Small distributors who answered our recent survey named "competition from large national distributors" and "pricing pressures" as their biggest concerns in the industry today. Sixty-four percent of respondents chose large competitors as one of the top three problems facing them, and 62 percent included pricing pressures in their choices. "Finding and keeping employees" was third in the survey at 41 percent.

The top two problems have been egregious for many years, according to distributors. In comments summarizing their feelings, many distributors note that niche markets and increased product knowledge are two hedges against the tide of consolidation and integrated supply. But it's a battle many feel they are losing.

Of 222 companies responding to this question, 139 named large competition one of their top three concerns; 135 named pricing pressures; and 90 named finding and keeping employees.

To get more in-depth information, we asked several small distributors to elaborate on their responses.

Christine DeNardo is the account executive for Industrial Rubber, Inc., a distributor of hose, fittings and safety equipment. Pricing pressures due to imports are her primary concern.

"Imports are driving the business and have increased competition, even though many products are inferior to American-made. We only sell U.S.A. products but may be forced to get into some imports. They would only be imports of equal quality, however," DeNardo says.

The issue of quality works both for and against small distributors who supply only the best products they can find, she added. "We have to provide a very high level of customer service along with quality products to compete. We provide research and follow-up. I think small distributors have to be agents of information. We check all the alternatives for customers because many of our products are custom assemblies," she says.

In the labor market, DeNardo says her company usually uses temporary-to-hire services to see if employees can acquire skills, but also to see if their interest is high. Technical training is so important to their trade that Industrial Rubber began paying workers' tuition for classes directly related to the job.

"Many people find they just have no interest in hose and fittings," she says. "There's a tremendous shortage of skilled labor in this field."

Dewey Lashua, president of Alferi Industrial Sales & Service in Neenah, Wis., a general line MRO distributor, says the way to face pricing and competition problems is one word: service.

"We service what we sell and have done that from day one. A lot of the big guys do not want to be involved in the small order and repair that's necessary for us. And a lot of us don't want to get bigger and leave that [service] behind," he says.

Customers can always find one of his people in an emergency.

"That's not always the case with other distributors. Also, many customers go to a smaller outfit to buy from a local businessman, trying to help those small businesses. It's a community thing to do," he says.

Small distributors can feel surrounded by competition, as is the case of Connor Fastener in Macon, Ga., a specialist in industrial and construction fasteners. The 90-mile radius around Macon is good sales territory for the company, according to owner Mike Connor. But the towns around him have branches of a large distributor and seem to have more every year, he says.

"Columbus, Savannah, Dublin, you name it. Fastenal is putting in small branches everywhere it seems. I don't know why they're not in Macon," Connor says.

His main sales defense, he says, is "delivering the five-dollar order as well as the $500 order. It's strictly service and name recognition. We don't have a $5 million inventory, but neither has anyone else in Macon. So it comes down to serving the customer," he says.

Connor has had difficulty keeping warehouse workers and delivery drivers in the eight years he has owned the business, and agrees that skilled help is difficult to find and keep.

The need to become more specialized, find niche markets and add services is becoming more intense, small distributors say, in the face of growing competition and price pressure from imports. In their descriptions of the way in which the role of the small distributor is changing, the words "niche" and "service" were used by nearly everyone.