Distribution in an online world

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About half the Riptide team are, from left, customer service leader Diane Best, Doug Saunders, business analyst Jonah Dwyer and Sian Smith.

New master distributor gears business for changing realities

By Simon Blake

The advent of the Internet and the widespread and expanding adoption of online shopping has changed the way many homeowners buy products for their home. This, in turn, has caused significant challenges for traditional wholesalers, retailers and even contractors. A new Ontario-based company is positioning itself to thrive in this challenging market.

Riptide Fulfillment Corporation is a new master distributor serving traditional distribution channels – a “wholesaler for wholesalers” and online retailers with finish plumbing products from select well-known brands. It operates from a new 56,000 sq. ft. facility in Milton, Ont., 20 km west of Toronto. “This is distribution central – a perfect location right off the highway,” remarked general manager Siân Smith.

Smith, and director of operations Doug Saunders, took possession of their building in October and set out to build their “fulfillment centre” from scratch.  They made the first shipment in February.

The spacious 56,000 sq. ft. building allows plenty of room for expansion.

 

Working with wholesalers

As a master distributor, Riptide is working to establish long-term partnerships with wholesalers, with several on board already. Wholesalers typically deal directly with manufacturers, but when one or two parts are back ordered and holding up a job, they can source it through Riptide.

They might also use Riptide if their customer wants a Kohler product, for example, but they don’t carry that brand.

The e-commerce fulfillment business is not for the faint of heart.

“We are in the ‘emergency shipping business’ where accuracy is critical along with guaranteed same-day shipping,” said Smith. “I am helping wholesalers complete projects, but not necessarily by shipping them 24 urinals. I am helping them solve a problem by providing a replacement urinal or the flush valve that they forgot to order.”

In a recent case, a wholesaler ordered a toilet trip lever in the wrong finish. “That’s a $25 product, but that $25 product is holding up closing the whole project… While I don’t want the business to be running solely on $25 orders, Riptide is the company that can help solve the wholesaler’s problem in a short period of time.”

An invisible partner

Working with online retailers is very different than working with plumbing wholesalers. Riptide serves as an invisible fulfillment partner. The customer orders from the online retailer and receives their product in the online retailer’s packaging, typically with the manufacturer’s packaging inside.

Orders are typically one or two products. Shipments can range from a single lavatory handle up to bathtubs. Return rates are much higher than in the wholesale channel. “The e-commerce fulfillment business is not for the faint of heart,” notes Smith. “We are buying in truckloads from manufacturers and parcelling it out in ones and twos, overpacking everything.” Online customers expect not only the product but the packaging to be pristine.

Having a lot of stock requires a lot of shelving. This section is for large items; another section behind it is for small parts.

“Our fulfillment centre associates are quickly becoming packaging engineers. They are taking boxes as we receive them from the manufacturers, opening them up, making sure the right products are safely positioned, repackaging sometimes inside the box and then over-packing it to ensure that it can withstand long distance freight.”

In its first six weeks, Riptide shipped to every province and to about 80 different cities, Smith estimates. “So far, in all the orders we have shipped, we have not had a single damage incident,” she adds. “It’s awesome!”

One issue the industry struggles with is online retailers that sell to consumers far below manufacturers suggested retail pricing. Riptide will only work with those that support IMAP – internet minimum advertised pricing.

In the beginning

Riptide is part of the Hajoca Corporation family of companies which, in Canada, also includes wholesalers Emco and Noble. Hajoca is a U.S. plumbing and mechanical wholesaler founded in 1858 and headquartered in Lafayette Hill, Pennsylvania. Riptide, Emco and Noble operate as stand-alone companies. Smith has worked in senior management positions at both Emco and Noble.

It was during discussions with Hajoca president Rick Fantham about the future of the plumbing wholesale industry that the idea for Riptide was born.

“We saw an opportunity to build out the fulfillment capability in Canada,” said Smith. The use of e-commerce sites to purchase plumbing products is much lower in Canada than in the U.S. “despite the fact that we are one of the most connected countries in the world.”

A big part of the problem, she added, is that there isn’t the fulfillment infrastructure to provide things like same day shipping so Canadian online retailers just don’t have the real-time product assortment that consumers are looking for.

Operations supervisor Eric Riediger operates the “Smart Bagger”. It produces bags that are place inside each box and automatically expand to cushion the product and prevent damage.

“We thought we would jump into the deep end of the pool with the widest assortment of product in the brands we choose to carry and an unparalleled commitment to shipping speed.”

Changing homeowner demand

Another issue, she adds, is that homeowners want more choice. “They’re watching HGTV and renovation shows and they are seeing French gold, vibrant stainless and black stainless.” It is difficult for a traditional wholesale business to have every product and finish in stock because they carry so many lines. “They’ve got a project from start to finish whereas Riptide has really  focused on the finished decorative plumbing categories and, in the categories that we choose to play in, we are dedicated to having the best assortment.”

“Waiting weeks for a product isn’t acceptable today,” she added. “When I order something online, I want to know that it is going to be shipped today, that I will receive it tomorrow and it’s going to be exactly what I ordered.”

For Riptide, one of the biggest challenges was simply deciding what to put on the shelves. Smith was able to gather information from various sources to get started. As well, Hajoca opened a similar business in the U.S. about a year previous, which helped.

“We took a very broad approach to our inventory mix. If a faucet has a good sales velocity in Canada, where a typical wholesaler might buy 120 of those faucets in chrome, I will buy six but I will also buy six in each of the other finishes.”

There’ve been some surprises, she added. “I wasn’t sure we would sell bathtubs, showers and other large products that traditionally go through a wholesaler and a contractor.” They are big, bulky and expensive to ship. “We’ve been amazed by the variety of product large and small going out the door.”

The company has a full-time data analyst tracking purchases to help guide future product choices. “We will learn, over the next six months and beyond, what sorts of products are flowing through the business,” said Smith.

Slow and steady

The company is taking a steady balanced approach to growth to ensure that it can fulfill its commitment to things like same-day shipping. “We want to make sure we can maintain our service experience at the absolute highest level.”

It takes the same approach with hiring. The company has eight “teammates”. “We are taking a very selective approach to hiring,” said Smith, who is the only person at the company that comes from a plumbing background.

Saunders joined the company in June, a supply chain and logistics specialist coming from the alcohol industry from which, among other things, he brought considerable knowledge in handling and shipping fragile products.

At this point, the spacious building has lots of room for growth.  But Riptide is also cautious about taking on new lines. The company wants to be sure it can provide full service for each manufacturer they support.

“If a customer calls us and wants something from one of our manufacturer brands, we want to be able to say with at least 98 percent certainty that we’ve got it on our shelf and we can ship it today.”

For the time being, the company’s strategy is to focus on decorative plumbing. Riptide has already been asked by manufacturers of rough-in and industrial products to add that to the mix. “Never say never,” says Smith, adding that Riptide may look at expanding into other product areas once the decorative plumbing side is well established, but for the time being that will remain the focus.

For more information, please visit www.riptide.ca.

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