Janitorial Distribution Margin Compression

Jul 25, 2019
 

 

Hello, sales pro, Adon here. In the last video transcript, I talked about the difference in the ISIS report of 2014 and 2016 in details. I also spoke about how the sales force is changing in such a way that the outside sales force is shrinking while those inside are expanding. If you haven't seen the video or read the transcript, I will advise you to do so as it will further enhance your understanding.

 

 

  • In the janitorial industry, over 50 percent of distribution sales are paper and garbage bags.

 

  • To make up for the loss and maintain the status quo within your margin, you have to increase sales by 36%. This is no easy task, but it is something that must be done.

 

  • Distributors need to analyze how they can create a competitive advantage because the survival of their industry depends on it.

 

  • From 2014 to 2016, the distribution industry witnessed another 3% decline.

 

This data stated below discloses the reason behind the decline the janitorial distributor industry is currently facing.

 

In the janitorial industry, over 50 percent of distribution sales are paper and garbage bags. In 2012, the average gross margin for a distributor for paper and garbage bags was 30%, and by 2014, there was a 4% decrease. This means there was a decline from 30 percent to 26 percent in the duration of 2years.  From 2014 to 2016, the distribution industry witnessed another 3% decline, bringing it down to 23% gross margin on paper. What does this mean? This means that from 2012 to 2016, which amounts to four years, the margin has been compressed by 7%.

 

But here's the shocker. Assuming you make a 30% margin on any of the products you sell (like brooms, or brushes), you will equally lose margins on paper and garbage in between the process. So to make up for the loss and maintain the status quo within your margin, you have to increase sales by 36%. This is no easy task, but it is something that must be done to stop any further decline in the average gross margin.

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You need to look at the fact that there is a sharp decline in the janitorial distribution industry, and this decline mostly comes from crappy sales and crappy infrastructures, so many distributors run their business on.

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Distributors also need to analyze how they can differentiate and create a competitive advantage because the survival of their industry and business depends on it.

 

Be Insightful, Adon 

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