Distribution Yesterday, Today and Tomorrow

April 15, 2003
Service is the key in distribution today.
Ledger annually looks at the working relationship between distributor and locksmith. The distribution idea was originally developed to fill a need for manufacturers. Instead of supplying thousands of individual customers who often required small specialized orders, a manufacturer could ship to a much smaller group of distributors who then serviced customers on a more local level. The distribution system was good for both manufacturer and customer. Distributors carried a large enough stock of product so customers could quickly obtain what they needed without waiting for a manufacturer to build it. Distributors also understood the requirements of customers in localized areas and could better predict what products would be ordered over the long range. Armed with this information, manufacturers kept their factories running at steady, economical production rates.A manufacturer to distributor to locksmith system worked smoothly for many years. Either by planning or circumstances, retail locksmithing has always been somewhat of a closed society. Quality products sold in our industry were normally available only from locksmith or builders hardware distributors. Lumber yards and hardware stores usually carried lower grade lock hardware more as an afterthought than as any serious competition for locksmiths.An evolution has taken place during the last decade as home centers have gradually supplanted lumber yards and even caused many smaller hardware stores to cease business. Most of these centers are owned by large companies who also own numerous other home centers across the country. Their sales volume quickly caught the notice of lock manufacturers who saw a new way to sell more merchandise. Home centers now sell name brand security products at deeply discounted prices. But the name brand security products sold in home centers are often not identical to products made by manufacturers for the locksmith and builders hardware field. For example, inner parts may be plastic instead of metal, or products may be low-cost imports with name-brand labels. If volume sales at home centers are any indication, the end-user apparently is primarily interested in price and automatically depends on the name brand marking as being the same quality product that locksmiths sell. This is the situation we find ourselves in today.In preparation for this article, Locksmith Ledger sent a questionnaire to many important locksmith distributors across the country. The following are our questions and the answers from the distributors.Where do you see your companies' direction going in the next 5 to 10 years?Most answers can be summed up in the word "service." Distributors are doing their best to broaden their inventory. With a larger inventory, there is a better chance of immediately filling customer orders from items in stock. Distributors are offering fast service, such as next-day delivery of orders, and are investing in new technologies. Internet sites and fax machines to simplify placing an order plus better computer systems for order handling and inventory control are just some ideas.How has your role as a Locksmith Distributor changed in the last 10 years?"...We sell the same products as a hundred other distributors, at roughly equal prices. It is only through better customer service that we can distinguish ourselves." This was a quote from one distributor and echoed by others. Most distributors agree that "value added" services will be increased during the coming years. Among these services are informational programs such as new product seminars and better-trained staff. Another distributor said his company is one of the few that exclusively supports the locksmith trade. This same distributor did not see its role as changing much at all. The company's top priority continues to be helping locksmiths to grow their business.What types of new products have you added to your inventory during the last 10 years?Everyone mentioned adding electronic products. Electronic locks, video systems, CCTV and diagnostic tools for automotive work were just some of the items listed. One distributor specifically pointed to home centers as affecting its business. Their sales of residential hardware have "eroded" as more and more home centers have opened nationwide. This same distributor is maintaining sales by selling more quality imported locks and putting additional commercial hardware items in inventory.Has there been a purchasing change by locksmiths during the last 10 years? Distributors say that locksmiths today generally are not stocking as much inventory. Distributors think of themselves as being used as stocking warehouses. Locksmiths routinely order product for each job and expect fast delivery. Distributors are meeting the challenge by extending sales hours, providing Internet sites for off-hours ordering and raising inventory levels so product is in stock. What do you see as the overall direction of distribution? According to one distributor, "Distribution has got to provide better and more efficient service to the locksmith." Some distributors have opened regional warehouses or formed relationships with distributors in other areas primarily "to achieve economies of scale," as one distributor described it.
Distributors are also finding niche markets such as having a full stock of all products from a few manufacturers instead of having a full-line inventory of popular locksmith items. One distributor described the problem caused by some distributors who may have broadened their sales base by selling product directly to the end-user. This can raise a conflict between the trade professional and the distributor over end-user accounts that the locksmith formerly serviced.Education of locksmiths is also a priority mentioned by many distributors. New electronic products require additional training. Trained personnel and seminar presentations are expensive. Distributors report that they are trying to find ways to provide locksmith education without passing the cost on with higher prices.DISTRIBUTORS IN THE FUTURE
The locksmith distribution system has been in existence for decades with few changes. This system will remain long into the future and will withstand assaults from home centers or whatever comes next. The only question is how it will evolve to meet any and all challenges.
A beginning locksmith should compare several different criteria when choosing a distributor. There must be an acceptable balance between services offered, knowledgeable distributor personnel and pricing. Value-added services and distributor know-how will be of prime importance. As an example, a new locksmith who does automotive work may need good advice much more than the best key blank pricing. Needs from a distributor can change as a locksmith becomes more experienced. Jobs can become larger and bids more competitive. A much closer relationship with distributors will be necessary. With experience comes knowledge, so availability and pricing may become more important than distributor know-how.Basically, a distributor is in business to sell merchandise. If a majority of security products are sold by home centers, then locksmith distributors probably will be selling less. One distributor described a plan he uses to keep business in the locksmith sector. When a locksmith is bidding on a job where price is a real issue, the locksmith and this distributor work together. The distributor keeps his pricing as low as possible and bids directly with the end-user on the product needed while the locksmith bids only for labor charges. While locksmith profit from product sales is lost, the job can be saved because of a lowered product bid. The locksmith wins a labor job he may not have otherwise gotten. Bold thinking such as this will be needed in coming years as the battle intensifies for customer business. Carefully choose a distributor who stocks the products you use and has both the technical expertise and the vision needed to help expand your locksmith business. It is an important choice to make.


By Security Hardware Distributors AssociationWhat lies in the future of distribution in the security hardware industry? How has the role of the security hardware distributor changed and what will these distributors look like in the future? Finally, what are the greatest challenges facing security hardware distributors and the industry as a whole? To attempt to answer these daunting questions, let's first look at how the industry has changed before addressing how it will change.

Historically, security hardware distributors were primarily an inventory and logistics provider for the industry's manufacturers and order-takers for their customers. However, this role has changed dramatically as technology and the complexity of the industry have increased. Customers are demanding more from their security suppliers and the products they offer. Traditional distributors, who inventoried product and fulfilled orders, have morphed into marketing partners, financial advisors and product experts.

Manufacturers can now turn to logistics providers such as United Parcel Service and Federal Express, but they have not. Why? These days, in addition to their fulfillment role, distributors now serve as consultants for their locksmith customers, which demands skills that a pure logistics provider cannot offer. Value-added services have expanded to include:

Sales and product recommendations.Technical and business education.Training on collections and financial management.Custom marketing materials.Technical assistance and troubleshooting.Customers and manufacturers alike are more pressed for time and resources and are looking for a true partner to assist with marketing, product education and training and service. The products sold through distribution are expanding at a rapid pace. As a result, the distributor is becoming more significant as the conduit between the manufacturer and customer, keeping the customer informed and educated on the newest products being produced. The security hardware distributor operates as a sales and technical consultant.Though eager to supply these advanced services, many security hardware distributors are struggling to find a way to be fairly compensated since the market for these "new distributors" is evolving day-by-day with no real pattern to follow. This disconnect between the standard practices of price shopping and the new services being offered by once-traditional distributors beyond what their traditional prices included has also increased the role and importance of the security hardware distributors, who are now in a position to redefine the industry and its practices. This cloudy and rapidly changing present hints at a very exciting yet uncharted future.

Distributors will play an even greater role in the future as they become more focused on products requiring technical support and application knowledge. Manufacturers will rely on distributors to provide regional technical support for their increasingly complex and technological products to their end users. The distributor sales force will become more technically and technologically savvy and will provide an invaluable consulting service for products and applications.

The vast array of products sold through security hardware distributors currently includes electronic security systems, electronic access controls, and mechanical and other security products. However, as new products and technologies are introduced, the distributor will be there with expanded inventory and product knowledge. Products sold through distribution will continue to expand at a rapid pace. As a result, the distributor will become increasingly more significant to the manufacturer and customer. The greatest issue facing this industry will be valuing these added services. Distributors will need to lead the way to get manufacturers involved to provide the best product and services to the marketplace at the best pricing for all involved.back to top