“We are a distribution business selling consumer products for different suppliers in our province. We heard that in 2015, the Philippines will be integrated into the Association of Southeast Asian Nations (ASEAN) under the Asean Economic Community (AEC). What are key opportunities and threats that this economic integration will bring?” – John Manila 
 
ASEAN will definitely change the regional landscape as AEC creates a single market economy with free movement of goods, services and investments throughout its 10-member nations. AEC envisages the following key characteristics: a single market and production base, a highly competitive economic region, a region of equitable economic development, and a region fully integrated into the global economy.  This will open doors wide for various companies to operate in our country and boost our own presence to other economies within the region. We can all expect to encounter intense competition in a more dynamic market. 
 
Opportunities
 
In this new landscape, more aggressive and nimble distribution companies will emerge and pose some threats to your business. However, more foreign suppliers will seek the distribution expertise of local distributors and this should make your business very relevant. Therefore, it is up to you to deal with the range of growth opportunities and the pace of change if you are to succeed.
 
Threats
 
To understand the distribution system adopted by most fast-moving consumer-goods companies, I must clarify the distinction between a modern trade and a general trade account. Usually, modern trade accounts (i.e. National retail chains) are directly served by brand owners or suppliers. In practice, regional distributors only serve local retailers in their assigned territories, which are referred to as general trade accounts (e.g. local supermarkets, groceries, sari-sari stores, public markets, local independent drugstores). 
 
The clear and present threat for your distribution business is not in our country’s integration to AEC. The real threat is from within. It is the aggressive and accelerated store expansion of modern trade or national retail chains like SM, Robinsons, Puregold, Gaisano, 7-11, Mercury Drug, and other local retailers with national presence. A national retail chain store will open at least two new stores per month in an attempt to strengthen their  position and narrow the windows of opportunity for both local and foreign competitors. This continued expansion of modern trade accounts in the Provinces has reduced the relevance of local retailers. In Cavite alone, where I operate, I have lost big accounts who were bought out by Puregold and Save More supermarkets. National retailers have the ability to leverage scale advantages with low costs and strategic relationships with suppliers. The more they eat up into your territory, the smaller your business share becomes. 
 
 
 
Business Relevance in this New Environment
 
Fundamentally rethink your business model and strategies as a distributor. The following is a list of suggestions you can ponder upon and consider:
 
1. Diversify into innovative distribution models. Develop area-specific distributor partners involving local entrepreneurs per barangay as your sub-distributors, or organize a particular consumer segment like teachers or housewives in your area to sell your products in a direct-selling distribution system;
 
2. Offer to suppliers or principals other services apart from your current commercial distribution such as: 
 
a. Warehousing and delivery services for modern trade accounts. I have done this to Shoemart, Mercury Drug Stores, Puregold and Robinsons. I was paid 3% of invoice amount to perform delivery services for modern trade accounts in my territory.
b. Merchandising services like providing merchandisers and promo girls to different principals – not necessarily your current suppliers. This may require you to create a separate merchandising agency. Most principals favor this set-up versus tapping manpower agencies who are not area experts;
c. Organizing and monitoring trade events;
d. Conducting market intelligence like local market or trade surveys. This will require you to invest in analytics capabilities to improve the generation of reliable local data and insights direct from the local trade and consumers;
e. Pilot testing your territory through your distribution infrastructure for new products or distribution model. 
 
3. Develop a highly capable organization. Compensate and train your people well to develop their appropriate skills and capabilities;
 
4. Focus on specific core competencies. You may decide to be an expert in distributing certain product categories (e.g. bakery products), or be known as an expert in managing specific channel segments only like schools, public market stalls;
 
5. Develop and sell your own brands.
 
Emilio Macasaet III is the Chief Distribution Strategist of Mansmith and Fielders, Inc. He will be running the programs, 6th Distributor Management Seminar on June 5-6, 2014 and The 3rd 7 Building Blocks of a Winning Sales Team on July 10-11, 2014. For more information, email info@mansmith.net, call (+63-2) 584-5858 / 412-0034 or text (+63) 918-81-168-88.