Member Article

Diversification is another route to success for UK businesses

Wholesalers and distributors, like many other businesses, are having a hard time with many reporting falls in profits over the last few years.

The pandemic kickstarted many new ways of doing business, from remote working to increased automation. And now, economic pressures are forcing businesses to look to new markets to ensure business continuity. 23% of businesses have diversified their sales channels in response to the pandemic and 20% of companies have diversified their product offering in response to the pandemic.

Operating within the wholesale and distributor sector for 47 years, the last two years in particular, we have witnessed the largest shift in how our customers do business - from first-time eCommerce users to entering adjacent or complementary markets, to expand their customer base and product portfolio.

A company may choose to diversify for reasons of increasing revenue, decreasing economic risk, supporting a struggling core business or expanding the growth of a profitable business. Diversification can reap dividends; however, it can come with high risk. As more of the wholesalers and distributors we work with are looking to benefit from new markets, here are our tips for successful diversification:

Build on core competencies

Aligning diversification with your core competencies, skills and resources is a way of minimising risks associated with entering a new or less familiar market/ product offering. For instance, TF Solutions started life as a tool and fastener distributor but quickly found a gap in the market for diversifying to become a dedicated distributor of air conditioning and refrigeration products and parts.

Lay the groundwork

When a business is looking at diversifying its operations, depending on team size, a lot can be done internally with robust research and a strong business plan, pulling in external specialists if and when needed. These could include consultants with experience and expertise in strategy, market analysis and industry trends; financial and tax advisors, market research firms and key staff.

Once a team has been identified, comprehensive market research will identify potential areas/industries that will be a good fit for your company’s competencies and offerings. Understand customer needs, preferences and competition in these markets. Diversifying from your industry into an adjacent market is a sustainable way to grow.

Risk assessment

Work with a consultant and your accountant or financial advisors to evaluate the various risks and opportunities of diversification and put in contingency plans. Ask yourself what are the specific strategic goals for diversification - do you want to reduce your dependence on a single market or expand your customer base for example?


Regularly monitor and measure your performance indicators to view the success of your diversification efforts, adjusting your strategy as needed. Sphinx Industrial Supplies was founded as a one-man machinery repair business before expanding into wholesale distribution – as customers and product lines increased, the team made sure they had a system that connects all sales channels, and centralised and digitalised processes. To ensure this is done well and right the first time around, we strongly recommend having good technology that can both monitor and measure your performance but also a separate solution that will assist with diversifying your business strategy.

Ensure your technology can keep up

Once you have a team and plan in place, consider your technical resources. This is in addition to the tech needed above for the evaluation step. Central to your competitive success in any new market, and when diversifying your offerings, are your technological resources and capabilities. When diversifying, you’re essentially handling a whole other business.

To boost your business productivity and encourage diversification and swift growth, it is crucial to streamline your business operations with a business software that brings together disparate data. In addition to risk management and automation, allowing you to streamline processes as you diversify, ERP systems like our Profit4 solution can also support continuous improvement by providing the tools and data needed to identify areas for improvement and implement changes.

It is therefore more important than ever to have easy access to overviews for all business data, customer information, inventory and supply chain data. One single “source of truth” like an enterprise resource planning technology will enable you to make accurate decisions with up-to-date information.


When business leaders face challenges such as a competitive industrial landscape or pressure to control costs amid a looming economic downturn, considering diversification could be an alternative route to success. By diversifying, a business can spread its investments and reduce the risk of impact. Diversification also allows for increased competitiveness as offering a wider range of products and/or services to customers not only provides the opportunity to attract new customers but it also means your company can reach new markets where any original competitors are not present.

While diversifying with similar products to your original offering is less risky, there are rewards to lateral product and service diversification. By not putting all your eggs in one basket, with just one product or service, you can avoid the financial implications that any shifts in the market may cause.

This was posted in Bdaily's Members' News section by OGL Software .

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