My first Quicktake conversation in 2023 with Mike Marks of Indian River Consulting Group helped distill my thinking about how the year ahead is shaping in positive ways that distributor leaders can leverage. With an article in yesterday’s Wall Street Journal noting that more than two-thirds of economists at 23 major financial institutions expect a downturn in the U.S. this year, I think our conversation was especially timely.
We touch on the ways that technology is strengthening decision-making, planning and sales support. We also look at the ways associations and marketing groups — with examples of NAED, HARDI, ISSA, Affiliated Distributors and IMARK Group — are playing much more dynamic roles than in the past for the members to become more strategic and innovative.
Like the past few years, 2022 is a hard one to wrap up in a neat package and polish off with a bow. But in this last month, a few clear signals have risen above a lot more noise lately. If I were forced to pick one word to forecast how the year ahead will be defined for distributors, it is “transparency.” At this point, nearly three years into a pandemic-whipsawed business cycle, this observation is more on the side of blinding flash-of-the-obvious than revelation. When you hear the gems of both Yogi Berra and Warren Buffett invoked more often, it’s a signal. (Perhaps MDM should start the Berra-Buffet index to measure… nevermind.)
Specifically, Buffett’s often-paraphrased comments on seeing who is swimming naked when the tide goes out nails it on several angles. The most obvious is in the consensus forecasts for a market slowdown from the past few years. Based on 10 months of data through October, MDM is forecasting overall U.S. wholesale distribution revenues to increase 17% in 2022 to more than $8.2 trillion after 2021 revenue growth of 22% over the prior year. Current MDM forecasts point to low single-digit revenue growth for distributors in 2023; other forecasts are more pessimistic (these are both downturn scenarios).
For some, the downside of transparency will finally show up in cash flow management or on the balance sheet in a very different operating environment. We’ve been surfing on a wave of incredibly strong sales volume, coupled with the highest inflation factor in decades. Many companies may not lose their swim trunks in 2023, but they may be consumed keeping them in the proper place, while competitors with a firmer stance won’t be as affected by an outgoing tide.
“People only gain share in the shoulders of an economic cycle,” Marks notes in our conversation, “either going from the expansion to the recession or the recession to the expansion — ’23 is going to be one of those shoulders. People have to decide up front: ‘Are we looking to gain share, or are we looking to play turtle and hunker down?’”
As we discuss in this Quicktake, 2023 will be a “frothy” environment. I’m optimistic for the positive side of transparency and the growth opportunities it holds for distributors in this year and years ahead. The value of building a more transparent organization was proven immediately when the pandemic hit. MDM documented many examples of how companies that had implemented a more transparent infrastructure in cloud technologies and work tools like Office 365 were able to recover and move forward faster.
Distributors are in an ideal position to proactively shift traditional mindsets around reactive supply chains to much more proactive (and profitable) value chains. My age may be showing, but it looks like an expansion of what has always been the bedrock of distribution: value-added services that meet unique customer needs. I think a lot of what will look different this year are the ways that transparency will define value from manufacturer to distributor to end-user customer.
I wish you a great year ahead!
Listen to the full QuickTake Podcast from the audio player above, and check out our full library of MDM Podcasts here.