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
Jun 8, 2024 - Wages Climb to Record High
- Average wages at industrial supply distributors jumped 10.1% in March compared to a year ago to an all-time high of $29.01 per hour, according to the US Bureau of Labor Statistics. March’s rise in the average wage coincided with a dip in industry employment, which fell by 0.8% year over year. Producer prices for machinery and supply wholesalers also eased by nearly 1% in March compared to a year ago after rising 16.6% in the previous annual comparison, per the BLS. Sales for machinery and equipment wholesalers fell 9.1% in March as demand eased. Steeply rising wages amid falling sales and prices are an uncomfortable mix for distributors.
- 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.
- More than two-thirds of US manufacturers have a positive economic outlook for 2024, according to the Q4 2023 Manufacturers Outlook Survey of member companies by the National Association of Manufacturers (NAM). Still, opinions are mixed about whether there will be a recession. Large manufacturers are the most optimistic, with 77.5% positive about their company’s outlook, while medium-sized manufacturers are the least optimistic, with 63% feeling positive. While fewer respondents expect a recession in 2024 than three months ago, nearly 41% said they feel uncertain. Over 34% of manufacturers believed the US economy would experience a recession in 2024. This year's top challenge for the manufacturing sector will be the workforce, with the labor market cooling substantially but remaining tight. Notably, NAM reported manufacturing construction spending is at a record high of $210 billion thanks to the production of semiconductors, electric vehicles and batteries, and general reshoring.
- The US manufacturing sector is undergoing a paradigm shift in payment practices, with real-time payments poised to replace traditional methods, according to PYMNTS Intelligence. Real-time payments (RTPs) – instant payments that are processed immediately and continuously, 24/7– are poised to replace checks, ACH (automated clearing house), and other traditional forms of payment, changing how businesses conduct financial transactions. A study by PYMNTS Intelligence and banking association and payments company The Cleaning House finds that 96% of manufacturers expect RTPs to replace traditional checks when making payments, while 87% anticipate the same for receiving payments. Similarly, 81% of firms forecast RTPs replacing standard ACH payments for making payments, while 84% predict the same for receiving payments. However, traditional payment methods will still have a role to play, according to PYMNTS Intelligence, with payment by cash and credit cards expected to remain relatively common.
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