How wholesale and distribution businesses can survive this recession

Maintaining profitability in the wholesale business.

The UK bank governor, Andrew Bailey, describes the outlook for the next two years as “very challenging”.

Businesses face rising energy costs, price increases from suppliers, reduced consumer spending, hiked interest rates and a lower availability of new financial capital.

Indeed, loans for investment or simply to keep a business afloat are harder to obtain, as investors are wary. While higher operating costs often need to be passed on to customers – a tough proposition at a time when customer loyalty is critical.

The Bank of England is hedging on the current downturn not being the UK’s deepest but it could be the longest in a century. This recession could last until mid-2024 and that means companies need to act now and knuckle down for the long-term.

What opportunities does a recession bring?

It doesn’t have to be all doom and gloom, however, businesses can both survive and thrive during a recession. Plus, those that do often come out stronger on the other side. After all, if an SME can flourish during a downturn, it can certainly flourish during a boom.

To cite famous recession survivors, Kelloggs came of the Great Depression in the 1930s by investing heavily into radio advertising and creating the “Snap! Crackle! Pop!” slogan in 1932 which made it and Rice Crispies a breakfast staple. FedEx emerged from the 1970s with Fred Smith’s delivery concept becoming a pioneer with its tracking service and real-time updates. Lastly Lego came out of 2008 with all-time profitability highs after shifting more towards global markets as its home market of the US faltered.

Yes, there are opportunities in a recession. It’s a chance to thoroughly review and assess, to research and explore new markets, to consider new partnerships, mergers and acquisitions that open new routes to market and profit. Indeed, some of these opportunities might not be apparent or present themselves when economic times are bountiful.

Review efficiencies

During periods of growth and success it’s easy for cost-control and processes to get out of control. Slower periods are a perfect time where costs and processes can be reviewed once more. There’s time to negotiate with suppliers, assess employee skills and training, analyse work streams to make improvements, and investigate new tools such as technologies which help to automate, augment and streamline processes. Costs can be reduced, and productivity increased.

New markets and partnerships

The pandemic was an example of finding new avenues for sales, or new product lines that suited a changing economy. Businesses started to explore adjacent markets. For example, catering companies were offering hygiene products. A new partnership, whether with a new supplier or complementary business can add advantage or opportunity. Though somewhat unnerving during a recession, it’s time to be brave and consider a strategy of partnership, merger or acquisition. Amalgamating a competitor or peer business again adds new markets and opportunity. In a recession, the investment may be valid.

Investing further in online presence

Businesses that are already successful in their markets may not have yet pursued an aggressive e-commerce approach. Even if they have, the speed technology and consumer habits change mean there are probably new ways or new platforms available to reach more customers.

Take advantage of government incentives

With high interest rates, public sector funding initiatives may provide an alternative access to capital. New incentives or tax-breaks are likely to become available and some already exist post-pandemic. For example, the tax super-deduction is available until 31 March 2023. This scheme encourages companies to invest in productivity enhancing assets to the tune of reducing tax bills by 25p for every £1 invested. Investment in technology tools such as ERP software qualifies for this scheme.

What are the key strategies to growing a business during a recession for wholesalers and distributors?

Assess and access all channels

In a time of recession companies need to research, analyse, and action all routes to market, new and old. Some products and channels may need to be dropped; others adopted based on findings. Investment, of time or other resources, should be funnelled to profitable routes to market. Multi-channel marketing is one way to spread risk. Improving online presence to access all markets and reach the most customers with product offerings is essential.

Brand building

Traditional and online marketing strategies should focus on building on brand recognition and credibility. Keeping customers informed and engaged is vital to galvanise brand loyalty. ERP software manages all business processes, including customer relationship management (CRM), and is vital to ensure that a customer’s needs are fully understood, and relevant promotions are distributed.

Engage new tools

A recession is a great time to make changes and improvements, and to implement new process management and cost-saving tools across a business. Technology is at the heart of this as it aids better and faster decision making. Adding new tools and training is great way to show employees progress and to give them focus away from negativity.

Implement cloud ERP software

One such tool to consider is an ERP software solution. Such end-to-end products encompass every element of a sale, from lead and order booking to stock control, dispatch, and invoicing. ERP software is becoming invaluable to business managers needing to analyse every aspect of a transaction to leverage savings, operating efficiencies, and identify new markets.

Cloud-based ERP means access and visibility whether on site or remotely. Home-based staff can be just as efficient and offer cost-savings to businesses. ERP software expands any multi-channel efforts, for example, it seamlessly integrates with eCommerce shopping channels such as eBay and Amazon. Automation of processes via ERP software means that more customers can be served using less resources, allowing managers to effectively allocate or review every resource at their fingertips.

In OGL Software’s recent profitability research focusing on wholesale businesses, the top three benefits of adopting ERP emerged as; 1) Improve efficiencies by removing duplication of work (45%), 2) Reduce admin time and improve accuracy of information (44%) 3) To achieve growth plans without taking on additional overheads (43%).

One OGL Software client adopting its Profit4 cloud-based ERP software, Anderson Electrical, says “Profit4 ticked every box for us in terms of time savings and efficiency, which would ultimately result in monetary savings that we could reinvest in the business.” They added, “we’re also buying and selling at the right price because the system tells us.” Anderson Electrical is a family run wholesale and distribution business with a 4,000 sq. ft location. In the first year with Profit4 they achieved a record turnover hike of 40% which they directly attribute to the software adoption.

A recession is a business challenge much like any other. Of course, it may affect every aspect of a business and can be a very severe threat. However, analysed and treated like any other threat and coupled with identifying every opportunity that may arise, survival and indeed success can be achieved. This may not be an easy recession, but strong decision making supported by technology that provides full visibility of all business processes, and perhaps some brave moves could protect profitability.

About the Author

Gary Haynes is Chief Financial Officer at OGL Software. OGL is a leading provider of ERP software, helping UK businesses buy better and sell smarter. We are incredibly proud of our 45 year heritage in the industry and during that time we have contributed to the growth and success of thousands of companies by helping them harness the power of technology to drive their business forward.

Featured image: zapp2photo