1. Resource Library
  2. General Finance and Accounting

In Wholesale Distribution, Low Profit Margins Leave Little Room for Error

  • 2 min read

Due to slim profit margins, you can’t compete with Amazon on price. To stay in the game, you must improve efficiencies and customer experience.

The gross margin for building materials and construction wholesale distributors is 13.5 percent.

With such slim margins, you’re under pressure to turn over inventory quickly. If it sits for too long, the carrying costs and interest rates eat into your profits. Analysts predict that the Federal Reserve will hike interest rates over the coming year – after almost 10 years of historically low, long-term rates. As the cost of borrowing increases, it will be more important than ever to optimize your operations so that you can control your costs and ensure that cash coming in is available as quickly as possible.

This includes taking a hard look at your AR inefficiencies and finding ways to streamline your processes – while simultaneously giving customers a higher level of service.

Small businesses have plenty of choice when it comes to where they can buy wholesale goods. With just a few clicks, they can get whatever they need on Amazon. Not only is the Amazon online shopping experience convenient, but the products are often priced lower and delivered faster.

"By 2020, the customer experience will overtake price as the #1 brand differentiator."
– Walker

But with thin margins, you may not have the option to compete with Amazon on price. Instead, your corporate performance depends on cost advantages based on operating scale, efficiencies, and productivity.

In an industry where switching costs for the buyer are low, the customer experience can make or break your profit.

To learn more about the challenges preventing Wholesale Distributors from achieving financial goals, grab a copy of our ebook.

About the author

Katie Canton

Katie Canton has been helping companies develop and implement successful social media, content marketing, and marketing communications strategies for more than 10 years. Since joining VersaPay in 2018, she writes on topics such accounts receivables automation, Customer-Centric AR, collections management, and fintech.

Always stay up-to-date


Join the 50,000 accounts receivable professionals already getting our insights, best practices, and stories every month.