D&H Financial Results Suggest Company’s Differentiated Strategy Is Working
D&H Distributing recently posted strong financial results for fiscal year 2019. Revenue for the year grew 17% over fiscal 2018. Sales in key categories did even better. Cloud solutions sales jumped 107% year over year, while network security sales climbed 77%.
That’s impressive for a growth for a company that caters to “tenure-tested” channel partners that emphasize hardware reselling along with managed services and more.
So, what is D&H Distributing doing to grow so quickly? The answer is embracing a business model that is transforming several industries today. Take food retailing. While traditional grocers have been buffeted by retail and tech giants Amazon, Walmart and Costco, one food retailer in particular is upending the grocery business like no other. It’s German upstart Aldi, which invites consumers to shop differently, just like Apple co-founder Steve Jobs did two decades ago.
Aldi has built a cult-like following, according to CNN. It does so by shaking up “the shopping experience” that many of us know today. Instead of massive food emporiums the size of Costco or Walmart, which typically run as large as 100,000 sq. ft. or more, Aldi stores are just 12,000 sq. ft. in size. What is more, Aldi stocks just a fraction of the number of SKUs that typical grocery stores or big box retailers do — 1,400 items compared to 40,000, typically.)
These differences translate into business value. How? Think customer experience and efficiency. Consider toothpaste. At a traditional grocery store, you will often find two-dozen different varieties of toothpaste for sale. At an Aldi store, you will only find a relative handful.
This provides Aldi an opportunity to not only reduce customer decision fatigue and operate more efficiently, it also allows the company to get closer with its suppliers. This is the same way that D&H Distributing stocks its shelves.
While most broadline distributors try to be the supermarkets of tech products and services, D&H has “the luxury of being line-limited,” says Dan Schwab, co-president at D&H Distributing. “Typically, we have just three or so vendors in a category.”
As a result, D&H can promise its vendor partners greater penetration within the D&H base of VARs and managed services providers. This, in turn, can translate into better deals with vendors. The strategy also reduces support complexity. (D&H salespeople simply have fewer brands and products to learn, Schwab suggests.)
Like Aldi, Schwab believes D&H can offer greater customer intimacy than its larger, more broadline counterparts. To back his claim, Schwab notes that his company hosts more regional events annually than most. (Next week, for example, D&H expects as many as 1,000 local partners to attend the D&H 2019 mid-Atlantic conference in Hershey, Pennsylvania.)
Another reason D&H is prevailing is timing, Schwab says. His company is strategically positioned to help the men and women who sell tech solutions to small and medium-size business, which have significantly ramped up the amount of money they spend on tech goods and services.
The increase has helped D&H and other distributors defy expectations.
“Five years ago, people would have thought cloud would disintermediate distribution from the landscape because customers could go direct,” says Schwab.
Theories and expectations aside, D&H found that end customers had little appetite for …