Top 20 Industrial Distributors
By Jenel Stelton-Holtmeier
Amid political noise and tepid economic growth, the general sentiment among companies on MDM’s list of the top 40 industrial distributors in 2015 was that business is “OK.” The list, which presents the largest distributors in North America, was recently released and is now available at www.mdm.com.
If you compare this year’s list to last year’s, you’ll notice a significant shift. Wolseley Industrial Group is no longer at the top of the list, as it has been since the inception of the MDM Market Leaders. Wolseley actually posted revenue gains of more than 12 percent in 2015 – strong growth in a year when many other industrial companies struggled – but we have refined how we rank certain companies to better reflect the competitive landscape for industrial distribution. As a result, Wolseley Industrial Group, which accounts for about 11 percent of Wolseley’s U.S. sales, shifted further down the list.
Chicago-based W.W. Grainger now tops the list, with nearly $10 billion in sales in 2015. HD Supply, Atlanta, continued to streamline its operations throughout the year, selling its Power Solutions business to Anixter International, but still landed at No. 2 with $7.4 billion in revenue. And Radnor, Pennsylvania-based Airgas took the No. 3 slot for the year, with $5.3 billion in sales.
Revenue growth for many top distributors was tepid. Grainger reported less than 1 percent growth, while Kaman Distribution Group grew by 1.3 percent.
But that low growth was positively rosy when compared to companies that rely heavily on oil and gas-related markets. MRC Global and Now Inc. (DistributionNOW) saw sales plummet more than 20 percent in 2015. The devastating decline in crude oil prices appears to have bottomed, and the West Texas Intermediate price has seen a generally positive trajectory since April. But as one industrial distributor told MDM, the industry is still in the “hangover phase” and has a long way to go to adjust to the new market standards.
As part of the 2016 Market Leaders, MDM also publishes the annual Distribution Trends Special Issue. Here are some of the trends MDM is tracking this year:
1) Finding – and keeping – talent remains one of the most critical challenges for industrial distributors. As veteran workers continue to age out of the workforce, the industry continues to struggle to bring new workers in. Millennials currently make up about 26 percent of the industrial wholesale trade workforce, compared to 35 percent of the general
workforce, according to the U.S. Census Bureau’s Current Population Survey. Baby boomers and the silent generation still account for nearly half of the workforce in industrial distribution.
Since 2015, companies’ hiring and training focus shifted somewhat. Rather than looking for the mythical unicorn employee – the one who walks in the door with all the right skills and experience – distributors recognize that if an employee has the right values and cultural fit, they can be trained on many of the industry-specific skills, such as sales technique or product applications. Increased employee tenure is an added benefit of investing in development programs. As The Conference Board’s Rebecca Ray told MDM:
“One of the most important levers that a company has to retain talent is to continually offer opportunities to grow and learn.”
2) E-commerce remains a priority, as more tools become available to distributors of all sizes. But the focus on technology investment has widened, as companies start to bring IT personnel out of the shadows and into the boardroom. Distributors are still cautious adopters, but many more have embraced the value of software-as-a-service models (or the cloud) as a way to build their technology infrastructure. And it has allowed distributors to improve how they communicate internally and externally.
3) New technology has also enabled better use of data throughout the distribution company. More distributors are using analytics to help them improve customer interactions, prospecting, and even internal process management.
4) Relationships are as important as ever to distribution, but the nature of those relationships has shifted. Customers continue to ask for more services and support from distributors, from inventory management to engineering and design support. And suppliers are starting to request more, as well. Distributors can no longer just be the trusted product provider in order to maintain and grow existing relationships.
5) Diversification is critical for long-term success, as highlighted by the long-term challenges presented by overexposure to oil & gas markets. But many large distributors are discovering that too much diversity can also be a negative. As a result, more companies are looking for ways to refine their offerings while still meeting customer needs.
For some distributors, such as HD Supply, this has meant selling off divisions to focus on a core business line; for others, it has meant finding new partnerships, including master distributors. This realignment is expected to continue.
Data for MDM’s lists of top distributors were based on 2015 revenue size alone. In most cases, we used fiscal 2015 revenue, but in some cases, MDM used calendar-year revenues for an apples-to-apples comparison. Companies were asked to provide data about revenues, and this information was supplemented by SEC filings when available. In the end, not every company was willing to provide revenue data, yet we deemed it important to include them anyway. We utilized several resources to estimate where to place these companies. Revenues for all companies in this report are in U.S. dollars.
Jenel Stelton-Holtmeier is editor of Modern Distribution Management and mdm.com, a specialized newsletter and website for wholesale distribution executives. Reach her at email@example.com.
This article originally appeared in the July/August 2016 issue of Industrial Supply magazine. Copyright 2016, Direct Business Media.