Washington, DC – Driven by online sales and an improved economy, the U.S. distribution industry is growing, according to the2014 NAW Institute/McGladrey Distribution Monitor. The annual report, presented by the NAW Institute for Distribution Excellence and McGladrey LLP, focused on the middle market, and shows that 74 percent of distributors reported an increase in sales over the past 12 months, with an average increase of 7.5 percent. Those numbers are expected to improve in the coming year, as 91 percent of distributors expect to increase sales an average of 8.9 percent.
“At 5.5 million employees, wholesale distribution accounts for approximately one in every 20 jobs in the United States,” said Dan Blaylock, 2014 Chairman of the Board of the National Association of Wholesaler-Distributors (NAW).
“Because the industry is so important to the vitality of the U.S. economy, identifying and understanding the various strategic management challenges that the distribution community faces is one of the great priorities of our time. Business intelligence — such as that provided by the Distribution Monitor— helps provide a roadmap to navigate to solutions,” said Mr. Blaylock.
Distribution Monitorresults show that 39 percent of distributors describe themselves as thriving in 2014, an increase from 32 percent in 2013. A lower percentage of distributors say they are holding steady or declining than in 2013. Sixty nine percent of distributors expect their profits before interest and taxes to increase over the next year.
Not surprisingly, given anticipated growth projections, two-thirds (66 percent) of distributors expect to add jobs in the United States over the coming year, with an average expected workforce increase of 5 percent.
“According to the U.S. Census Bureau, in April 2014, sales of U.S. merchant wholesalers totaled $450.2 billion, up 7.8 percent from April 2013,” said Karen Kurek, leader of industrial products for McGladrey, the nation’s leading provider of assurance, tax, and consulting services focused on the middle market. “Total inventories of merchant wholesalers were $530.6 billion for the same period, up 6.7 percent from the year before. These figures confirm the results of the 2014
Distribution Monitor, which clearly finds good news across the distribution industry.”
When asked about potential impediments to growth, distributors most often cited competition from other companies (65 percent) as the biggest threat over the next 12 months. However, nearly as many distributors (63 percent) cited government regulation as a limiting factor on growth, and 59 percent said they expected taxation to limit their growth over the next 12 months.
When asked about specific regulations and their impact on growth, implementation of the Affordable Care Act was by far the most commonly cited limiting factor. Sixty-eight percent of distributors said they believe the implementation of the law would limit their growth over the next 12 months. The only other regulation cited by more than half of respondents was state regulation (53 percent). Federal (60 percent) and state (61 percent) taxes were also identified as potential threats.