Tech for Distributors' Customers
Q1 Distribution Tech Quarterly Report
Hi everyone,
Big news this past week: Dot Foods, a $10B food redistributor, is partnering with Choco, a digital commerce solution in the food service industry.
We see more and more of these partnerships happening – a distributor helps proliferate a technology solution to their customer base. We highlight some additional examples for this partnership model below.
And, this week concludes our Q1 VC coverage – with our State of Distribution Tech quarterly report – for premium subscribers.
Distributors Proliferate Tech to their Customers
The Dot & Choco partnership isn’t the first kind of partnership we’ve seen in this model. Another example in food service, Gordon Food Service partnered with Meez and also invested via their CVC Relish Works.
Jumping to the building material and construction industry, we saw SBP partner with TOOLBX last year. And, Watsco Ventures invested in Housecall Pro and Ferguson Ventures & Superseed (Reece’s venture arm) invested in Bluon. Ferguson also invested in Payzer which was acquired by WEX last year for $250M.
In industrial, we’ve seen MSC Industrial partner with a software tool for machine shops. In auto, Genuine owns Napa TRACS. The list goes on and on.
Distributors distribute products, so why not also distribute a software solution?
The exact deal structure and economics vary depending upon the industry and the type of software solution; however, at a high level, these partnerships are relatively straightforward: a billion-dollar B2B distributor and the tech startup share a common customer base – the distributor helps the tech startup accelerate customer acquisition. The startup provides a useful solution to the distributor’s customer – earning the distributor goodwill from the customer, because the customer appreciates that the distributor has its best interests in mind.
Keys to Success in the “Gray Label”
We like to call these kinds of partnerships a Gray Label of the tech solution. A Gray Label is a co-branding of a tech startup’s software by the distributor. However, the key to successful proliferation of the software comes down to people. And incentives.
After years of technology advisory in B2B Distribution, what’s the biggest asset I’ve come to identify within distributors? The people.
Distributors have thousands of salespeople who have personal relationships with customers and suppliers.
The distributor’s people need to trust that the solution will provide value to the customer and there needs to be proper economic alignment for a sales rep to go out of his or her way.
State of Distribution Tech Quarterly Report
And, now, without further adieu … the moment we’ve all been waiting for!