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Page 1: 2017 Wholesale Distribution Economic Trends · 2017 Wholesale Distribution Economic Trends: Revenue Growth for the Industry. 6. Total fourth-quarter 2016 employment in the industry

12017 Wholesale Distribution Economic Trends: Revenue Growth for the Industry

© 2017 Gale Media, Inc. Unlawful copying or sharing of this data is prohibited.

In partnership with:From:

2017Wholesale DistributionEconomic Trends: Deflation drives down distributor growth

Page 2: 2017 Wholesale Distribution Economic Trends · 2017 Wholesale Distribution Economic Trends: Revenue Growth for the Industry. 6. Total fourth-quarter 2016 employment in the industry

© 2017 Gale Media, Inc. Unlawful copying or sharing of this data is prohibited.

22017 Wholesale Distribution Economic Trends: Revenue Growth for the Industry

Executive SummaryDeflation drove down the real value of production in 13 of the 19 major wholesale distribution sectors in 2016, according to the 2017 Economic Benchmarks for Wholesale Distribution report. Aggregate revenues of wholesaler-distributors fell 0.4 percent for the year, but increased 2.2 percent when inflation (or deflation) is considered.

Weak commodity prices hit the oil & gas sector hard. While actual revenues fell 8.6 percent for oil & gas during 2016, when adjusted for inflation sales increased 13.6 percent. If prices stabilize as expected in 2017, the sector should experience solid growth from its much smaller base.

The agricultural products sector also experienced significant pressure from deflation. Revenue in 2016 fell 6.7 percent when compared with 2015; adjusted for inflation, the sector grew 3.4 percent.

The economy and the wholesale distribution industry appear to be turning a corner for 2017, however. Positive outlooks for employment, wages and corporate investment are expected to boost U.S. economic growth overall. All 19 major wholesale distribution sectors are expected to post actual (not adjusted for inflation) revenue growth in 2017 and 2018.

The data in this whitepaper is pulled from the 12th edition of MDM’s Economic Benchmarks for Wholesale Distribution, published each year to provide a comprehensive look at the wholesale distribution industry. The data in the report is based on information collected by the U.S. Census Bureau, the Bureau of Labor Statistics and the Bureau of Economic Analysis – and incorporates periodic revisions released the U.S. government.

Distributors use the Economic Benchmarks for Wholesale Distribution reports to benchmark their performance with data on how much sales and sales per employee have changed in their lines of trade, how much weekly earnings have changed, which end-markets are consuming their products, how sales and inventories have fared quarter-by-quarter and how many companies are competing in their lines of trade.

This executive summary was originally published as a blog on mdm.com. Click here to view the original post.

Page 3: 2017 Wholesale Distribution Economic Trends · 2017 Wholesale Distribution Economic Trends: Revenue Growth for the Industry. 6. Total fourth-quarter 2016 employment in the industry

© 2017 Gale Media, Inc. Unlawful copying or sharing of this data is prohibited.

32017 Wholesale Distribution Economic Trends: Revenue Growth for the Industry

Total revenues of wholesale distributors fell 0.4% to $5.3 trillion in 2016, driven by deflationary pressures bringing down the real value of production in 13 of the 19 industry sectors. Real (inflation-adjusted) revenue increased 2.2% for the year, and correcting for deflation, industry output for the year grew in 14 sectors.

The data in this whitepaper is taken from the 2017 Economic Benchmarks for Wholesale Distribution, published by Modern Distribution Management. NetSuite is the exclusive sponsor for these reports in 2017. To learn more, visit www.mdm.com/2017ebwd.

Wholesale Distribution Industry Revenue Trend: 2012-2016 (Adjusted for Inflation)

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Wholesale Distribution Industry Snapshot

Measure Value% Change vs. Previous Year

Industry Revenues ($B), 2016 $5,272.5 -0.4%

Industry Revenues, 2017 Forecast Growth 3.4%

Industry Inventories ($B), Non-LIFO method $594.5 2.6%

Inventory-to-Sales Ratio, 3-Month Moving Average 1.29 -1.8%

Total Employment, 2016:Q4 4,991,600 0.5%

Average Annual Revenues per Employee $1,060,700 -0.7%

Average Weekly Earnings (non-supervisory personnel) $1,145 2.7%

After price adjustments, the wholesale distribution industry grew faster than the overall U.S. economy in 2016 by 0.6 percentage points (2.2% for wholesale distributors versus 1.6% for U.S. GDP). In 2016, the U.S. economy exhibited its weakest growth since 2011 despite moderate employment growth, low levels of unemployment, record household wealth and positive indicators from both consumers and industry.

Page 4: 2017 Wholesale Distribution Economic Trends · 2017 Wholesale Distribution Economic Trends: Revenue Growth for the Industry. 6. Total fourth-quarter 2016 employment in the industry

© 2017 Gale Media, Inc. Unlawful copying or sharing of this data is prohibited.

42017 Wholesale Distribution Economic Trends: Revenue Growth for the Industry

Major Sector

2016 Revenues

($B)

Avg Gross Margin (2015)

Change in Actual Revenues

(2016)

Change in Real

Revenues* (2016)

Change in Employment (2016: Q4)

2017 Forecast

Pharmaceutical Wholesalers $643.2 9% 6.4% 1.7% 0.1% 9.9%

Grocery and Foodservice Wholesale Distributors

$625.8 13% -0.5% 1.0% 2.5% 4.2%

Electrical and Electronics Wholesalers

$553.2 25% 0.8% 2.0% 1.7% 4.7%

Oil and Gas Products Wholesale Distributors

$504.8 5% -8.6% 13.6% -0.3% 24.2%

Motor Vehicles and Motor Vehicle Parts Wholesale Distributors

$427.7 21% -0.6% -0.4% 0.4% 3.5%

Industrial Distributors $391.7 26% -1.7% -1.7% -1.0% 4.7%

Other Consumer Products Wholesale Distributors

$255.1 17% 1.4% 3.0% -1.4% 2.2%

Commercial Equipment and Supplies Wholesale Distributors

$236.9 32% 9.0% 10.7% 1.2% 5.7%

Computer Equipment and Software Wholesale Distributors

$223.9 22% -3.5% -0.8% -1.7% 3.2%

Miscellaneous Durable Goods Wholesale Distributors

$210.7 22% 0.2% 0.7% -3.8% 2.0%

Agricultural Products Wholesale Distributors

$204.3 10% -6.7% 3.4% -0.5% 1.5%

Apparel and Piece Goods Wholesale Distributors

$162.6 34% -1.7% -1.6% 3.3% 5.6%

Metal Service Centers $140.6 12% -10.3% -5.7% -3.9% 2.2%

Beer, Wine and Liquor Wholesalers $139.2 27% 2.0% 1.6% 4.1% 4.8%

Hardware, Plumbing, and Heating Equipment/Supplies Wholesalers

$134.4 28% 3.8% 3.4% 1.7% 6.4%

Building Material and Construction Wholesale Distributors

$125.2 23% 6.4% 5.5% 4.8% 6.4%

Chemicals and Plastics Wholesale Distributors

$114.5 21% -2.8% 0.2% -0.7% 7.9%

Office Product Wholesalers and Paper Merchants

$95.7 23% -0.1% 2.3% -0.4% 2.1%

Furniture and Home Furnishing Wholesale Distributors

$83.1 32% 4.4% 4.2% 2.3% 5.0%

*Real revenues equal actual revenues adjusted for product inflation/deflation.

Wholesale Distribution Industry Sector Trend Summary

Page 5: 2017 Wholesale Distribution Economic Trends · 2017 Wholesale Distribution Economic Trends: Revenue Growth for the Industry. 6. Total fourth-quarter 2016 employment in the industry

© 2017 Gale Media, Inc. Unlawful copying or sharing of this data is prohibited.

52017 Wholesale Distribution Economic Trends: Revenue Growth for the Industry

The largest sectors in the wholesale distribution industry in 2016 were:

• Pharmaceutical Wholesalers ($643.2 billion)

• Grocery and Foodservice Wholesale Distributors ($625.8 billion)

• Electrical and Electronics Wholesalers ($553.2 billion)

The fastest pace of nominal sales growth in 2016 came from Commercial Equipment and Supplies Wholesale Distributors, Pharmaceutical Wholesalers, Building Material and Construction Wholesale Distributors and Furniture and Home Furnishing Wholesale Distributors.

The fastest pace of real (inflation-adjusted) growth was recorded by Oil and Gas Products Wholesale Distributors and in Commercial Equipment and Supplies Wholesale Distributors, the former reflecting increased production despite price declines. The industry to register the largest decline in 2016 (both real and nominal) was Metal Service Centers.

MDM forecasts that all 19 major sectors will record revenue growth in 2017 and 2018 (in nominal terms). The fastest growth is anticipated in Oil and Gas Products Wholesale Distributors – the only sector projected to record double-digit growth – as rising oil and gas commodity prices prompt increased drilling and production.

Pharmaceutical Wholesalers are projected to have the second-fastest growth, supported by the growing health care sector and aging demographics. The slowest growth is expected for Agricultural Products Wholesale Distributors and Miscellaneous Durable Goods Wholesale Distributors.

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Oil & Gas Distributor Revenue Trend: 2012-2016 (Adjusted for Inflation)

Page 6: 2017 Wholesale Distribution Economic Trends · 2017 Wholesale Distribution Economic Trends: Revenue Growth for the Industry. 6. Total fourth-quarter 2016 employment in the industry

© 2017 Gale Media, Inc. Unlawful copying or sharing of this data is prohibited.

62017 Wholesale Distribution Economic Trends: Revenue Growth for the Industry

Total fourth-quarter 2016 employment in the industry increased by 27,000 jobs (0.5%) over 2015 levels. The wholesale distribution industry now employs nearly 5 million people – more than one out of 25 U.S. private sector nonfarm workers.

The largest year-over-year gains in employment were recorded in Building Material Wholesalers and Distributors (4.8%) and in Beer, Wine and Liquor Wholesaler-Distributors (4.1%).

While the gains outstripped the losses, year-over-year job losses were recorded in nine of the 19 sectors in 4Q2016, with the largest percentage declines in Metal Service Centers (-3.9%) and Sporting Goods (-3.8%).

With decreasing revenue and increasing employment, the average revenue per employee fell to $1,060,700 per employee in 2016. Average weekly earnings in wholesale distribution increased 2.7% and remained above average earnings in all private U.S. industries.

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Wholesale Distribution Industry Employment Trend: 2012-2016

Page 7: 2017 Wholesale Distribution Economic Trends · 2017 Wholesale Distribution Economic Trends: Revenue Growth for the Industry. 6. Total fourth-quarter 2016 employment in the industry

© 2017 Gale Media, Inc. Unlawful copying or sharing of this data is prohibited.

72017 Wholesale Distribution Economic Trends: Revenue Growth for the Industry

About the 2017 Economic Benchmarks for Wholesale Distribution

The 2017 Economic Benchmarks for Wholesale Distribution, sponsored by NetSuite, is the most comprehensive source of accurate data and statistics for the U.S. wholesale distribution industry. The report uses a model originally developed by Dr. Adam Fein and Pembroke Consulting Inc.

The data in this whitepaper comes from the 12th edition of this report, published by Modern Distribution Management (www.mdm.com) in connection with the Business Research Division of the Leeds School of Business at the University of Colorado Boulder.

The data is based on information collected by the U.S. Census Bureau, the Bureau of Labor Statistics and the Bureau of Economic Analysis. Some of the data is based on a proprietary model developed for these reports. The subsectors are based on the North American Industry Classification System (NAICS), though some have been combined and unbundled to better reflect the industry.

For more information on this data, available for 19 sectors, visit: www.mdm.com/2017ebwd.

Page 8: 2017 Wholesale Distribution Economic Trends · 2017 Wholesale Distribution Economic Trends: Revenue Growth for the Industry. 6. Total fourth-quarter 2016 employment in the industry

© 2017 Gale Media, Inc. Unlawful copying or sharing of this data is prohibited.

82017 Wholesale Distribution Economic Trends: Revenue Growth for the Industry

About the Survey Sponsor

The NetSuite Global Business Unit, an independent business unit of Oracle, empow-ers tens of thousands of fast-growing wholesale distributors with software to trans-form and accelerate their businesses. Using NetSuite, distributors can run their busi-nesses on a single, unified platform reducing IT costs and gaining comprehensive, real-time visibility across their organizations.

NetSuite gives your company customer-facing sales force automation and B2B ecom-merce, as well as marketing and customer service capabilities that link seamlessly with back-office inventory management, fulfillment and accounting. In delivering NetSuite for Wholesale Distributors, NetSuite has leveraged experience and lessons learned from thousands of wholesale distribution customers, complemented with a best prac-tice professional services implementation methodology and customization services.

Learn more about SuiteSuccess - NetSuite’s unique approach to implementation and customer success at netsuite.com/suitesuccesswd.

For more information about NetSuite’s offerings for wholesale distribution, visit netsuite.com/wd.