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Digital Wholesale Distributor Trends

The Wholesale Distribution Industry continues to grow. It has gone from a 3.2 trillion to 5.3 trillion industry in the last 12 years. B2B revenue has increased over 50% in the last 3 years, with over 10% of all revenue coming through the e-commerce channel.

Although the industry is growing, the number of distributors is shrinking, dropping from roughly 270,000 to 245,000 in the last 10 years, as a result of industry consolidation through acquisitions. Merger & Acquisition activity has doubled over the last 5 years, alone. Additionally, distributors continue to vertically integrate through specialty manufacturing and increased services. Revenue from services has increased from 8% to 22% over the last 10 years.

Industry Digital Transformation is top of mind for growing distributors. Old, antiquated systems that had served them well for 20 to 30 years are reaching end of life, and can no longer support business growth. New business models and processes are causing distributors to ask themselves if they can continue to add new code to already highly modified applications, or if they should move to a new digital enterprise solution that will carry them through the next 30 years. Top digital imperatives include streamlining ERP systems, improving e-commerce platforms, implementing business intelligence and taking full advantage of human capital management technology.

New technology is also of high interest as the Wholesale Distribution industry matures. The average age of an employee in the industry is 43. Over 1/3 of Wholesale Distribution industry employees are over the age of 55 & 1/4 of workforce retiring in next 5 years. Distributors need to prepare for at least 75% of their workforce being comprised of millennials by 2020. In order to attract and retain millennials, distributors require current technology that will keep the new generation engaged and excited. Over half of all distributors now have a strategic plan surrounding human capital that includes, in part, replacing old and outdated systems.

In the past traditional distributors focused on:

  • Driving future revenue
  • Providing a customary product offering
  • Analyzing abundant sheltered information
  • Managing the retirement and aging process
  • Acquiring organizations for geographic expansion

Today digital distributors are focused on:

  • Managing current margin Offering value-added services as competitive differentiator
  • Leveraging empowering analytics
  • Preparing for the next generation of employees
  • Developing new vertical business models

It is clear that distributors want to evolve in our digital economy to sustain growth by increasing revenue while controlling operating expenses. Distributors in all sub-segments continue to invest in technology to unite the company over time, towards a common set of information systems. It is refreshing that the SAP product strategy for the wholesale distribution industry allows for solutions to be deployed by business model or process, ensuring that distributors can accomplish digital transformation goals in phases.

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