6309 Monarch Park Place, Suite 203
Niwot, CO 80503, USA
Phone (303) 443-5060
Toll free (888) 742-5060
1. Diversification of Product Offerings
Distributors continue to diversify and add product lines, including private label, which has become a significant percentage of some larger distributor's sales. Safety and jan-san are both complementary growth areas, especially for those industrial distributors focused on MRO. Customers continue to want to consolidate suppliers, and distributors have worked hard to educate them on the array of products they offer.
For example, Canadian Bearings has gone so far as to change its name and branding to CB to move past its traditional product areas in the mind of its customers. The distributor says it has grown its product offerings over the year to serve national accounts, and now it wants to grow spend in other customer accounts. As an example of the mindset of these distributors, MSC Industrial Supply COO Erik Gershwind told MDM earlier this year: "We put the most focus on are the product lines that logically are in the most demand from our customers. Certainly metalworking, our core business, would be a big one. Other examples would be safety supplies, hand and power tools, material handling products and fasteners to name a few." To expand product lines, some distributors are using acquisitions.
2. Ecommerce/Online Tools Become More Sophisticated
The largest – and even some of the smaller – distributors in this sector expanded and improved their websites over the past year. Grainger, for example, gets 25 percent of its sales from its ecommerce site. MSC Industrial Supply gets nearly a third. The sites are starting to resemble B-to-C best practices.
Still, not all industrial distributors are jumping into online transactions. While they are updating their websites, online buying is not part of the equations for distributors like Lewis-Goetz & Co., which has a highly technical product and service line. "The products we sell for the most part don’t lend themselves to that," says CEO Jeff Crane. "We don’t sell from a catalog, and we don’t sell off a shelf. Everyday our locations are making and fabricating products specific to a customer and an application. The other dilemma for us and the products we sell is that they can be hazardous if they are applied incorrectly."
3. Services Growth
Inventory management and other services have grown in importance. Grainger and MSC Industrial Supply, for example, have both pointed to inventory management services as a key growth area. Distributors have also grown their expertise in safety to complement their expansion in that area. Customers are looking to distributors to help them be more efficient and provide more resources and services than ever before, and distributors are taking advantage of this to improve their stickiness and sell more products. In the same vein, industrial distributors tell MDM that demand for integrated supply and/or national account services continues to grow, as customers seek to consolidate suppliers and improve efficiencies.
The industrial distribution sector remains fragmented, but acquisition activity has picked up significantly in 2011. Here are the key moves from the largest distributors in the industrial sector in 2010 and the first half of 2011:
Average sales growth 2009 to 2010 for Top 40 Industrial Distributors: 10.44%
Economic indicators of interest to this sector: