< Industry Views >

The Differences Between Distribution

and Wholesaling

by David Sheets senior VP-chief sales and marketing officer S TL Distribution N.A.

>_boo>_{ks f}> IN THE CBA MARKET, THE TERMS “DISTRI bution” and “wholesaling” are used interchangeably to describe a supplier, or middleman, who buys rom publishers and manufacturers and then resells them to retailers. And while the supply-chain function of the distributor and wholesaler are similar, there are some important differences retailers need to know to make their businesses more profitable.

Wholesalers bridge the gap in the supply chain between the supplier and the retailer. Wholesalers provide a service. The strength of the wholesale model is the tens of thousands of titles that can be purchased from one source. The most important factors in determining whether to use a wholesaler or which wholesaler to use are:

• Selection (or fill rate)

• Speed (how fast you can get your selection from order time— wholesalers average 2-3 days, publishers 7-10 days)

• Service (low minimum orders to qualify for free freight) Distributors provide another important service to the industry by representing product lines. Distributors take publishers’ and manufacturers’ products lines and combine them with the best services of a wholesaler.

• Discount (selection, speed, and service at publisher discount)

• Depth (plenty of inventory to draw from)

• Direct representation (sales team calls on clients)

The ABA has long embraced the distributor as an important way to supply books to the market. Some of the leading players in this sector include Publishers Group West (PGW), National Book Network (NBN), and MidPoint. Publishers large and small are using these “consolidators” to sell and distribute their books.

This phenomenon is increasing for three reasons:

1. Retailers want to use fewer vendors, not more.

YOUR VIEW COUNTS 2. Retailers are free to spend more time with their customers rather than more time receiving, paying invoices, and processing returns.

3. Publishers can consolidate their sales and distribution to drive costs from their supply-chain management.

The CBA market has

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been slower to see the benefits of the distributor as a long-term solution. There have been spurts of activity in the past. In more recent times, GL Services and STL Distribution (formerly known as STL/Faith Works) have become important vendors of this supply-chain solution.

Wholesale replenishment business is key to a healthy retail business. Leonard Shatzkin, in his excellent book, The Mathematics of Bookselling (Sun River Press), shares his own research of booksellers who buy into the wholesale replenishment model and see their turns go from two or three times to six or more times. The result is a healthier business with more choices for customers, more staff time devoted to helping the customer find what they want/need, and more cash flow.

Shatzkin spends considerable time talking about the importance of inventory and how important it is to measure how quickly you can turn the inventory dollars on your shelves into cash flow for increased investment. He says that inventory in the average stores represents more than 65% of your investment, or more than four times more than any other investment you make. It makes sense to maximize the turns by using the supply chain to do so.

The new paradigm combines wholesale replenishment with publisher distribution. This concept brings the best of both worlds to retail—selection, speed, and service—along with discounts and freight options, all combined in an easy one-source solution. Retailers can conveniently place one order with one supplier, receive one shipment and one invoice, and are provided one address for returns. Retailers can order many types of products including products from the largest publishers in the industry at competitive wholesale discounts along with some products at publisher discounts, while always receiving the maximum discount by vendor. Finally, the entire order combines to give the retailer the best deal on freight and payment terms.

STL Distribution offers both the wholesale model and the distributor model in one source to retailers. Some distributors offer only a handful of publishers in one box, which doesn’t allow for booksellers to conduct supply-chain management across the wide range of products. In addition, other wholesalers offer order consolidation but don’t offer replenishment on the wide range of product that retailers need (i.e., gifts, remainders, homeschool products, etc.). And most wholesalers will match any price available from other wholesalers.

In the end, selection, service, speed, and your satisfaction will make the difference for your store. R+R

The Official Magazine of CBA