not just about selling products and receiving payment. Rather, the value in nurturing and supporting them is strategic. Distributors are in the fight of their life with online disruptors. They must innovate to survive, but true out-of-the-box innovation does not come naturally to distributors. By working with craft, artisanal, and specialty customers, distributors will gain new insights on innovation and experiences that will help with new ideas and a new culture of innovation. It’s a tough fight, but with important gains that can help distributors be different by being local, even as they build out the e-commerce and digital capabilities that are equally essential for survival