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This is a part of the 2016 Distribution Trends Special Issue. The annual feature was researched and written by MDM based on interviews with dozens of distributors, industry experts and manufacturers. MDM also conducted a survey of its readers to uncover the trends outlined in this issue.
2016 Distribution Trends Special Issue
Flat to slow market growth of the past five years continues in sector. Electronics distributors on the 2016 Market Leaders list averaged just 1.3 percent revenue growth last year, as the industry's tepid sales environment persists. "In distribution, there has been an intense focus on market share gain as the primary way to outperform the market, which has created a lot of downward margin pressure," says Michael Knight, senior vice president, Americas, TTI Inc. "Component lead times are very low and stable, which tends to enable the customer base to focus on driving cost reductions through continuously putting their requirements out for bid."
Electronics distributors have opportunity to drive internet of things progression. By 2020, Gartner predicts that more than 20 billion "things" will be connected, and the consulting firm expects connection to the internet of things will grow 30 percent in 2016 alone. As Knight points out, electronics component distributors have been "selling into IoT since before the term was coined" and have the opportunity drive distribution's adoption of this and other new technologies. "If you think of IoT in terms of thing-to-thing communication, it is easy to find electronic component distributors heavily involved in the supply chains for the OEMs that incorporate that functionality into their equipment, from industrial and building automation to smart appliances," he says.
Companies must pursue talent even in slow-growth times. While wage and benefit rates are growing ahead of inflation and sales, putting even more pressure on distributors' bottom lines, companies must manage those costs while also keeping an eye on staffing needs. "It has been a while since the electronics component distribution industry as a whole has been a net hirer, so we do see some human resource related issues ahead for the industry when our end markets pick up some momentum, which we think will occur next year," Knight says. "Good people make for a good business, and a smart business doesn’t lose sight of that, even in a flat market."