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). Only about 3,000 companies have annual revenue over $100 million, but these large companies account for 70 percent of industry revenue. A typical midsized distributor has 30 employees and annual sales of $15 million.

Distributors specialize by product. Within product segments, concentration is often moderately high. In many segments, the 50 largest distributors hold between 40 and 60 percent of the market.

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 highly automated: 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 ...