Wholesale Sector Industry Profile

The wholesale distribution industry in the US includes about 300,000 companies with combined annual sales of about $5 trillion. Large distributors include SYSCO (foods); McKesson (drugs); and Avnet (electronics). Distributors specialize by product. The industry is highly fragmented: the 50 largest distributors generate about 25 percent of industry revenue.

Top global companies include Switzerland-based pharmaceutical distributor Alliance Boots GmbH, Taiwan-based components wholesaler WPG Holdings, Japan-based medical distributor Mediceo Corporation, Brazil-based petroleum products wholesaler Petrobras, and Germany-based chemical distributor Brenntag AG.

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 about $900,000.

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 15 percent between 1999 and 2009.

Supply chain efficiencies allow some manufacturers and retailers to bypass independent distributors. Manufacturers account for nearly 30 percent of wholesale trade in the US. And large retailers like Wal-Mart operate their own distribution systems, taking products directly from producers.

Imports have become a more important source of supply for distributors, as ...