We’re excited to provide the readers of Industrial Distribution with the results of our 68th annual Survey of Distributor Operations. The objectives of this report, as always, have been to understand the most critical issues affecting distributors, and to provide data to help drive their educated business decisions. Through these findings, we’ll discuss new and ongoing industry trends, and what trends have fizzled.
In this segment, we focus specifically on:
- Demographics, which establishes a profile of survey respondents based on company size, years in business, sales volume, and product line.
- Challenges, Trends & Economy, which outlines the initiatives distributors are undertaking to address key business and market concerns. This also covers mergers and acquisitions, and how distributors view the impact of the economy.
- The Balance Sheet, which offers insights into revenues and profitability. This addresses areas of investment, concern, and other analysis of factors impacting revenue.
- Best Practices, which sheds light on distributor relationships with suppliers and customers, as well as their global business plans and what challenges are involved.
- Tech Usage & Investments, which covers areas like e-commerce and other big-impact technology solutions for now and the future.
- Value of the Distributor, which addresses the reasons our survey respondents believe customers do business with them, and which service offerings play a significant role in the industry.
- Employment, which identifies hiring and layoff trends, recruitment, and compensation.
The results of this study are based on an email survey sent to Industrial Distribution subscribers. Recipients of the survey were offered an incentive to complete the questionnaire. Industrial Distribution’s subscriber base is comprised of 30,000 readers, the majority of whom identify as executive, upper management, sales, or sales management. Results are based on a pool of respondents within this subscriber base.
Because Industrial Distribution transitioned to a new publisher in 2010, no survey was conducted that year. Therefore, results which track comparisons over the past decade will reflect a gap between 2009 and 2011.
Comments on this year’s results? Email ID’s executive editor, Anna Wells, at Anna.Wells@advantagemedia.com.
This year, our pool of respondents for the Survey of Distributor Operations is again heavily represented by suppliers to the industrial MRO sector. In fact, 83 percent say they reach manufacturing/processing customers. The second largest end market is, once again, the construction industry – which this year was nearly tied with the OEM market, up four percentage points over last year.
While the results of this question on end markets are usually consistent, it’s probably because ‘consistent’ is the name of the game. A whopping 47 percent of companies responding say they’ve been in business for 50 years or more (Figure 1). Another third have existed between a quarter and a half a century, and only fi ve percent for fewer than ten years. Despite the record merger & acquisition activity that’s taken place in the last several years, the 50+ year-old set has dipped only incrementally since 2011, where it registered at 50 percent (and 49 percent a year later).
Other consistent demographic characteristics:
- Most of our respondents are still headquartered in the Midwest (37 percent) with another 21 percent in the Northeast. This has remained relatively stable.
- A variety of revenue segments are represented. As is typical, the most common segments are at the high end of $500 million or more (27 percent of respondents) and the low end at $10 million or less (27 percent). Since the higher revenue-yielding companies have more employees, it’s likely that the 27 percent in the $500M+ category actually represents fewer companies, since some survey respondents likely work for the same business. Overall, 53 percent fall within the $50 million or less category, which is a fairly consistent representation of the survey audience versus years past.
Where we have seen a marked change – notably over the last 10 years – is in the number of industrial distributors who are family owned. In 2005, 78 percent reported they worked for a family-owned company; 58 percent say the same today. The impact of the recession suggests a significant point where some family-owned businesses likely began exiting the market, a phenomenon that snowballed as acquisition activity increased dramatically afterwards. In 2009, for example, 69 percent were still family-owned, a number which dipped to 60 percent in 2011 and has declined incrementally further since.
It’s no surprise, based on the aforementioned market segments, that our survey respondents most commonly carry MRO supplies, a product category represented by nearly half (Figure 2). Other top categories tend to fall within this broader MRO category and include things like safety products (48 percent) hand tools (47 percent), power tools (43 percent), and adhesives & sealants and lubricants (42 percent each).
In general, the trend towards product line expansion – versus specialization – has been steady, as many distributors add to their breadth in order to create a one-stop-shopping experience. When we asked our respondents to identify whether the number of product lines they carried had expanded, contracted, or stayed the same as last year, 66 percent said they’d expanded. In fact, only two percent contracted, leaving around one-third who kept a fairly consistent number of lines. These numbers are nearly identical to last year’s results, which may suggest that certain businesses are consistently looking to grow from a product variety standpoint.