Research: Distributors’ Top Concerns to Start 2025 - Modern Distribution Management

Research: Distributors’ Top Concerns to Start 2025

There's no better time to find out what keeps distribution executives up at night than at the start of the year. We analyze more than 250 write-in responses to our early January survey question asking about their top concerns.
The path is interrupted by uncertainty. Uncertainty, threat and danger. Resolve the problem before continuing your journey. Bring a gap.

At MDM, one of the most common questions we seek commentary from our audience about is their top concerns. What are they most worried about? What keeps you up at night? – These are the type of inquiries that we seek both quantitative and qualitative input on.

This is particularly true at the end and start of the year as we look to gauge the industry’s temperature of what distributors are keeping an eye on for the next 12 months.

To formally research this sentiment, we included a completely qualitative question in the 4Q24 Baird-MDM Industrial Distribution Survey — conducted in early January to a pool of about 400 respondents, the majority of them representing distributors in the U.S. and Canada across a range of sizes and markets.

We simply asked, “What is your biggest concern entering 2025?”

It produced over 250 write-in responses. Analysis of them didn’t reveal any major surprises, but it’s always worthwhile to analyze the sentiment for this question.

Visual Representation

Let’s start with a visual. While this was a completely qualitative survey question that asked for write-in responses, technology gives the ability to represent it as an image. Here’s how those 250+ responses spanning nearly 3,000 words look like as a word cloud:

Top Concerns Identified

Let’s dive in by breaking down the analysis of the sentiment shared throughout these hundreds of comment responses:

1. Tariffs and Trade Policy (Most Frequently Mentioned)
  • Widespread concern about the impact of tariffs on:
    • Pricing and supply chain disruptions
    • Margins and demand uncertainty
    • Cross-border trade, especially with Canada and Mexico
  • Fear of potential escalation of trade wars affecting economic stability
2. Economic Uncertainty
  • General worry about macroeconomic risks, including:
    • Recession fears
    • Interest rate volatility and inflation
    • Slower recovery in key sectors, such as manufacturing and housing
  • Concerns about consumer demand and spending slowing down
3. Inflation and Costs
  • Pressure from rising costs of raw materials (e.g., brass, logistics) and regulatory compliance
  • High inflation affecting affordability and profitability:
    • Housing markets (mortgage rates and affordability)
    • Construction and manufacturing costs
4. Political Instability
  • Political infighting and policy uncertainty stemming from the new administration:
    • Delayed decision-making impacting businesses
    • Polarized views on the Trump administration’s policies, particularly regarding trade and tariffs
5. Supply Chain Challenges
  • Fear of renewed disruptions similar to past years
  • Difficulties in securing materials and navigating increased costs
  • Uncertainty around global trade logistics due to tariffs
6. Global Instability
  • Concerns over geopolitical tensions, wars, and global economic slowdown
  • Impact of these factors on global markets and trade
7. Talent and Workforce Issues
  • Struggles with:
    • Hiring qualified employees
    • Adjusting to rapidly changing technology (e.g., AI)
    • Managing workforce entitlement and productivity
8. Margins and Profitability
  • Ongoing pressure to maintain or regain margins amid rising costs and weaker demand
  • Declining profitability due to inflation, supply chain issues, and competition

Recurring Themes

  1. Uncertainty:
    • The overarching theme across all concerns. Respondents frequently mentioned difficulty planning for the future due to unclear policies and unpredictable macroeconomic conditions
  2. Impact of Government Policies:
    • A strong focus on government actions, including tariffs, trade regulations, environmental rules and stimulus measures
  3. Global Trends:
    • Respondents highlighted fears of a global economic slowdown, particularly in Europe and in the automotive and construction industries
  4. Technology and Innovation:
    • Mixed sentiments:
      • Positive potential of AI but also concerns over its impact on jobs and workforce readiness
      • Need for operational efficiencies and adapting to technological changes

Editor’s Choice

Here’s a selection of 20 survey responses I found particularly interesting or well-thought out that warranted sharing:

  • “I am most concerned how macro risks may affect the economy at large – such as commercial real estate market, effects of natural disasters on insurance industry, businesses going bankrupt, and consumer credit default rate.”
  • “Uncertainty – we can live with several decision but we can’t with rumors and possibilities.”
  • “Timing of renewed industrial activity. Our customers’ manufacturing activity and resulting demand for our products has been depressed for over a year now. We are optimistic about increasing demand in 2025, but are concerned with how quickly that will result in new orders. We need to see some positive momentum in Q1 to achieve our 2025 growth goals.”
  • “When will this young workforce realize it is called “work” and not “fun”? Many seem entitled to live like a prince on a pauper’s income. There are many gems out there, but they are hard to find.”
  • “Soft market potentially decelerating further with tariffs (and countervailing tariffs), labor supply due to deportations.”
  • “The biggest concern we have now and entering 2025 is focused squarely on the U.S. economy. There has been a huge hit to capital and large MRO purchases over the last half of 2024. If we continue to see a very soft market into late Q1-Q2, revenues may have us reviewing staffing and financial positions.”
  • “Tariffs driving inflation but in the wrong direction which will pause or reverse interest rate decreases. This has an immediate impact to our demand.”
  • “Volatility remains a key concern. Pricing and supply chain uncertainty abounds with respect to how much of the tariff discussions will be implemented vs. how much of it is just posturing for negotiations.”
  • “Soft demand and still way too much inventory at OEMs and dealers that needs to be sold before “normal” demand returns.”
  • “Our biggest concern remains regaining margin, even though it appears to have stabilized. The decrease in margin over the last 36 months will likely take just as long to recover.”
  • “Getting out stock levels right since the de-stocking with our customers is now coming to an end; we see a strong uptick in demand and are weary of a next amplitude in the bullwhip emerging. Yet, it is our core role to carry sufficient stock for our customers but avoiding overstocking again.”
  • “Overall demand. The direction of the economy appears to be on a good trajectory but is uncertain. The new administration’s economic policies have the potential to cause upheaval in the global supply chain, which impacts both customer demand and our supply from global manufacturing locations. Using the first term as a guide, it will take 2-3 years to completely sort out and will result in higher inflation.”
  • “My biggest concern is the unknown from an economic standpoint. Nothing is signaling a soft landing as previously predicted, and while the rhetoric of the incoming administration is appreciated, people need to see action that influences immediate improvements to our economy in general. Selfishly, I’d like to see interest rates improve on both new home and consumer loans to trigger more sales.”
  • “My biggest concern is that manufacturing is in a recession, while the overall economy is viewed as robust. This may result in policies that extend the recession in manufacturing.”
  • “Municipalities that we sell to for 65% of our business not opening the purse strings. The government money is all dried up. Our sellers don’t have a hall pass anymore and will need to actually sell and provide value over their competition to gain the business.”
  • “We are looking at an economy that was squeezed with higher interest rates and we are looking at uncertain legal impact on the vehicle market. If for example the electric vehicle market in the larger trucks (semis) continues, we could see soaring freight costs to offset it. Those same trucks running traditional fuels are being hit with heavy EPA regulations, this administration has its work cut out for it to get us products flowing at reasonable prices again. It’s not all about tariff costs, we have a lot to fix in the supply chain.”
  • “We were hoping to see rates fall, and so far, we are seeing the opposite. Our 2025 budget was based on the assumption that demand would increase YoY due to money being cheaper. Also, we aren’t sure where we expect price levels to be by the end of the year. We saw 2.4% deflation in 2024, and we have 1% further deflation budgeted for 2025. However, with the impending increase in HVAC prices due to the refrigerant changes, I think we may end up closer to flat.”
  • “Inflation or low margins will make it harder for us to invest in AI projects and increase the pay of high value employees. Falling behind because we aren’t investing in future technologies or paying our best people enough to stay.”
  • “Uncertainty relating to the unpredictable actions of the new administration, and this uncertainty causing customers to hold off on big changes to their business which will slow our growth. The new leadership coming in has an unfortunate history of inconsistency and whiplash decision-making disconnected from reality. Tariffs and other ill-advised policies will have negative impacts that will go way beyond just driving onshore sourcing. Since onshore sourcing isn’t possible for everything, we’ll just be driving prices up that will have negative impacts on our ability to grow.”

Share this article

About the Author

Sign Up for the MDM Update Newsletter

The MDM update newsletter is your best source for news and trends in the wholesale distribution industry.

Register for full access

By providing your email, you agree to receive announcements from us and our partners for our newsletter, events, surveys, and partner resources per MDM Terms & Conditions. You can withdraw consent at any time.

Learn More about Custom Reports

Request a Market Prospector Demo

  • This field is for validation purposes and should be left unchanged.

Get the MDM Update Newsletter

Wholesale distribution news and trends delivered right to your inbox.

Sign-up for our free newsletter and get:

  • Up-to-date news in a quick-to-read format
  • Free access to webcasts, podcasts and live events
  • Exclusive whitepapers, research and reports
  • And more!