The 2020 Mid-Year Economic Update_long

February 10 2009

Volume 39, Issue 3 - 02/10/2009

Volume:

39

Issue:

3

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Features
While many consumers were cheering the drop in the price of oil this fall, the sentiment was mixed when it came to wholesaler-distributors.
 
Certainly, transportation costs may come down - particularly for distributors who rely on their own fleets for delivery. But for those who sell oil-based products like plastics and industrial lubricants, the value of inventory has also plummeted.
 
The trend is not limited to oil. The prices of most products on the commodities markets are falling as the world economy continues its downward spiral. Copper has lost more than 60 percent of its value since last summer; lumber has fallen to the lowest prices in 20 years. Corn and wheat saw similar spikes and falls in the past year.
 
The bubble has ...
Amazon.com surprised everyone in late January when it announced North American revenues were up 18 percent for the fourth quarter of 2008, and its earnings grew almost 10 percent compared to the year earlier fourth quarter. Worldwide sales of electronics and other general merchandise sales grew 31% to $2.89 billion for the quarter.
 
One aspect of Amazon's success was that they had a successful new product that generated a lot of interest and did well: the Kindle electronic book reader.
 
What does that have to do with distributors? I think there are several important lessons for distributors when you start to look beyond the numbers. To start, last quarter was the worst holiday shopping season in decades for traditional retail across all categories. ...

Manufacturers have for the past couple of decades commonly offered pricing tiers to distributors, setting purchase quotas to qualify for price discounts and offered rebates based on growth and penetration. These rebates have been of great benefit to distributors - actually we buy our bottom lines - and have been the primary driver behind the growth of buying groups.

In some industries, rebates based on quantity purchases alone have been removed from the table. Pricing at the time of purchase, and special rebates or pre-bates to grow specific markets seem to be the emerging trends.

This means that many in distribution will have to rethink their purchasing strategy and start to look at shorter term growth and market penetration. Pre-bates are paid ...

Grainger, Chicago, IL, has named Court Carruthers to a newly created position as president of its international businesses in Canada, Mexico, and China. Carruthers' new responsibilities include growing and improving Grainger's international business operations, which had sales of more than $800 million in 2008. Carruthers is currently president of Grainger's Canadian subsidiary, Acklands-Grainger. More

Grainger reported sales of $6.9 billion for the year ended Dec. 31, 2008, up 7 percent from 2007. Profit of $475 million was up 13 percent. Grainger reported that it is somewhat below the low end" of the range it provided in November for 2009 of -5 percent and +5 percent. In ...
This is the pdf of this issue of Modern Distribution Management. Apply the full $24.95 pay-per-view cost toward an annual subscription (within 30 days of purchase), which includes two issues a month plus access to more than six years of online archives and market data. Call 1-888-742-5060 or email info@mdm.com to ...
MDM and Dr. W.R. McCleave, PE, recently surveyed readers on how they are responding to changes in the economic environment as it pertains to profitability in 2009. This article is an overview of those results. McCleave advises readers to reflect on the results and act accordingly with respect to their own situations. More than 250 industry executives responded to the survey from more than a dozen distribution sectors.

In a nutshell, the idea that resonated throughout the survey results was: Now is the time to act. As one respondent wrote, Climb into bed with your income statement, and act now. Responses to the profitability survey indicate that distributors and manufacturers are indeed responding to the new market conditions. ...
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While many consumers were cheering the drop in the price of oil this fall, the sentiment was mixed when it came to wholesaler-distributors.
 
Certainly, transportation costs may come down - particularly for distributors who rely on their own fleets for delivery. But for those who sell oil-based products like plastics and industrial lubricants, the value of inventory has also plummeted.
 
The trend is not limited to oil. The prices of most products on the commodities markets are falling as the world economy continues its downward spiral. Copper has lost more than 60 percent of its value since last summer; lumber has fallen to the lowest prices in 20 years. Corn and wheat saw similar spikes and falls in the past year.
 
The bubble has ...
Amazon.com surprised everyone in late January when it announced North American revenues were up 18 percent for the fourth quarter of 2008, and its earnings grew almost 10 percent compared to the year earlier fourth quarter. Worldwide sales of electronics and other general merchandise sales grew 31% to $2.89 billion for the quarter.
 
One aspect of Amazon's success was that they had a successful new product that generated a lot of interest and did well: the Kindle electronic book reader.
 
What does that have to do with distributors? I think there are several important lessons for distributors when you start to look beyond the numbers. To start, last quarter was the worst holiday shopping season in decades for traditional retail across all categories. ...

Manufacturers have for the past couple of decades commonly offered pricing tiers to distributors, setting purchase quotas to qualify for price discounts and offered rebates based on growth and penetration. These rebates have been of great benefit to distributors - actually we buy our bottom lines - and have been the primary driver behind the growth of buying groups.

In some industries, rebates based on quantity purchases alone have been removed from the table. Pricing at the time of purchase, and special rebates or pre-bates to grow specific markets seem to be the emerging trends.

This means that many in distribution will have to rethink their purchasing strategy and start to look at shorter term growth and market penetration. Pre-bates are paid ...

Grainger, Chicago, IL, has named Court Carruthers to a newly created position as president of its international businesses in Canada, Mexico, and China. Carruthers' new responsibilities include growing and improving Grainger's international business operations, which had sales of more than $800 million in 2008. Carruthers is currently president of Grainger's Canadian subsidiary, Acklands-Grainger. More

Grainger reported sales of $6.9 billion for the year ended Dec. 31, 2008, up 7 percent from 2007. Profit of $475 million was up 13 percent. Grainger reported that it is somewhat below the low end" of the range it provided in November for 2009 of -5 percent and +5 percent. In ...
This is the pdf of this issue of Modern Distribution Management. Apply the full $24.95 pay-per-view cost toward an annual subscription (within 30 days of purchase), which includes two issues a month plus access to more than six years of online archives and market data. Call 1-888-742-5060 or email info@mdm.com to ...
MDM and Dr. W.R. McCleave, PE, recently surveyed readers on how they are responding to changes in the economic environment as it pertains to profitability in 2009. This article is an overview of those results. McCleave advises readers to reflect on the results and act accordingly with respect to their own situations. More than 250 industry executives responded to the survey from more than a dozen distribution sectors.

In a nutshell, the idea that resonated throughout the survey results was: Now is the time to act. As one respondent wrote, Climb into bed with your income statement, and act now. Responses to the profitability survey indicate that distributors and manufacturers are indeed responding to the new market conditions. ...