After a tough 2020, where total annual sales by U.S. distributors and wholesalers dropped by 5% because of the economic ups and downs of the COVID-19 pandemic, 2021 is shaping up to be a solid rebound.
In 2020, total U.S. distribution and wholesaler sales dropped by 4.8% to $5.798 trillion from $6.088 trillion, according to data from the U.S. Department of Commerce. But so far, and through the first six months of 2021, distributors are up by 22.1% to $3.388 trillion from $2.774 trillion the first six months of 2020.
Based on an analysis of data for its forthcoming 2021 B2B Distributor 300 report, Digital Commerce 360 projects that total distributor and wholesaler sales are on track to grow by about 15% to $6.644 trillion from $5.798 trillion in 2020.
That projected annual growth rate of 15% is below the 22% clip at which total distributor sales grew for the first six months of 2021. But several significant factors may yet slow distributor sales in the back of the year.
For starters, the new delta variant of COVID-19 already has dialed back some economic growth and adversely impacted the labor market. Distributors and wholesalers also still face challenges ranging from supply chain disruptions, a shortage of workers for distribution centers, the skyrocketing price of wood pallets and related items, and other increasing delivery costs.
“This year, the supply chain has become a competitive sport,” W.W. Grainger Inc. CEO D.G. Macpherson told analysts on the company’s recent second quarter earnings call. “The year has been characterized by strong demand but a very challenging supply chain environment. Raw material shortages, labor shortages and transportation challenges have been the norm, particularly in the second quarter.”
Distributors such as Grainger anticipate that supply chain disruption issues will impact their business and logistic operations until at least some point next year. “We expect the supply chain challenges to last through the end of the year and likely well into next year,” Macpherson said.
The growth in monthly and total annual distribution sales have a big impact on distributors and their ecommerce operations. That’s because the COVID-19 pandemic permanently accelerated the shift from offline to online business purchasing from younger purchasing managers that prefer self-service ecommerce and digital sales channels. Only about 20% of B2B buyers say they hope to return to in-person sales, even in sectors where field-sales models have traditionally dominated, such as pharmaceuticals and medical products, according to a survey from McKinsey & Co.
70% of B2B decision makers also say they are open to making new, fully self-serve or remote purchases of more than $50,000, and 27% would spend more than $500,000, McKinsey says.
Distributors also closely watch monthly and total distribution sales for direction on how to keep their ecommerce programs and strategies flexible based on shifts in business buyer behavior. At Global Industrial Co.—formerly known as Systemax and a distributor of industrial supplies and maintenance, repair and operations products—the company has made investments in ecommerce to stay flexible in challenging times, says CEO Barry Litwin.
“Supply chain, labor availability and freight disruptions continue to be widely reported across all segments of the economy,” he told analysts on a recent earnings call. “We’re building a scalable infrastructure that will support future growth and positions us for long-term success—with a powerful customer growth model, we remain well positioned to further capitalize on the shift to B2B ecommerce.”
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