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Overall news is much more positive, as Adam Fein points out in his Oct. 20 blog at: www.distributiontrends.com.
Fein is raising his forecasts for industrial distribution with "slightly positive" year-over-year growth in the first quarter of 2010. The weakening dollar also is helping exports. All good. But few distributors expect a straight-line rebound like the good old days. There are too many important moving parts zigzagging in different directions to have a smooth recovery this time around. While August was good news for many distributors, September was mixed. The coasts seem to be gaining more traction and that typically leads us both into and out of recessions.
I think the real payoff pitch will be the month of November, and many distributors are concerned about a fastball to the head. Here's why I'm seeing that as a bellwether month in this final quarter.
November will give a better indication of how well manufacturing will offset expected weak consumer drivers outlined below. It will also be a decision time for delayed capital projects – from infrastructure to IT projects that are critical to supporting anticipated 2010 growth. Other factors:
Consumer spending. No one is bullish on consumer holiday spending. We are in late October and consumer debt and confidence are still troubling. We have likely not seen the peak of unemployment. Fourth quarter retail won't be driving the recovery. But there seems to be some beginning impacts of the huge government infusion finally having an impact on certain sectors – good for distributors in those areas.
Gross margins, pricing pressures. Every distributor is intensely focused on cost control. Most are stretching resources right now, from staff to credit access to inventory availability. At a time when sales are rebounding and your company is scrambling to meet spiking customer service demands, competitors are getting nasty (or nastier).
As an upcoming article in MDM will describe in more depth, many distributors are in dogfights for market share right now. Some larger distributors are strategically going after specific customer sets and getting aggressive on pricing. Not a surprise at this point in the business cycle but it is a profitability drag at a critical point in stabilizing your business.
For a timely and in-depth analysis on how these factors and more are shaping up for 2010, be sure to attend our 2010 Economic Forecast for Wholesale Distribution Webcast with Dr. Adam J. Fein on Nov. 19. More information on this event is at www.mdm.com/2010forecast.