What is Trace Data?
Wholesalers provide reporting, known as trace data, to manufacturers to address the downstream visibility challenges that come with selling through the wholesale channel—i.e., knowing what distributors are purchasing your products. Trace reporting typically includes SKU level sales data with customer information like sold-to names and ship-to locations. Unfortunately, this data is not free. Wholesalers charge manufacturers a fee, typically a percentage of revenue, that ranges from 0.5% – 2.0% to access trace data.
In our experience manufacturers have been hesitant to make the investment in trace data due to their inability to receive an adequate return on their investment. However, trace data can unlock substantial value for a manufacturer if it’s used correctly and tied to the manufacturer’s field sales team’s execution. Highlands has made investments into people and systems to create trace sales analytics capabilities that are tightly coupled with our independent distributor field sales strategy. It’s our point of view that manufacturer reps who appropriately leverage their clients trace data have a significant advantage when it comes to growing sales in the ubiquitous wholesale channel.
Uncover Revenue Opportunities:
Our trace sales database contains over 2,000,000 lines of data across thousands of distributors giving Highlands a unique view of who the key distributors are and their relative size. We can quickly match our client’s wholesale trace data against our dataset to identify gaps where key distributors aren’t currently selling their products. We can then prioritize the top distributors to target and create a campaign for our field and virtual sales team to execute a sell in program against. Moreover, with our distributor classification process we can pinpoint what product offerings are most relevant to a distributor based on the end-users they serve.
Identify Assortment Gaps:
Often, we see manufacturers measuring distributor’s performance based on their total sales number; however, that can be a superficial metric that misses high quality opportunities to grow sales. Our ability to analyze trace data enables us to group together like distributors—those who serve a similar end-user base—to create a reference point for what the typical mix should look like for similar distributors. Comparing individual distributor’s sales mix to this reference point allows us to find additional sell in opportunities that our team can execute against ensuring we are capturing the fair share of spend for our clients.
Minimize Distributor Churn Risk:
The B2B distribution channel can be hyper-competitive with several manufacturers vying for placement in the distributor’s assortment and attention with their sales team. We regularly monitor distributor sales performance to identify changes in their purchasing behavior, which helps us proactively manage revenue risk from distributor churn. Our sales team puts those distributors identified as a risk on hyper care, which allows Highlands to quickly identify any challenges with the distributor and create an action plan to recover sales when necessary.
Proactively Manage Channel Conflicts:
COVID-19 and the subsequent supply challenges that followed had significant impacts on the B2B distribution channel’s supply chain. This created a lasting impact on independent distributors’ wholesale sourcing strategy. Highlands internal data shows many independent distributors are switching from a sole source wholesale relationship to working with multiple wholesale partners. Our trace data capabilities give our team a better understanding of their specific account’s sourcing strategy, which enables them to successfully navigate the complexities that come with a multi-sourcing approach.
For example, a distributor may show a decline in sales with Essendant, indicating a need to engage the distributor and the Essendant account representative to recapture the lost volume. However, the distributor could be moving their business to SP Richards as part of their multi-sourcing strategy. Without that knowledge there is significant channel conflict risk where SP Richards could view the manufacturer rep as working against them to keep the business with Essendant, which is a damaging claim that doesn’t necessarily match the manufacturer rep’s intent. Furthermore, the manufacturer rep can build credibility with the distributor by proactively knowing this information and identifying ways to support the distributor as they adjust to their new sourcing approach.
Dylan Huggins Director, Strategy & Analytics