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Navigating the Upcoming Recession: How to Stand Out and Stay Profitable

The COVID-19 pandemic has had a significant impact on businesses around the world, including those in the distribution industry. While the industry remained essential during the pandemic, supply chain delays, raw material delays, and other factors meant that many distributors experienced unpredictable supply and high-volume demand. As the supply chain is rebounding, experts are predicting an incoming recession, and companies are left wondering how this new economic climate will impact them. 
 
The Upcoming Recession and Its Impact 

The current economic climate is uncertain, and many experts predict a recession is on the horizon. According to a recent article from Forbes, the pandemic has caused considerable damage to the economy, which has “exacerbated process inefficiencies, communication breakdowns, skill gaps, and a host of other problems that were always present but stayed under the radar.” This in addition to challenges like inflation, geopolitical relations, and labor shortages has created volatility and stress for every industry and distribution businesses are not immune to the effects.  

According to an article by the National Association of Wholesale-Distributors (NAW), during the Great Recession of 2008, wholesale distribution sales declined by 21 percent over a 12-month period. Recessions can lead to a decrease in demand, increased competition, and decreased profit margins. However, there are steps that distributors can take to prepare for and soften the impact. 

 

Differentiation Strategies 

Looking back on how distributors operated during previous recessions can help others anticipate what may lie ahead if forecasts become reality. According to, How distributors can build momentum in a slowdown, during the Great Recession, a small number of distribution companies were able to remain flexible and adapt quickly to changes which led to them gaining market share over their competition.  

 
In analyzing the performance of approximately 40 publicly traded industrial distributors in the Great Recession, we found that 20 percent significantly outperformed peers through both the downturn and recovery, increasing total shareholder returns (TSR) in the decade through and after the recession by an average of 70 percent. (McKinsey & Company, 2022)
 

We’ve compiled techniques that experts recommend for gaining an advantage in a competitive market. Distribution Strategy Group (DSG) recommends that distribution businesses should take steps to manage their finances, including reducing inventory levels and managing cash flow. NAW recommends planning for a reduction in sales, focusing on customer retention, and investing in automation and technology to reduce costs. 

 

By investing in technology and automation solutions, distribution businesses can improve efficiency and reduce costs. According to a study by the DSG, companies that invest in automation and technology are more likely to survive during a recession. When looking to purchase technology, look for those that provide many benefits rather than one solution. For example, implementing WPCRM can help businesses manage customer relationships, improve sales, automate marketing efforts, quoting and BI tools, provide suggested products, and much more. An effective CRM should address challenges and improve efficiencies company-wide.  

 
Diversifying product offerings is a way that businesses can begin to differentiate themselves. There may be a natural expansion of their current product line, or another possibility is expansion by acquiring another company. By offering a wider range of products, businesses can appeal to a broader range of customers and protect themselves from market fluctuations. 
 
Focusing on sustainability and eco-friendliness is another way to differentiate. Consumers are becoming increasingly environmentally conscious, and businesses that prioritize sustainability are more likely to gain customer loyalty. This includes using environmentally friendly packaging, sourcing materials responsibly, and reducing waste.  
 
The Role of CRM in Differentiation Strategies 
CRM software can support these strategies in several ways. By providing valuable insights into customer behavior, businesses can tailor offerings to meet customer needs better. WPCRM goes beyond standard reporting and offers actionable analytics that only transforms sales data into useful information, giving businesses a data-driven advantage, but also acts as an organized central workspace for your sales reps.  
 
By storing customer data and order history in a centralized database, distributors can better understand customer needs and preferences. As discussed in our recent blog, Keys to Leveraging Buyer Behaviors Through Sales and Marketing Alignment, data provided through WPCRM Customer Scorecard provides insight into customer purchasing patterns and can identify gaps in purchases of accompanying products. This data can be utilized to generate sales, rather than waiting for them to find you. WPCRM takes your data and uses AI technology to provide suggested products based on your clients' buying habits – providing your team with the tools to increase sales opportunities.  
 
During a recession, your company should be in constant communication with your customers and prospects. With integrated marketing tools, distributors can create effective, targeted marketing campaigns, build segmented lists of complex business data, and promote efficiency. The WPCRM marketing module allows users to build segmented contact lists based off specific accounts, contacts, and/or sales data, all within one central platform. No email or conversation is lost, and every customer appointment is synced onto your calendar with WPCRM integration to Exchange or Outlook.  
 
Winning a bid can come down to who is able to fulfill needs first. So, being able to start and complete orders promptly is crucial. WPCRM builds and sends quotes using real-time pricing and inventory from your ERP system. It gives sales professionals access to correct pricing and product availability even when they’re out in the field. Using a mobile device or browser, WPCRM lets them create professional-looking quotes on the spot—and convert them to an order. Access to accurate, reliable information is crucial for improving the sales teams’ efficiency. 
 
Distribution businesses must prepare for the upcoming recession by differentiating themselves. Strategies such as offering exceptional customer service, investing in technology and automation, diversifying product offerings, and focusing on sustainability can help businesses succeed during a recession. An efficient CRM can support differentiation strategies by providing valuable insights into customer behavior through actionable analytics, helping businesses provide exceptional customer service and reduce customer attrition.  
 
WPCRM is the fully-integrated CRM built for the wholesale distribution industry. To learn about how we leverage your existing data in WPCRM, check WPCRM for Sales Professionals or contact hello@webpresented.com. 
 

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