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We’re halfway through 2012, and though some uncertainty pervades the current economic and political environment, many distributors we spoke to for the 2012 Distribution Trends Report said that sales growth remains strong this year.
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For the annual report, we spoke with dozens of distributors across sectors and surveyed our readers. We appreciate your input.
From these discussions, four key trends emerged – as well as others that were more specific to particular sectors – that are driving distribution in the second half of 2012.
1. Consolidation booms. At least 33 deals have occurred so far in 2012 in distribution. Valuations are up again and competition for the best companies is stiff. Both private equity and strategic buyers are active. According to one consultant, it’s a seller’s market. Some of the surge may be due to pent-up demand, but other factors include more owners ready to sell and the availability of cash that needs to be deployed. Acquirers are buying companies to fill product or service niches, gain access to a supplier’s lines or reach new customers or end-markets.
2. Vending gains ground as a key growth driver. Especially among national industrial distributors, vending has become an attractive piece of the revenue puzzle for companies like Fastenal and MSC Industrial Supply. Part of the attraction of vending is that it provides more data on usage and product lifecycles to the distributor and customer. It also makes customers stickier, by making the relationship more integrated. But some smaller and mid-sized distributors are not necessarily eager to jump in or invest much in the service because, they say, it’s not perfect for every customer and the capital investment required makes it difficult to gain a positive ROI on the effort. (Related: Distributors Put Inventory Under the Microscope.)
3. Distributors continue to see challenges in attracting interested employees. As the economy picks up again, so do sales and the need to hire to help meet growing demand. But distributors say that finding employees that are both qualified and interested in working in distribution continues to be a challenge. Part of the challenge is meeting the needs of a new generation of workers.
4. More distributors take action with online tools. Distributors of all sizes are starting to act on the need to make their online presence more effective, whether that means improving the look and feel of their website or adding transactional capabilities. Some are building out capabilities to improve their customer service, allowing customers to track shipments, for example, or view their invoices. More than 85 percent of respondents to a recent MDM survey said they plan to improve their websites over the next 12 months.
Watch the video below for our take on the Top 40 list and the Top 25 Electrical Distributors list. Get more in the latest episode of Executive Briefing, Behind the 2012 Distribution Trends Report.