Early Thoughts on the 2020 Outlook for Distribution - Modern Distribution Management

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Early Thoughts on the 2020 Outlook for Distribution

Talk of a potential slowdown isnt stopping these manufacturers and distributors from anticipating a relatively strong year ahead.
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In speaking with more than a dozen distributors and manufacturers who recently took MDM’s Trends survey, we touched on important topics of the moment that will continue to be issues heading into 2020. Chief areas of discussion that have the potential to define success or trigger a slump next year included recruiting and retaining talent, effectively managing technology and the state of the economy as it weathers the impact of America’s ongoing tariff dispute with China. For a full rundown of these issues, check out the latest issue of MDM Premium here.

One manufacturer made a great point about how he’s monitoring the state of the industry as we prepare to enter a new decade. He’s continually checking the pulse of his distributor partners, particularly regarding potential economic uncertainty. “We worry about our distributors' take, so we try to have a lot of conversations with them: ‘What do you think? What do you feel? What do you see? Are you concerned?’ We want to have a good idea where their heads are,” says John Kehoe, VP of national accounts at sign manufacturer National Marker Company. 

As for 2020, Kehoe expects distributors to increasingly focus on retaining their existing clients and prioritize retention selling. But if the economy does experience a downturn, everyone could go after new business growth at the same time, resulting in “a lot of collateral damage,” he says. “We're trying to figure out if there’s an opportunity to get out in front of something, now is the time to do it. But more importantly, we want to bring some really focused energy to our partnerships to win.”

Penn Hoyt, vice president of operations and marketing at furniture distributor LMT Imports, is monitoring the market as well. LMT’s independent sales reps have their eyes and ears on the market, which allows them to work smarter and stay ahead of the competition — all reasons Hoyt is mostly optimistic about 2020. The company is testing new lines of business to debut at the beginning of the year.We're still in a growth mode,” he says. “We're not hunkering down and not doing anything. You can't do that. We're pretty positive about what's going to go on [in 2020].”

Continued Action

While talk of a possible downturn is common these days, John O’Brien, director of distribution sales for the electric motor and variable frequency drive division of Toshiba, says he’s not buying it. His sales group is close to 100% of last year’s numbers—and 2018 was a huge year for business with 22% growth, he says. Responsible for all distribution in North and South America, O’Brien says, “I feel pretty good. When I'm talking to my customers, they say the same thing. … So, I don't know if people are talking us into recession, but I haven't seen it yet.”

Some day to day business is “a little off,” but O’Brien feels strong about opportunities in the coming year and predicts only minor adjustments might be needed, such as inventory management.  

James Teat, co-owner of Access Technology, a Motorola value-added distributor of two-way radios, predicts the continuation of another trend for 2020: market consolidation. He’s watched it happen to industrial and electrical distributors, and now sees in the radio market as well. 

The big distributors are looking to buy expertise,” Teat says. “There’s still a tremendous amount of cash out there right now for mergers and acquisitions. I think you’ll continue to see that trend, at least until something happens that affects the overall health and wellbeing of the country.”

For a deeper breakdown of responses to MDM’s annual Trends survey and how they may impact the market in 2020, read the full trends report in the September 25 issue of MDM Premium


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