Specialist Equipment Markets Intelligence Note. Monday 5 October 2026
When the Distributor Owns More of the Customer Than You Do
Mark de Barra
10/5/20262 min read
Distribution Can Grow While Manufacturer Influence Shrinks
Observation
H.I.G. Capital completed its acquisition of Arco last week.
On the surface, it is a straightforward private-equity transaction involving one of the UK's largest safety-equipment distributors.
Commercially, it is more interesting.
Arco supplies PPE, workwear and safety services into infrastructure, defence, utilities and healthcare.
H.I.G. did not describe the attraction simply in terms of distribution scale.
It highlighted Arco's customer relationships, product-audit capabilities, safety expertise and differentiated service proposition.
Arco's own description of the next phase is equally revealing.
The business intends to expand its products and services, invest in digital capability, deepen customer and supplier partnerships, expand internationally and pursue further acquisitions.
It also reports 38.4% compound annual EBITDA growth over the previous four years.
This is not simply more PPE moving through a larger warehouse.
It is a specialist intermediary accumulating more capability around the customer.
Pattern
That creates a problem manufacturers can easily miss.
Distribution revenue can grow at exactly the same time as manufacturer influence declines.
Imagine a specialist manufacturer whose largest distributor is performing well.
Orders increase.
Geographic coverage expands.
More customers are reached.
From the manufacturer's P&L, the relationship looks healthy.
But underneath those numbers, something else may be happening.
The distributor increasingly understands the customer's entire requirement.
It sees purchasing behaviour across categories.
It provides training.
It supports compliance.
It manages services.
It knows when equipment needs replacing.
It owns the digital purchasing interface.
It can compare one manufacturer's offer with another.
The manufacturer's view can become much narrower.
It sees the purchase order.
That asymmetry matters.
The distributor begins accumulating customer intelligence while the manufacturer accumulates transactions.
Those are not equivalent assets.
And as specialist distributors consolidate, invest in digital capability and add services, the imbalance can become larger.
The obvious reaction is to argue for direct sales.
That misses the point.
Many specialist manufacturers need strong distribution.
A national safety provider can offer account access, logistics, purchasing integration, local service and category breadth that an individual manufacturer could never reproduce economically.
Removing the distributor may destroy value.
The strategic requirement is therefore not to eliminate the intermediary.
It is to understand what the manufacturer must continue to own.
Commercial implication
Every manufacturer should be able to identify its source of channel power.
That might be technical authority.
It might be specification influence.
It might be certification.
Training.
Installed-base information.
Proprietary technology.
Exceptional product performance.
Or enough end-user preference that customers actively request the brand.
Without something defensible, the manufacturer risks becoming increasingly interchangeable.
The economic consequences extend beyond distributor margin.
Negotiating leverage weakens.
Access to customer information declines.
Replacement visibility disappears.
New products become harder to introduce without distributor support.
Alternative brands become easier for the channel to substitute.
Private-label competition becomes more credible.
Eventually the manufacturer may still have significant revenue through the distributor while owning remarkably little of the reason that revenue exists.
That is a dangerous position because it can remain invisible for years.
The purchase orders still arrive.
Growth can continue.
The warning appears only when the distributor changes priorities, consolidates suppliers or finds a commercially preferable alternative.
Manufacturers therefore need to measure more than distributor sales.
They need to understand:
Who influences specification?
Who owns the customer contact?
Who sees usage and replacement information?
Who provides technical credibility?
Who controls service?
And who would the customer actually miss if one party disappeared?
That last question is uncomfortable.
It is also useful.
Because distribution can increase market access while simultaneously reducing manufacturer control.
The objective is not to own every customer interaction.
It is to remain responsible for enough of the customer's value that the channel cannot easily replace you.
Revenue tells you whether the distributor is selling your product.
It does not tell you whether you still matter to the customer.
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