Industrial Supply Distributors
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 5,800 industrial supply distributors in the US purchase maintenance, repair, operating, and production (MROP) supplies in bulk and resell them to customers in smaller quantities. Product categories include abrasives, strapping, tape, and inks; mechanical power transmission supplies; industrial containers and supplies; industrial valves and fittings; and welding supplies. Distributors may offer technical support, repair, or assembly services.
Offshore Production
Offshoring of manufacturing production to low-wage countries reduced demand for domestic industrial supply distributors.
Growth in Green
The growing interest in the environment and energy efficiency has created a demand for “green” products and expertise.
Industry size & Structure
A typical industrial supply distributor operates out of a single location, employs 18 workers, and generates $11-12 million annually.
- The industrial supply distributor industry comprises about 5,800 companies that employ 105,000 workers and generate $64 billion annually.
- Customer categories include manufacturers (OEMs), institutions, government, utilities, construction, and mining.
- Large broad-line distributors carry over 1 million SKUs purchased from thousands of suppliers.
- Large domestic companies include W.W. Grainger, HD Supply, and Airgas.
Industry Forecast
Industrial Supply Distributors Industry Growth
Recent Developments
Oct 8, 2024 - Prices Dip Amid Rising Inventories
- Producer prices for machinery and supply wholesalers dipped 0.6% in July compared to a year ago after rising 6.1% in the previous July-versus-July annual comparison, according to the latest US Bureau of Labor Statistics data. After climbing steeply beginning in mid-2021, producer prices lost steam beginning in 2023 as the US manufacturing contracted. Inventories for machinery and equipment wholesalers rose 13% year over year in June amid falling sales. Employment by industrial supply distributors fell 0.6% YoY in July, while average industry wages rose 2.9% over the same period to $28.49 per hour, BLS data show.
- Presidential campaign promises to strengthen the languishing US manufacturing sector, if realized, would likely drive domestic demand for industrial supplies. As part of her “America Forward” agenda, VP Kamala Harris has outlined $100 billion in new investments in manufacturing, offering tax credits to boost investment and create industrial jobs, investments in AI, science, and energy development, and supporting American-made products. Former President Trump has proposed instituting a four-year plan to boost domestic manufacturing so that the US doesn’t need to rely on China for crucial goods. He has promised big corporate tax cuts for manufacturing and protectionist across-the-board tariffs. In September, Trump threatened to slap farm and construction equipment manufacturer John Deere with a 200% tariff if it moved some production from Iowa to Mexico as planned. The Fed’s rate cut in September and the signal of more to come by year’s end will benefit the US industrial sector.
- US wholesale prices rose by a larger-than-expected 2.6% in June from a year earlier, a sign that some inflation pressures remain elevated, according to the Labor Department. The June rise in wholesale prices was the sharpest year-over-year increase since March 2023 and comes at a time when other price indicators show that inflation has continued to ease. Month over month, the producer price index rose 0.2% in June versus May. The June increase in wholesale inflation was driven by a 0.6% rise in services prices, led by higher profit margins for machinery and auto wholesalers, according to the Labor Department.
- May was a busy month for distributor dealmaking activity, according to Modern Distribution Management (MDM). Deal volume, as tracked by MDM, spiked to 40 in May, the most distribution deals – pending or completed – tracked by MDM since at least the start of 2023 that involved at least one distributor. May’s total was a significant increase relative to the first four months of 2024, during which deal volume averaged 25 transactions per month. Ferguson accounted for four of the deals with four bolt-on geographic and capability acquisitions. In total, the company has closed on eight acquisitions this fiscal year (ends July 31, 2024) with aggregate annualized revenue of approximately $350 million. Home to many small players, the industrial distribution market is ripe for consolidation. Technological advancements are driving consolidation. Companies with solid ecommerce platforms and effective digital channel deployment are becoming increasingly prized, Supply House Times reports.
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