Over the past few weeks, there has been a great discussion in Welding & Gases Today’s On The Edge section about the impact of industry consolidation on GAWDA members’ businesses. If you haven’t had an opportunity to check it out yet, I recommend starting with small distributors’ reactions (here), then moving on to large distributors (here) and finally suppliers (here).
I was somewhat surprised to discover just how many distributors say they like the current trend of acquisitions. Although it is somewhat telling that while 73% of distributors say it will help their sales, only 42% of distributors say they like consolidation (only 35% dislike it). There is a tenor of apprehension when one distributor says, “Although it is a bit disconcerting to watch all of the independent distributors get eaten up by the giants, it also gives us hope and opportunity in our marketplace.”
Hope and opportunity are something also reflected in the view of Brandon Jones, president at Jones Welding & Industrial Supply (Albany, GA), who says he loves the effect consolidation has had on his business. “At one time we had five different distributors in our market. Now it’s us and one competitor,” he says, adding that as his competitor grows, it loses the ability to provide the same level of personal service.
“It’s still about relationships and service,” says Jones. “I know most of my customers. I sit across the table from them when I take them to lunch, or we play golf, that type of thing. If there’s a problem, they don’t have to filter up to the bureaucracy to get anything done.”
Jones says his business is more profitable than ever, and it’s largely due to finding new ways to compete and continuing to develop customer relationships. “You have to know your market, and you have to know your customers. What works for me in my market might not work for somebody up North or out West.” For his market, Jones has found success by carving out a niche selling steel.
“Steel is a different animal than welding supplies. For the most part, price determines where customers buy their steel, whereas there’s a lot more service that has to be factored in with gases. So I can go to a competitive account and say, ‘I know you don’t buy your welding supplies from me, but we sell steel. Can we quote you on your steel?’ That way, we’re able to develop a relationship through that venue, versus just trying to cold call them from time to time on their welding supply needs.”
As consolidation makes the big distributors bigger, niche markets can be a great way for smaller distributors to sweeten the pot and open doors for new accounts. But as Jones says, it’s important to make sure there is a need for those products and services. He says, “You have to know the weaknesses of your competitor, and you’ve got to know their strengths, so you don’t waste energy and money.”
What are your thoughts about industry consolidation? How are you taking advantage of the opportunities created by acquisitions?