Top 10 List
These companies are the 2010 market share leaders among industrial distributors
by Lindsay Konsack
About six months ago, the specialized information Web site and newsletter for distributors, Modern Distribution Management (www.mdm.com), embarked on a project to list the top distributors by revenue in six sectors: Industrial, Power Transmission/Bearing, Electrical, HVAC/Plumbing/PVF, Electronics and Building Materials/Construction. In partnership with other organizations, MDM also presented the top 10 distributors in plastics and pharmaceuticals. The lists can be found at www.mdm.com/marketleaders.
MDM worked to make the lists as complete as possible; while not every distributor presented revenue figures, MDM included them anyway in the interest of presenting a complete picture of the industry (e.g. McMaster-Carr). This special report prepared for Industrial Supply magazine highlights the top 10 distributors on MDM's list of the top 40 industrial distributors. The Top 40 are at www.mdm.com/marketleaders.
| Company | Size (in billion $) |
| Wolseley | $22.9 |
| HD Supply | $7.4 |
| Grainger | $6.2 |
| Airgas | $3.9 |
| McJunkin Red Man |
$3.7 |
| Motion Industries | $2.9 |
| McMaster Carr | (estimated) |
| Applied Industrial Technologies | $1.9 |
| Fastenal | $1.809 |
| Wilson Industries | $1.807 |
At the top of the industrial list was Wolseley, at $22.9 billion, despite its shedding of Stock Building Supply in 2009. HD Supply came in at No. 2, with $7.4 billion in 2009 sales, while Grainger was No. 3 at $6.2 billion. The next several distributors on the list have seen great growth over the past five years either due to acquisitions or to green-fielding and product line expansion.
Among them: Radnor, Pa.-based Airgas, which comes in at No. 4 with $3.9 billion in revenues. Airgas has seen incredible growth over the past five years, going from $1.8 billion in 2004, to its current figure of $3.9 billion, a 116 percent increase. That growth has been driven by acquisitions. Indeed, the distributor acquired 14 companies in 2009, and 13 in 2008. Airgas is now faced with a hostile takeover attempt by Air Products; interestingly, Air Products sold its U.S. packaged gas business to Airgas in 2002.
Every distributor on the list recorded a sales decline in 2009, with the exception of Perry Supply (No. 31), which attributes its sales increase to a focus on global mining markets, which have seen strength despite the recession.
In addition to the lists of top distributors in these sectors, MDM also presented an in-depth Distribution Landscape report that presented an overview of trends and issues being faced in distribution markets. The report reflects the past year while documenting where the distribution industry is today.
MDM spoke to dozens of distributor on and off its lists to present the trends, opportunities and challenges these distributors faced in 2009 and continue to face in 2010. Distributors said sales improved in the first half of 2010 and they were much more optimistic than a year ago.
Charles Gray, owner of industrial distributor Machinery and Factory Industrial Supply, Racine, Wis., told MDM, "The light at the end of the tunnel right now is not the proverbial oncoming train. We business owners are sleeping better these days."
Distributors said they were adjusting to what has been referred to as the "new normal." MDM Publisher Tom Gale wrote in a recent issue of MDM that market-leading distributors are rethinking their models for 2010 and beyond. They are focused on building a leaner, productive operation, built on the strengths and values that made them successful in the first place.
As David Gordon of Channel Marketing Group said,"If you want to get back to 2007 revenues, you have to identify where that business will be because the drivers of 2007 will not be the drivers of 2011."
Every distributor will approach this strategic task differently, but most recognize they cannot be everything to everyone without stretching their limited resources. So they are recalibrating their organization's mindset and building a strategy to capitalize on shifts in the market and meet changing definitions of value at the customer level.
In addition to these broader shifts in perspective, distributors noted other trends already in motion before the recession hit. E-commerce, for example, continues to be a bigger and more important part of many industrial distributors' sales and marketing strategies. Many distributors in this sector have launched revamped Web sites in 2009-2010, with a focus on e-commerce capabilities.
Grainger and Hagemeyer were among the largest distributors to announce site redesigns in 2009. And more distributors, big and small, are considering or are moving their catalogs online, recognizing that a new generation of buyers wants to get information in different ways.
Another continuing trend: product expansion. Large distributors in the industrial distribution sector continued to expand their product selection over the past year to meet more of their customers' needs. Grainger added 64,000 products to its catalog, a 33 percent increase over the prior year. Some distributors launched specialty catalogs. And green products have been increasingly popular as well, with several distributors putting out green-focused catalogs, including Grainger, HD Supply, MSC Industrial Supply and Barnes Distribution.
While distributors continue moving forward on these initiatives, many distributors remain constrained by a decrease in resources over the past two years. Industrial distributors slashed inventory to historic lows in 2009; the question of when and how to build that back up to meet growing demand remains on most distributors' minds. And distributors in this sector, like in most, cut staff and costs across the board. In fact, few made it through the year without cutting jobs.
And finally, industrial distributors that have traditionally supplied manufacturing facilities continue to face a shrinking customer base. That has been magnified with the recession, which forced major product cutbacks and facility closures
In response, some distributors told MDM they have diversified their focus. Some have looked to government customers, where demand has been relatively steady, if not strong; and others have diversified into alternative energy sectors such as geothermal and wind power. Or distributors are increasing their focus on institutional customers such as schools or health care facilities, which are less cyclical than their traditional customer bases.
Due to these trends and continued consolidation in the channel, MDM expects some dramatic shifts to our list of top 40 industrial distributors by revenue next year, as some distributors won't adapt as well, but others will reap the rewards for finding and exploiting some of the emerging opportunities.
To view the full set of MDM Market Leaders lists, go to www.mdm.com/marketleaders. MDM Editor Lindsay Konzak can be reached at lindsay@mdm.com.
This article originally appeared in the July/August 2010 edition of Industrial Supply magazine. Copyright 2010, Direct Business Media, LLC.
INDUSTRIAL SUPPLY MAGAZINE
The November/December issue of Industrial Supply magazine features an in-depth cover story about Kimball Midwest. Plus, we're featuring articles by contributing writers Dirk Beveridge, Frank Hurtte, and Mike Marks, as well as interviews with numerous product and distribution industry experts.
