The 2020 Mid-Year Economic Update_long

The Distribution Industry’s Hopes and Fears for 2021

Distributors know we are not out of the woods yet, and they are planning accordingly.
Man push number zero down the cliff where has the number 2021 with blue sky and sunrise. It is symbol of starting and welcome happy new year 2021.

For as long as I can remember, I’ve celebrated a little monthly holiday I like to call Calendar Change Day. Heck, I even got married on Calendar Change Day. The first day of the month represents a fresh slate, a chance to commit to new goals and let go of ones that are not serving us. I find it energizing and motivating. Of course, January 1 is the ultimate Calendar Change Day and this year in particular most of us were as eager to flip that calendar as we ever have been. But however temping, we cannot engage in magical thinking about 2021. 

The global pandemic did not end with 2020, and no matter how hard we wipe, our slate is still going to be covered in the dust of last year for at least several months ahead. Most distributors, manufacturers and service providers who responded to our annual Industry Outlook Survey understand this reality and are planning accordingly. Only 9% expect sales growth to be flat or down this year, while others expect sales to rise up to 5% (18%), up to 10% (40%) or more than 10% (33%) by the end of the year. Still, they have understandable concerns about the first half of the year.

A Mixed Bag

When asked what is their overall outlook for 2021, the majority of respondents said they are planning for a rough first and/or second quarter — followed by marked improvement. Typical responses include:

• “Slow, challenging first half, especially Q1 as we compare against pre-Covid 2020 performance. Improvement through the summer, and strong fall when supply chain issues and product availability normalizes.”

• “Tough first quarter followed by incremental improvement moving forward.”

• “With the vaccine availability in 2021, I expect businesses to rebound towards the second semester.”

Reported business-specific and industry-wide concerns were similar to each other. Employee health and safety, the potential for further lockdowns or product shortages and the speed of economic recovery are top of mind. Perceived threats include Amazon and other ‘e-tailers,’ China, suppliers going direct, labor shortages and the continuing impact of COVID-19 disruptions.

To cut costs and perhaps stave off some of these concerns, respondents’ top three plans (they could make multiple choices) are to streamline and automate processes (56%), improve employee productivity (55%) and reduce transportation costs (23%).

Interesting and a little alarming, 23% reported having no cost-saving plans at all yet. Perhaps those respondents would benefit most from joining us for MDM’s first webcast of the year, our 2021 Distribution Industry Outlook. MDM CEO Tom Gale will be joined on January 21 at 1 p.m. EST by Baird Senior Research Analyst David Manthey and NetSuite Vice President Ranga Bodla for a wide-ranging discussion on the economic indicators for 2021, including industry-specific data you won’t find anywhere else. Register for free here.

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