09 Apr The Latest Insights for the Electrical, Plumbing & Hardware Wholesalers Industry
Anthony Citrolo, CPA – The NYBB Group
Trend: Rise of Multi- Story Distribution Centers
According to the Quarter 4 Industry Update from First Research by Dun & Bradstreet and M&A Source, an increasing number of distribution centers in the U.S. are considering the investment of multi-story warehouses. The trend, already common in more populated areas of Europe and Asia, offers companies a way to stay competitive and maximize efficiencies in the increasingly competitive market.
The industry for electrical, plumbing and hardware wholesalers is predicted to see an increase in domestic demand at an annual compound rate of 3% between 2019 and 2023, according to the report. Still, despite the forecasted industry growth, there are some challenges that businesses in this sector are likely to encounter due to changes in the market. These changes are encouraging businesses to get creative in the way they operate as their role becomes redefined.
In recent years, the market has seen an uptick in consolidation among customers. As a result, the number of customers who are able to purchase directly from the manufacturers in bulk is increasing and is a potential threat to distributors. According to the report, the four largest home improvement center companies control more than 90% of the market and can buy in bulk directly from manufacturers. Furthermore, the dependence of many small distributors on a few large customers could pose a risk in light of the current consolidation trend.
Another challenge that wholesalers are facing is advancing technology. As technology improves and delivery systems continue to enable customers to order what they need with shorter delivery times, the industry is seeing more orders going directly to the manufacturer. In conjunction with this competition, distributors remain reliant on personnel having a wide knowledge of the industry they supply. This knowledge enables distributors to give useful advice on supplies, parts and equipment to their customers. The disadvantage to this is that is costs more to pay employees.
Wholesalers are facing a lot of industry change at the moment, which can be tricky. Fortunately there are two major trends that can help them to regain their competitive edge and evolve with their industry: redefining their role in the market and considering multi-story distribution centers.
Traditionally, distributors played a passive role in the product to consumer chain. However, given the recent industry trends and conditions, many distributors are staying competitive by taking on a more active role. To do this they are adding services like customer inventory management, providing technical support for customers and offering a mobile app that allows customers to find and order products with ease.
Multi-story distribution centers are another way that wholesalers can stay relevant in the current market. While being able to increase the amount of storage space that you offer as a company is always a benefit, the increased costs of land make buying larger one-story warehouses difficult. However, having the increased warehouse space without the increased land costs could benefit a company greatly by giving them the ability to carry larger amounts of stock, offer customers inventory management and stay the top choice of their larger customers who might otherwise be tempted to go directly to the manufacturer.
If you would like to discuss this article or schedule a private and complementary consultation, please contact Anthony at Anthony@nybbinc.com or 516-346-5272.