The Distribution Blog

"We can go into a town of 10,000 people and serve that market more effectively because we're spreading that cost base out across multiple verticals."

In the latest episode of In the Mind of a Distributor, Benj Cohen sat down with Paul Kennedy, CEO of Dakota Supply Group (DSG). 

Under his leadership, DSG has thrived by doing something many distributors avoid: selling across multiple verticals (electrical, plumbing, HVAC, and waterworks) in markets that others might consider too small to service.

Here are the key takeaways from the conversation, along with trends we’re seeing across other distributors selling multiple segments in rural areas. 

Takeaway #1: Know the “rural density" equation

The central challenge for rural distributors is simple math: In a town of 10,000 people, there isn’t enough total addressable market (TAM) to support a standalone electrical branch, a separate plumbing house, and a dedicated HVAC supplier.

Paul’s strategy at DSG is to leverage a shared cost base. By running multiple verticals out of a single facility with shared trucks and a shared warehouse, DSG makes the economics work where specialized competitors can’t.

We see this across the "flyover" states. While national giants who specialize in one vertical often struggle with the "last mile" in rural areas, regional multi-vertical distributors thrive in these markets. That's because by consolidating logistics, they become the "one-stop shop" for rural contractors who want to reduce administrative friction.

Takeaway #2: Operations are general, sales must be specific

A common trap for multi-vertical distributors is the "generalist rep": a salesperson who knows a little about everything but not enough to consult like an expert. Paul was clear on how DSG avoids this:

• Back of house: The warehouse doesn't care if it's picking a pipe or a wire. It’s all logistics. No need to worry about specialization there. 

• Front of house: The customer cares deeply about having a rep who knows what they’re selling. This is where training and/or regional resources are critical. 

DSG solves this by maintaining specialized sales teams even in rural regions. They utilize regional experts to handle complex quotations, ensuring the customer gets technical expertise even if the local branch is small.

Many of DSG’s peers struggle here. We often see rural reps "winging it" which in practice looks like sticking to their comfort zone (e.g., selling only fluid power products) and ignoring other opportunities because they lack the technical knowledge to speak confidently about them.

The most successful distributors are now using data to bridge this gap, flagging cross-sell opportunities to give generalist reps the "courage" (and more importlantly the knowledge) to start conversations they otherwise wouldn't.

Takeaway #3: Segment expansion is key for growth

DSG’s growth strategy isn't just about planting flags in new states; it’s about planting new verticals in existing buildings. Paul mentioned that if DSG is in Montana for plumbing/HVAC, the logical next step is to introduce electrical to those same branches.

This aligns with a harsh reality of rural distribution: Customer churn is fatal. Unlike urban markets, you can’t always just go find a replacement customer down the street because the market is finite. Therefore, the only sustainable growth lever is increasing the share of wallet. 

To do this, distributors in rural areas are increasingly acquiring smaller, local players not just for their revenue, but to plug them into a broader supply chain, instantly expanding the catalog available to that local customer base.

Takeaway #4: Adopt AI to create more “order taker” reps

Paul offered a pragmatic view on technology: "AI is not going to replace your job. The person that figures out how to utilize AI is going to be the person that replaces your job."

He noted that the real challenge isn't automating tasks, it's deciding what to do with the time you get back. For example, if AI frees up 30% of an inside sales rep's week, how should that time be reinvested?

Across the board, we see a push to move reps from "order takers" (reactive firefighting) to "order makers" (proactive selling). In rural markets where face-to-face visits come with high "windshield time" costs, distributors are using AI to ensure that when a rep does travel far to visit a customer, they aren't just checking in, they’re arriving with specific, data-backed recommendations to close gaps in the customer’s spend.

Growing your reach in rural markets

If you’re looking to expand your business in secondary markets, it’s important to leverage a shared cost base, increase your share of wallet amongst customers, and enable your sales team with better training and regional resources to help them sell across multiple verticals. Get Paul’s full playbook by listening to Paul’s podcast episode here.