Top 75 Electronics Distributors: Catalogers fare better than other distributors during downturn
Catalog distributors managed to increase their sales last year despite the recession.
By James Carbone -- Purchasing, 4/30/2009 2:00:00 AM
Click here for Top 75 Electronics Distributors: 2008 North American Rankings
Catalog distributors say their businesses are not recession proof but they don't seem to be as hard-hit by the economic downturn as other distributors.
While total North America revenue of the top 75 fell by about 2.4% in 2008, catalog distributors increased their sales. Digi-Key had a slight 0.6% increase; Allied grew sales 4.6%; Newark was up 8.2% and Mouser posted a gain of 23.4% in 2009, according to Purchasing's annual survey of the top 75 electronics distributors.
While sales revenue of catalog distributors may decline in 2009, sales won't be down as much as other distributors' sales because of design activity. Catalogers have a lot of business with engineers who are designing new products. While OEMs may reduce volume production for equipment, they continue to design new products.
Mark Larson, president of Digi-Key, based in Thief River Falls, Minn., says design activity for Digi-Key was strong in 2008, but its volume production business has dropped off. He says many companies buy from Digi-Key during times of shortages because Digi-Key carries a lot if inventory of many different parts and right now there are few shortages.
However, inventory is being reduced, says Larson. "What has happened is semiconductor manufacturers have been working off dies that they manufactured. Die banks have been depleted and there will be some shortages within the next two or three months," he says. "And because of our strong inventory position it is going to play to our advantage."
Design focus
Newark, based in Chicago, started to focus on design activity in 2007 and it has paid off.
"It has enabled us to take advantage of the continuing design activity during the recession," says Barry Litwin, senior vice president marketing at Newark.
"What we are doing is inserting ourselves earlier into the design process, educating design engineers with content, technical tools and web capabilities," he says.
While design activity is still occurring, the "time for that design to reach production has obviously been extended during the recession. If you are a distributor in that production model you are going to get hit harder," says Litwin.
He says Newark has shifted its mix of business "to become more small orders with higher services levels. As a result of that we have been able to keep our margins stable to weather the storm and get more customers during a very tough time," says Litwin.
He says Newark has added 25,000 new customers in 2008. It has added new web capabilities for engineers and buyers to make it easier to do business with Newark.
However, the recession affects everyone in the supply chain. "No one going through this market is recession-proof. No way," says Litwin. "The question is who is weathering the storm better than others."
No immunity
Scott McLendon, vice president of product management and marketing at Allied Electronics in Fort Worth, Texas, agrees that catalog distributors are not immune to the recession, but "we are probably less affected as a high-volume distributor."
"We are on the front end with design and development activity and we support prototypes and small runs. There is still a lot of work being done on the front end," says McLendon.
However, with the downturn and layoffs, even design activity is being affected.
With some companies "instead of trying to design the next big whiz-bang thing, they may try to optimize a current design of an existing product and get more efficient with it," he says. However, with downsizing OEMs have leaner design staffs, and "there are customers looking to us to provide some of the front-end expertise that they may have lost with layoffs," says McLendon.
He says Allied is competing during the recession by being "flexible" with customers.
"Customers want flexibility. They are ordering hand to mouth and want the flexibility to buy and return parts. They want favorable credit terms," says McLendon.
He says despite the recession, "we haven't seen a drop in the number of orders, but the order value is down. Buyers are not placing orders until they get a firm commitment from whoever is buying their equipment."
Click here for Top 75 Electronics Distributors: 2008 North American Rankings
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