It would be easy to say that distributors are having a great year based solely on the economy. After all, growth is easy to come by when everyone is operating at full throttle. One of the biggest contributors to industrial and contractor supplies distributors’ growth this year is the overall strength of the U.S. economy, which was growing at a 4.2 percent annualized rate in the second quarter. The construction and oil-and-gas markets have been especially strong.
We recently compiled the results of the NetPlus Alliance quarterly Industry Outlook survey. As with distributors in many sectors, our members are experiencing significant growth and are optimistic for the rest of 2018. Specifically, 72 percent of distributor survey respondents expect sales growth, with 39 percent expecting growth of more than 8 percent at year-end. However, many of our distributor members are experiencing growing pains, reporting talent shortages and, in some cases, long lead times.We have also seen a few suppliers raise the prices of products affected by tariffs or the threat of them.
Because of these challenges, as well as escalating competitive threats, distributors tell us they are not just riding the wave of economic strength. They’re not taking growth for granted. (Perhaps they are also mindful of the market’s rapid decline in 2008 after several years of record growth.)
We asked our distributor members how they will achieve profitable growth as we go into 2019. The answers were all about growing wallet share and diversifying their markets. More than half said they are focused on selling more add-on items to existing customers. A little less than half are re-evaluating their product mix. About a third are looking at new markets. Technology is also on their radar; distributors are looking at ecommerce, CRM, and other technology that will improve their transaction efficiency, internal operations, and sales process.
None of these are economy-specific. The most successful distributors know they need to build stronger relationships with suppliers and customers as well as improve operations so that they can keep promises to customers. They also need to leverage technology to support their value proposition to the market.
As you start to think about 2019, don’t take your eye off the ball. Just because the economy is strong doesn’t mean you should sit back and relax. While you can, invest in the right people, tools, and technology to strengthen your relationships with customers and suppliers and ensure growth long into the future – no matter what the economy does.
Dan Judge is the founder of NetPlus Alliance, a buying group for industrial and contractor supplies distributors. Learn more about NetPlus at netplusalliance.com.