If we are to believe what we hear and read in the press, we are about to experience a period of growth as people go back to work and sectors such as hospitality, events, and conferences open up further.

Those who have successfully managed to navigate through this crisis deserve to be congratulated. How some would still be trading now had the Government not provided life support, is open to speculation.

Sympathy must go to the distributor owners and the staff who were unable to continue. Also, to those made redundant to allow businesses to continue to trade. Some made the decision to sell up rather than fight another day, possibly encouraged by buyers with an eye for striking a favourable deal after a significant drop in sales since March 2020.

The pandemic punished badly-managed businesses that had poor leadership; too much reliance for their sales on a specific market sector particularly affected by COVID; or were milked during the good times and left unprepared for the challenges ahead. No one was prepared for what lay ahead. I recall Warren Buffet’s now infamous comment during the last financial crisis: “Only when the tide goes out do you discover who’s been swimming naked.”

Now that the landscape has changed, and whether new distributors emerge or existing ones return leaner or bigger through acquisitions, all will face the ongoing challenges of trading post Brexit and the rising cost of freight from the Far East, which will inevitably feed through to ramp up prices. So, what size of distributor will seize new opportunities in this new landscape?

From a small distributor’s perspective, the big guys have all the advantages: greater buying power, more finance, bigger value orders, established accounts, marketing resources and momentum. What the small distributor might not see is the legacy and expensive infrastructure costs and a bias to protect the status quo and not have to make difficult and unpopular changes. The costs of employing and managing staff can significantly affect the bottom line. For many big distributors who had to make redundancies last year, the attractions of being leaner and possibly more profitable will far outweigh their previous desire to go for growth and accept the associated costs.

From the big distributor’s perspective, the small guy can work on smaller margins, which would be unprofitable for the big distributor. The big guys must rely on established relationships and their reputation. In this climate, many end user buyers may be tempted to switch supplier. Anecdotal evidence suggests that significant marketing budgets have been accrued since 2020 and we are likely to see a marked uplift in promo spend for the rest of this year and into next year. The challenge for all distributors is more likely to revolve around disrupted supply chains, new border controls and revised working practices which might persuade procurement to seek out new suppliers.

Many hold the view that the small distributor can provide a level of service that the big distributor cannot offer. Perhaps this is due to their greater flexibility and willingness to go the extra mile to win the business and to respond faster. Certainly, owner distributors who are customer facing may have greater experience, maturity, and knowledge than those representing the big distributor.

Charles Darwin’s famous theory of ‘survival of the fittest’ is interesting, as his definition of ‘fittest’ did not conclude that it was biggest, fastest, strongest, richest or smartest but he hypothesised that it was the most adaptable. In business terms, this would relate to how flexible and responsive the business is to a change in the marketplace.

Those small distributor businesses that can maintain the flexibility that provides a leading edge can take their business to the next level provided they can call upon the necessary resources to service the larger deals and compete head on with the big distributor.

The pandemic has forced companies to think in a different way about how to run their business in order to thrive and flourish. To achieve this, they need to think and act differently to the way businesses have traditionally functioned.

Technology and outsourcing certain functions of the business are key tools to improve efficiencies and profitability. If the pandemic has taught us anything, it is that, having been forced to work from home, the small distributor wants to achieve a better work-life balance and if profitability can be improved at the same time, then it is a total win-win situation. Those who achieve this will be the true winners.

By Paul Green, MD of Galpeg. For more information about Galpeg, visit www.galpeg.com.