Bruised and battered from one of the worst years in the distribution trade's history, attendees came to this year's annual conference of the National Association of Wholesaler-Distributors (NAW) singing the same song: We are already lean beyond belief. We are feeling mean because of the -20 percent or worse shellacking our sales took in 2009. We have honed our businesses into efficient fighting machines to battle our way out of the recession. What ideas do you have to help us survive?
Gathering Jan. 26-28 in Washington, D.C.'s Fairmont Hotel, wholesalers from a diverse array of distribution trades were treated to a mix of economic and political forecasts, a panel discussion where several distributors discussed their survival strategies and sessions on best practices in sales, marketing and hiring.
Economist Alan Beaulieu, president, Institute for Trend Research, Bascawen, N.H., is encouraged by some of the leading economic indicators he tracks and says better times are not that far down the road. “Inventory replenishment is starting,” he said at NAW. “2010 is that rocky bottom where the second half is better than the first. Commercial construction will have to wait until 2011.”
Beaulieu also calmed fears about a potential replay of the subprime crisis in the commercial construction market. He said banks have a sufficient money supply to cover any loans that do go bad, and that on the whole they are now operating much more responsibly after what they have been through with bad residential loans. He estimated that $500 billion in commercial loans are coming due in 2010-2011, and that banks have $800 billion in funds in reserve.
Beaulieu did say, however, that inflation could very well hit 6.5 percent by next year and that 2010 is the time for businesses to buy buildings and invest in capital equipment because they will be more expensive next year. “Inflation is coming, and all of us have to worry about it,” he said. “It will show up first in commodities. Interest rates have been historically low.”
One of the highlights of any NAW conference is the opportunity attendees have to learn how distributors in other lines of trade are solving common business problems. Distributors are all looking for different indicators unique to their markets that suggest their business will improve. Charles Banks, chairman of U.S. Foodservice, Rosemont, Ill., a $19 billion food distributor, is looking for signs that people are eating out more again and, when they are in a restaurant, that they are ordering dessert — a high-profit item. He also tracks pricing changes basic food commodities, such as including beef, pork and corn.
David Pugh, chairman and CEO, Applied Technology, Cleveland, a $1.9 billion broad-line distributor in the MRO market with a focus on the power and transmission, bearings and fluid power business segments, watches capacity utilization and inventory levels at industrial facilities. He says Applied Technology focuses on the bowels of industry and that when the shafts on production lines start turning, they are among the first to spot it. “We haven't seen it yet,” he says.
Also on the program was Texas A&M's Dr. Barry Lawrence, who updated attendees on the research project on best practices in sales and marketing that the university's industrial distribution program is conducting for NAW and several of its members. The research is helping NAW distributors analyze their customers based on order frequency, profitability and other factors so they can customize the services they provide based on these parameters.