Extreme Margin Pressure

We are in the midst of extreme margin pressure for distribution channels. There are three factors that appear to be driving down channel margins across most B2B industries:

• The economic downturn is causing every distributor/channel member to cut price in order to win or maintaion the business
• Globalization – We are truly in a global economy now. The North American market was still somewhat insulated from extreme global competition before the downturn. Now, every customer is looking for cost savings and will consider lower-priced brands from Asian manufacturers since most American manufacturers are bringing in their products from Asia anyways
• The Internet increases pricing transparency in just about every industry. The Internet can wreak havoc with channel margins in industries with low freight costs and high price points

These three factors: The economic downturn, globalization and the Internet make it more important than ever for manufacturers to develop policies that protect channel value-add. If you do not protect channel value-add you will soon find your channel partners selling your competitor’s product