1. Vending explodes among the largest industrial distributors. As reported in the 2012 Distribution Trends Report, The Fastenal Company and MSC Industrial Supply have targeted vending as a growth opportunity. Sales to vending customers can be two times that of other customers, and the customer stickiness factor is attractive to these national distributors. Smaller local and regional distributors say that the nationals' focus on vending as a growth area has challenged them in some cases to either move into the space, bolster their current positions in vending or vendor-managed inventory, or better educate customers on where vending might be the best option.

 

2. More activity by North American distributors in global markets. Either as a hedge against downturns in North American markets or because new growth is more limited as the economy fights to return to a stronger growth rate, distributors are increasingly looking to other countries for growth. They are not only following customers overseas, but they are also targeting local customers in those regions. Canada continues to be a target, but more and more distributors large and small are targeting Mexico and South America as opportunities for growth. Mexico is gaining ground as an attractive market as more manufacturing and assembly moves closer to the U.S. Europe has drawn some of the larger distributors - Grainger for one expanded into Europe in a big way with the acquisition of Europe-based fasteners distributor Fabory in 2011.

 

3. More activity by European distributors in North American markets. The top distributor on the Top 40 Industrial Distributors list, Ferguson/Wolseley Canada, continued to acquire in North America even though its parent company, Wolseley plc, sold off businesses in Europe. Dutch industrial distributor ERIKS made a big play in North America with the acquisition of Lewis-Goetz and Co. this year, doubling its sales on the continent to $700 million. The Wurth Group, a Germany-based conglomerate of 400 companies worldwide, acquired Oliver Van Horn Co. in late 2010 as a platform to grow its industrial supplies capabilities in the U.S.

 

4. National accounts and/or integrated supply account growth. For years now, national accounts or integrated supply opportunities have been growing. This year, many distributors noted ongoing opportunities to serve customers nationwide. Smaller and midsize distributors continue to work with other distributors via buying and marketing groups or through co-ops or partnerships to compete on a national level.

 

5. More sophistication in the use of online tools. Distributors have started to sift through the capabilities that online tools can provide their customers and choose the ones that work best for their business models. Oft-cited e-commerce leader Grainger continues to grow its sales online - which now comprise more than a quarter of its total volume. However, many other distributors in this sector have focused more on the customer service aspect of online tools, such as tracking shipments, getting invoice histories, or making repeat buys through an existing customer portal. "Our value proposition is not limited to a pure transaction," says Phil Derrow of OTP Industrial Solutions. "It's the expertise we bring to bear."

 

6. Higher levels of technology in products drive opportunities for distributors. "Part of our job is sifting through the changes in product offering," Derrow says. OTP is also capitalizing on the opportunity to use technology to offer services, such as monitoring equipment remotely for customers. "It saves customers money and extends machinery's life," he says.

 

7. Continued focus on building out service capabilities organically or through acquisitions. Distributors not only continue to diversify product offerings, but they also worked over the past year to diversify the services that they offer. Safety has been of particular interest to many distributors big and small. DXP Enterprises has been one of the most active in building up safety service capabilities in the past couple of years.