Frank Hurtte, of River Heights Consulting, spoke at this week’s FPDA/ISD Joint Industry Summit at the Westin Savannah on the state of the world of fluid power distribution—and what the future holds. Hurtte kept the audience engaged, noting that experts have told some pretty scary stories over the years. These so-called experts, he said, have incorrectly predicted the demise of fluid power distributors many times. Examples include:
1995: Disintermediation—the Internet will eliminate the need for distributors!
1996: Integrated supply—Unless you can sell everything, you will be blocked out of customers!
1999: The Y2K threat—The rollover from 1999 to 2000 will shut down everyone’s businesses!
2008: Private equity threats—Private equity is rolling up distributors and they will steal business on price and build volume!
2014: Millennials—The next generation sees no value in the distribution model!
2016: Amazon takes over the world—Everyone wants to buy in an Amazon-like environment!
But he noted that the industry has a pretty resilient business model, as well as a track record of adoption. Some examples he presented include dealing with logistics changes (UPS and FedEx’s growth) in the 1970s, computers, consolidation and the idea of value-add in the 1980s, the birth of logistics and email in the 1990s, recession, mega-consolidation and eCommerce in the 2000s, and vending machines, private equity and remote monitoring/troubleshooting in the 2010s.
Today’s distributors have valid concerns that include an aging sales force, succession planning, more competition in a very competitive landscape, a shrinking customer base, and getting eCommerce right. Attendees indicated that eCommerce was definitely an area where they were lagging. In fact, a live poll showed that 38% of attendees’ companies did zero eCommerce. For another 50%, eCommerce represented less than 5% of their business. Only 12% of attendees said that eCommerce represented between 11-20% of their sales.
Hurtte polled the audience as to where they thought their growth would be. Most (35%) said it would be through acquisitions and mergers, while 26% said organic growth with existing customers would be their main strength. Others said organic growth with new types of customers in the same territory (22%), expanded geography and more customers (13%), and expanded product offerings (4%).