Wholesale Sector

The wholesale distribution industry in the US includes about 300,000 companies with combined annual sales of nearly $5 trillion. Large distributors include SYSCO (foods); McKesson (drugs); and Avnet (electronics). Distributors specialize by product. In many product segments, the 50 largest distributors generate between 40 and 60 percent of revenue.

COMPETITIVE LANDSCAPE

For most distributors, demand is closely linked to local economic activity. The profitability of individual companies depends on efficient inventory management and order fulfillment operations. Large companies can supply customers with a wider range of goods and in more markets, but smaller distributors can compete successfully by carrying specialty products or providing add-on services. The industry is capital-intensive: average annual revenue per worker is over $1 million for large distributors, about $500,000 for smaller ones.

Computer and communications technology have had a major effect on the industry by improving the efficiency of warehouse and distribution operations. Because of automation, industry labor productivity improved more than 40 percent in the past 10 years.

Supply chain efficiencies allow some manufacturers and retailers to bypass independent distributors. Manufacturers account for 32 percent of wholesale trade in the US, up from 22 percent 10 years ago. And large retailers like Wal-Mart operate their own distribution systems, taking products directly from producers.

PRODUCTS, OPERATIONS & TECHNOLOGY

The major segments of the wholesale sector are wholesale merchants of durable goods (42 percent of revenues); wholesale merchants of nondurable goods (46 percent); and business to ...