The 68th Survey of Distributor Operations: The Balance Sheet

Though the economy has been relatively stable in manufacturing and steadily improving in construction, does it necessarily translate to higher sales for industrial distributors? For most of our survey respondents, the answer is yes.

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This article appeared as part of Industrial Distribution's 2015 May/June print issue. To view the full digital edition, click here.

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.

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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.

Methodology

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.


The Balance Sheet

Though the economy has been relatively stable in manufacturing and steadily improving in construction, does it necessarily translate to higher sales for industrial distributors? For seven out of ten of our survey respondents, the answer is yes (Figure 1). Of the remaining, most consider their sales stable, with only 10 percent of this total group suffering from decreases in sales. This highlights an improvement over last year, when 13 percent said sales had decreased. In fact, 2013 was also several points lower, as 17 percent said they’d experienced declining sales.

As for profits, that can be another story. In a low margin industry, government regulations, employment issues, price increases and just about everything else under the sun can impact the distributor’s bottom line. This year, 61 percent (Figure 2) say their profits increased over the year prior — a significant increase from last year’s results, where 51 percent said the same. Those whose profits decreased are also represented by a slightly smaller chunk – 14 percent, versus 17 percent in 2014’s results – but it seems most of the newly increasing sales came from the group who last year had identified their profits as relatively similar to the year prior.

The relative success around sales and profits has inspired confidence in most of our survey respondents, as 77 percent say they believe their sales will increase in the coming year. Seven percent say sales will likely decrease, while the remaining chunk anticipate steadiness. Despite the overall positive trend we’ve seen with distributors in this year’s survey, there is a larger group facing sales declines than we saw last year (4 percent).

Kiplinger’s reported a weak first quarter as businesses responded to another harsh winter, as well as weak exports. That said, the remainder of 2015 is expected to face growth of 3 percent. The outfit also predicts that Fed interest rate hikes will hit in September, but will most likely be modest. This suggests the remainder of 2015 could offer some great prospects for steady revenues and growth opportunities.

So, if 77 percent plan to grow their revenues, how do they plan to do it? For most, the primary growth tactic will center on sales and marketing (Figure 3). This area was pinpointed by 56 percent of respondents, who were permitted to “check all that apply.” Other key areas include improving or redesigning the company website (48 percent); selling more via the web (47 percent); and adding product lines (46 percent). Low on the list of priorities is doing business overseas, something only one in ten said they considered very important for growth and business development. These goals are fairly well in line with what was reported in the past two years, though global expansion has dropped two points from the 12 percent who reported this was a growth strategy in 2014 and 2013.

Finally, we asked our audience to best describe their timelines for receivables, and:

  • 4 percent said <15 days.
  • 17 percent said 16-30 days.
  • 40 percent said 31-40 days.
  • 30 percent said 41-50 days.
  • 8 percent said 61-90 days.
  • 1 percent said 90 days or more.

The most notable shift from last year shows that a few points from the 30 days or less category – along with a few points from the 41-50 days category – seem to have settled in the 31-40 days designation. This was the most popular timeline for receivables identified last year, but it applied to 34 percent of respondents.

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