Electrical, Plumbing, and Hardware Distributors
Buy This Industry Report
Get more in-depth industry information with a First Research industry report containing business challenges, trends, executive insight, call prep questions, and so much more!
Get Information Now
Rest assured, your information will not be shared with anyone else (see our privacy policy for details).
Industry Overview
The wholesale distribution of hardware, plumbing, heating, and electrical supplies is a $200 billion industry with about 30,000 outlets. Big distributors include Graybar, True Value, and WESCO. The industry is fragmented: the 50 largest companies hold less than 40 percent of the market.
Competitive Landscape
Sales are driven by demand from the construction, electrical distribution, telecommunications, and hardware retailing industries. Profitability depends largely on merchandising and efficient inventory management. Small operators can compete successfully by stocking specialty products, stocking all the parts their particular customers need, or delivering superior service. The industry is highly automated: average annual revenue per employee is around $450,000.
Products, Operations & Technology
Distributors are middlemen between manufacturers and end-users. The companies in this industry buy large quantities from hundreds of manufacturers, then "break bulk" and resell them to thousands of customers, thereby allowing customers to buy small quantities of products from many different manufacturers. In addition to selling products, many distributors provide technical knowledge and support and some provide maintenance and repair. A specialty distributor of fasteners (screws, nuts, bolts) may buy some 100,000 stock-keeping units (SKUs) from 1,000 manufacturers and sell to around 6,000 customers. Electrical supplier WESCO buys some 200,000 items from around 6,000 suppliers and sells to about 130,000 customers.
Small distributors usually operate out of a single location. Tracking inventory and sales and restocking are major activities. A national distributor might operate numerous small distribution centers of 20,000 to 50,000 square feet throughout the country, or might maintain a hierarchical system of zone and area warehouses and district distribution centers. A regional distributor might service mainly from a large central 500,000 square feet distribution center.
Companies take orders over the phone, by fax, and increasingly by electronic data interchange (EDI) or over the Internet. Large deliveries may be made via a fleet of owned trucks or by third parties. Small orders are usually picked up by the customer.
Fast service and a wide selection are key, as firms act as the inventory warehouse for customers. Distributors closely monitor "fill-rate," the percentage of items shipped to customers within 24 or 48 hours; a good rate is above 95 percent. Many distributors provide free same- or next-day delivery, extend credit, and offer product advice and training.