What is Channel Distribution & How TechPartners Can Help
Channel distribution helps ensure that sustainable products reach the marketplace in a smooth and collaborative way. It promotes local ownership and experience while still ensuring that the marketplace has access to the products they need.
Not only do both partners benefit, but channel distribution also allows each partner to specialize in their respective areas.
So how do we effectively get to this point?
In this post, we’ll explore the current popular method for building materials distribution and its drawbacks, as well as dive more into what channel distribution is and how it can impact manufacturing and construction for the better.
Without further ado, let’s get into it.
Where We’re At
Put simply, materials-distribution companies procure basic materials, components, and equipment, and then resell them to consumers and businesses. Usually, distributors:
- Connect suppliers with project sites and subcontractors
- Handle logistics
- Keep stock of a complex array of components and materials
- Sometimes provide credit (depending on the region)
According to McKinsey, the segment today represents a high share of both value added (8 to 12 percent) and profits (13 to 17 percent) in the construction ecosystem. But, given the unprecedented disruption most industry leaders expect—especially when it comes to new production technology and the digitization of products—it’s time for the model to evolve.
As McKinsey’s survey revealed, “Distributors could see value erode if no action is taken to overhaul their current business models, particularly in the new-build segment…In fact, 20 percent of survey respondents believe that materials distributors will see the largest decline—or even stop existing in their current form—within ten years.”
This is because many of today’s materials distributors have limited access to new tools, lack education and knowledge when it comes to the application of new technologies, and suffer increased costs for each layer of the classic distribution channel.
Thankfully, there’s a solution.
Where We Need to Go
While there are several different types of business models, we at ZS2 prefer the channel distribution model. By partnering with local folks who share philosophical green building values, we promote local ownership and experience while still ensuring that the marketplace has access to technologies outside of their market.
Successfully moving into channel distribution can mean increases in both profitability and valuation as companies:
- Gain scale
- Consolidate the market
- Excel at demand forecasting and inventory planning
- Lean efficiencies and category reviews
- Meet sustainability expectations re: logistics emissions, alternative building materials, etc.
What makes channel distribution even more effective is that all the above is possible without sacrificing the expertise and value of having a local market expert firmly in place, vs. an outsider coming in and breaking new territory.
What Makes an Ideal TechPartner
At ZS2, we’re adapting to this model with something we like to call our TechPartner program. These partners are typically general contractors, architecture and design firms, and in construction or sell construction products and in a whole will represent ZS2 in their local markets.
When looking for TechPartners, we look for construction and building experts who are innovative, forward-focused, and eager to adopt new technologies to address issues in construction, including product availability, sustainability, skilled labor, and more. They usually have:
- An appetite for progressive and innovative building methods and materials
- A relationship-based business model with close ties to the local market
- Construction consultant experience
- General contractors/architects/off-site construction experts/consultants
- An existing business model that is complementary, e.g. design/architecture services
More importantly though, they feel as strongly about changing the world as we do, in a practical and cost-effective way of course.
Find Your TechPartner in ZS2
When the roadblock to the above is a lack of access to the materials and green building expertise, that’s where ZS2 can help get an organization across the goal line. The end result is an ability to bring the best green building materials and methods throughout each region across North America, while also placing high value on local ownership and experience.
When we find the right TechPartner, we ensure they’re set up for success by providing:
- Collaborative goal setting
- Dedicated channel support and onboarding
- Sales, design, estimating, and installation training
- Automation and lead generation tools
- Marketing and brand integrity with geographical protection
- And more
To explore the TechPartnership Model and how we apply this at ZS2, contact us for more information; we’d love to discuss why channel distribution is the future of sustainable construction and how we can collaborate together.