Trends in distribution
Semiconductors, interconnects drive distributor sales.
By Staff -- Purchasing, 5/17/2007 2:00:00 AM
The healthy $2.1 billion gain in revenue the Top 75 distributors made in 2006 came, in part, from double-digit growth in semiconductor and interconnect component sales.
Sales of active components among the top 10 distributors for semiconductors increased a hefty 30.8% to $9.0 billion, up from $6.9 billion in 2005. This surpasses the $8.9 billion in revenue IC distributors enjoyed in 2004. However, chips sales by semiconductor specialist distributors was more mixed. Nu Horizons, which derives most of its revenue from semiconductors, posted a 39% increase, while All American increased its sales by 4.2% and Jaco Electronics reported a sales increase of 1.3%.
Interconnect distributors continued to post healthy growth. Connector sales for the top 10 interconnect distributors increased 14% to reach $1.5 billion in 2006, up from $1.3 billion in 2005 and $1.1 billion in 2004. The top 10 distributors for passive/electromechanical components experienced a 4% gain. Sales for these devices grew to $2.8 billion in 2006, up from $2.7 billion in sales in 2005. Computer sales took a hit in 2006, decreasing by nearly 8% to $5.8 billion from $6.3 billion in 2005.
Revenue growth by catalog distributors remained strong. Mouser Electronics posted a sales increase of 33.3% nearly matching the previous year's growth rate of 35.3%. Digi-Key posted an increase of 25.2% in sales, surpassing its growth rate of 15.0% in 2005. Allied Electronics' growth was 21.2% in 2006, up from 7.2% in 2005. Newark InOne sales increased about 11% compared to 5% in 2005.
Among the top distributors, Avnet's sales increased by 10.8%, enabling the company to maintain its number one position in North American sales. Arrow's sales grew 10.5%, keeping it at number two. Bell Micro Products posted a sales growth of 5.7%, with all of its revenues coming from computer products. IP&E specialist TTI increased sales by 17.2%.
Sixty-five of the Top 75 distributors reported sales increases compared with 30 in the previous year. Only six reported sales declines, which is less than the previous year when 13 distributors reported lower sales. Four distributors experienced flat growth in 2006.
Despite overall strength in the distribution industry, many distributors were wary about making too many investments in sales offices or warehouse expansions. Only two distributors—Bisco and DAC—reported expansions in the U.S. Several others reported expansions overseas, including IBS Electronics, Mouser, TTI and Wes Garde.
There were also several acquisitions in 2006, particularly for computer products. Avnet acquired Access Distribution, with $2 billion in computer product sales; Bell Microproducts acquired Prosys Information Systems; and Arrow purchased SKYDATA, InTechnology and Alternative Technology—all computer products distributors. Other acquisitions included DB Roberts' (part of DAC) purchase of Arconix and Nu Horizon's addition of U.K.-based DT Electronics.
|
|
The top 10 distributors continue to control the largest share of the North American distribution industry, with 86.6% or $21.7 billion in revenue for 2006.
|
|
|
After growing a little more than 3% in 2005, sales by the Top 75 distributors increased $2.1 billion to $25.1 billion in 2006, an increase of about 9%. In 2004 revenue had increased $3.2 billion which had reversed a downward trend. Prior to 2004, the distribution industry was in a three-year slump with a $1.4 billion decrease in 2003, a $5.9 billion decline in 2002 and a drop of $8.3 billion in 2001. |
|
| Global sales for the top 10 independent distributors remained flat, which is still considered positive after reporting a decline of 9.1% in 2005. Global sales for the top 10 totaled $2.0 billion in 2006. |
|
|
Avnet has retained its position as the leading North American distributor with sales of $7.2 billion in 2006. Avnet is also the leader in worldwide sales, reaching $14.8 billion in 2006, up from $12.6 billion in 2005. Arrow reported global sales of $13.6 billion in 2006, up from $11.2 billion in 2005. |
This year's losses weren't as dramatic as last year's declines, with only one distributor reporting double-digit declines. Those reporting decreases tend to be small- to mid-sized distributors with the exception of Dependable Components (ranked 17, in 2006), which reported a decline of 4.8%.
Other distributors that experienced declines in revenues include Altex-Mar Electronics, with a sales decline of 10.3%, followed by JRH with a fall of 7.4%. Also, Gopher Electronics' sales fell by 3.6%, followed by House of Batteries with a 3.4% decline and PSC with a drop of 3.3%.
Yet, many of the smaller distributors reported the biggest gains. Wise Components grew 38.1%. Simple Technologies grew by 32.1%. Other big earners among the smaller distributors include CDM, which recorded a sales gain of 29.3%, and SMD which posted revenue growth of 26.1%.
Other big gains were enjoyed by Electro Enterprises, a newcomer to the Top 75 ranking, with 29.5% growth, followed by Airtechnics with a growth of 29.0% and DAC with an increase of 25.2%.
All of the top 10 distributors reported growth, with eight out of the 10 racking up double-digit gains. Avnet, Arrow, Future Electronics, Bell Microproducts, and Newark InOne remained in the top 10, with no shifts in positions. TTI moved down one position to number six, switching places with Digi-Key, which moved up into the number 5 slot. Nu Horizons moved up one position to number eight and DAC moved up one position to number nine. All American fell two positions to number 10.
|
Only 42 out of the Top 75 distributors responded to Purchasing's question on what percent of their total sales in 2006 were derived from China. They reported that in total $5.6 billion of their global sales were derived from Asia and China. In comparison, the 46 distributors who answered that question last year took in $3.8 billion in sales from Asia and China. The survey reveals that 17 distributors derive none of their sales from China in 2006, and 24 say they derive none of their revenue from Asia and Japan. Only four distributors report double-digit sales from China, Asia and Japan. That's down from seven last year. Twenty-two distributors say less than 1–9% of their sales come from China, and 17 say 1–9% of their sales come from Asia and Japan. Last year, 25 distributors reported that 1–9% of their sales came from those regions. Only two distributors expect more than 50% of their total sales will be derived from China in the next two years. Only one distributor predicts 20–49% of its revenues will come from the region and one forecasts the number at between 10–24%. The rest say zero to less than 10% of their sales are derived from China. The majority of distributors say less than 10% of their sales will come from Asia and Japan with only three distributors reporting that 10% of their total sales will come from the region. |
Web Exclusives:
Genie Group remains tops in productivity
The genie group keeps its title as the leader in employee productivity with $4.4 million in sales per employee, followed once again by Dependable Component Supply Corp., with $3.6 million in sales per employee. The survey also reveals that four of the top 10 distributors—Avnet, Arrow, Bell and Nu Horizons—rank as leaders in productivity. Eight out of the top productivity leaders reported productivity rates of $1 million or higher per employee, which is up from seven last year. In addition to Genie and Dependable, they include Flame Enterprises, Avnet, Arrow, Bell Microproducts, Nu Horizons, and JRH.
ISO certification remains a key priority Quality continues to remain a top priority for the Top 75 distributors. Fifty-four of them have received ISO certification. Of the remaining 21 distributors that are not certified, two are in the process of registration; four have plans to be certified, and 11 distributors have no plans for certification. The remainder did not respond.
Online buying continues to grow
Sales transactions via the Web are still a small portion of the distribution industry’s sales, generating between 1-54% of total sales, according to Purchasing’s survey, although more distributors are offering online buying this year. Catalog distributors report some of the strongest sales via the Web. Digi-Key says 54% of its sales are derived from the Internet, which is up from 47% in 2005, followed by Mouser with 31%, up from 28% in 2005; and Allied with 19%, up from 18% in 2005. Others that reported online buying in the double digits include Beyond, DEE, Fedco, Flame, Garrett, JRH, Kensington, Master, Nedco, Schuster, and Symmetry. Fifty-five of the Top 75 offer online buying, nearly the same as last year, when 56 distributors said they offer
online sales. Fourteen of the top distributors reported double-digit sales via the Web, which is down from eighteen in 2004. However, 24 of the top distributors did not provide the percent of their sales through the web. Many distributors are still primarily using their websites to provide product information, including the ability to access datasheets. Many are also offering requests for quotes and inventory searches. For those with online shops, they offer order tracking and in some cases personalized extranets for e-procurement services.
Also read:
Catalog distributors draw big imitators
Top 75 Electronics Distributors Alphabetical listing
Now Playing: 