Distributors saw an annual sales revenue increase of 3.4% in 2015, according to the Distributor Quarterly Sales Survey released this week by ASI. This propels industry sales to approximately $22 billion, now the all-time high for distributor revenue after surpassing 2014’s sales of $21.5 billion. It is the sixth consecutive year of annual growth, including a 19% increase in total sales revenue since 2011.
The survey also found that distributors raised sales revenue by 3.6% in the last quarter of 2015. In addition, the Counselor Confidence Index, which measures the health of distributor companies, improved slightly in Q4 2015 to 114, from 112 in the previous quarter. The highest-ever index rating was 115, in Q1 of 2015, though it has remained generally consistent over the last three years.
Greg Muzzillo, founder of Proforma (asi/300094) reports that his company saw a revenue increase of more than 11% from 2014 to 2015. “This year we welcomed several large distributors and sales reps bringing in $1 million to $3 million in revenue,” he says. “We also helped some of our existing owners win many millions in new business.” Muzzillo attributes the growth to technology differentiation, focusing on major accounts and targeted owner and sales rep recruitment.
More than a third (36%) of distributors reported an increase in sales for Q4 2015 when compared to Q4 2014, and 43% reported an increase in sales for all of 2015 when compared to 2014. Almost one quarter (24%) reported a decline in the same time period.
“Our revenues in the fourth quarter were up about 35% compared to the same quarter last year,” says Larry Cohen, president of Axis Promotions (asi/128263). “Our fourth quarter was incredibly strong and showed significant growth over the prior quarter which was up from the quarter before that. Even when prospecting, we haven’t lost our focus on our existing clients. Sales are really based on the groundwork you’ve laid in prior months.”
Overall, the study also found that large distributors (more than $1 million in revenue) were more apt to report a revenue increase for Q4 2015, compared to Q4 2014. Less than half (46%) of large distributors reported an increase compared to only 28% of small distributors ($250,000 in revenue or less).
Muzzillo says that companies that are doing well continue to recruit top-notch sales reps and win business from their competitors. “I believe the smaller distributors will continue to struggle to compete,” he adds. “They’re getting squeezed by Internet companies at one end and larger, more sophisticated distributors at the other.”
While the Counselor Confidence Index has stayed positive over the past three years, Muzzillo cautions against taking the numbers at face value. “My sense is that distributors are busy with more, smaller orders, which is responsible for their overall optimism,” he says. “I think smaller distributors should be very concerned. The continuing consolidation in our industry is accelerating and I believe the larger suppliers will want to do more business with the larger distributors. Additionally, as suppliers consolidate, they’ll be increasingly unwilling to serve as ‘venture capital’ for struggling distributors paying late.”
With the current struggles in the marketplace, particularly for small distributors, Cohen says it’s important to continue providing value to clients. “Everyone in our industry, both large and small, needs to be focused on providing a service that goes well beyond the product or price,” he explains. “We must provide value so clients view what we provide as a necessary asset as opposed to an optional expense. Our industry has so much to offer that goes beyond logos. We’re in the marketing and advertising business, and we need to find ways to help our clients build their brands and grow.”