Download handouts (PDF) : www.mdm.com/slides or info@mdm.com THE 2014 DISTRIBUTION INDUSTRY OUTLOOK Featuring: Andrew Duguay, Lindsay Konzak and Ranga Bodla January 16, 2014 Produced by: Event Sponsor: 1
Download handouts (PDF) : www.mdm.com/slides or info@mdm.com Speakers: Andrew Duguay Senior Economist Institute for Trend Research Lindsay Konzak Editor Modern Distribution Management Ranga Bodla Director of Industry Marketing Netsuite Tom Gale - Moderating Publisher Modern Distribution Management Event Sponsor:
Download handouts (PDF) : www.mdm.com/slides or info@mdm.com Agenda: Introduction Tom Gale (5 Minutes) Presentation Andrew Duguay (40-45 Minutes) Presentation Lindsay Konzak & Ranga Bodla (20-30 Minutes) Q&A Everyone (10-15 Minutes) Close Tom Gale (2 Minutes) Event Sponsor:
MDM Webcast January 2014 2014 Economic Outlook Andrew Duguay ITR Economics www.itreconomics.com
Real Gross Domestic Product 5 18 18 17 17 16 16 15 15 14 14 13 13 12 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 12 Trillions of $ www.itreconomics.com
Four Phases 6 0 0 www.itreconomics.com
Four Phases 7 Expansion 0 0 www.itreconomics.com
Four Phases 8 Expansion 0 0 Recession www.itreconomics.com
Four Phases 9 Expansion 0 0 A A Recession www.itreconomics.com
Four Phases 10 Expansion B B 0 0 A A Recession www.itreconomics.com
Four Phases 11 Expansion B C B C 0 0 A A Recession www.itreconomics.com
Four Phases 12 Expansion B C B C 0 0 A D A D Recession www.itreconomics.com
Delinquency Rates on Consumer Loans 13 Percentage 7.0 6.5 6.0 5.5 Consumer Loan Delinquency Rate Consumer Credit Card Delinquency Rate Percentage 7.0 6.5 6.0 5.5 5.0 4.5 4.0 3.5 10 Year Average 10 Year Average 5.0 4.5 4.0 3.5 3.0 2.5 2.0 Lenders are increasing the amount of credit available for consumer installment loans Consumer demand for loans is rising 3.0 2.5 2.0 3MMA Data Trends www.itreconomics.com
Commodity Price Index 14 600 500 400 300 Steel: $361 per Gross Ton 200 Oil: $95.84 per Barrel 100 0 '05 '06 '07 '08 '09 '10 '11 '12 '13 3MMA Index Dec 2009=300 www.itreconomics.com Copper: $3.32 per Pound
Commodity Price Index 15 600 500 400 300 Steel: $361 per Gross Ton 200 Oil: $95.84 per Barrel 100 0 '05 '06 '07 '08 '09 '10 '11 '12 '13 3MMA Index Dec 2009=300 www.itreconomics.com Copper: $3.32 per Pound
Commodity Price Index 16 600 500 400 300 Steel: $361 per Gross Ton 200 Oil: $95.84 per Barrel 100 0 '05 '06 '07 '08 '09 '10 '11 '12 '13 3MMA Index Dec 2009=300 www.itreconomics.com Copper: $3.32 per Pound
World Countries Industrial Production 17 Year-Over-Year Growth Rates % www.itreconomics.com
Europe Imports and Exports 150 130 110 90 70 50 Export Volume Import Volume '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 www.itreconomics.com
Total Retail Sales (deflated) R-O-C 14 MMT 4.50 19 7 3/12 12/12 3.8 3.1 4.00 0 3.50-7 3.00-14 $2.193 2.50 3MMT -21 2.00 12MMT -28 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 1.50 Trillions of 82-84$ www.itreconomics.com
Retail Sales 20 Computer & Software-1.9 Furniture Stores Automotive Parts Stores Health and Personal Care Stores Grocery Stores Sporting Goods Stores Clothing Stores General Merchandise Stores Bldg Materials, Garden, Supplies US Light Vehicle Retail Sales Beer, Wine & Alcoholic Beverage Jewelry Stores Electronic Shopping 0.9 1.5 2.0 2.4 2.3 3.6 3.9 5.7 5.6 6.9 9.7 11.5-4 -2 0 2 4 6 8 10 12 14 www.itreconomics.com
Nondefense Capital Goods New Orders w/o Aircraft 21 R-O-C MMT 40 1600 20 0 3/12 12/12 5.5 3.6 1400 1200-20 1000-40 12MMT $806.3 800-60 3MMT 600-80 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 400 Billions of $ www.itreconomics.com
Wholesale Trade Durable Goods R-O-C 40 22 MMT 5 20 0 3/12 12/12 6.0 3.4 4-20 3-40 $2.344-60 3MMT 12MMT 2-80 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 1 Trillions of $ www.itreconomics.com
Wholesale Trade Electrical & Electronic Goods 23 R-O-C 30 MMT 730 3/12 15 12/12 4.5 630 0 3.9 530-15 430 $372.8-30 3MMT 12MMT 330-45 230-60 130 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 Billions of $ Source: US Census Bureau www.itreconomics.com
Wholesale Trade Hardware, Plumbing, HVAC Equipment & Supplies ROC 40 MMT 24 200 3/12 12/12 0 7.4 5.5 150-40 $115.4 100 3MMT 12MMT -80 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 50 Billions of $ www.itreconomics.com
Wholesale Trade of Lumber & Other Construction Materials R-O-C 40 25 MMT 275 3/12 12/12 4.4 3.6 0 200-40 3MMT 12MMT $123.2 125-80 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 50 Billions of $ www.itreconomics.com
Housing Starts R-O-C 60 MMT 5.2 26 30 0 3/12 12/12 Mar 13 20.8 10.9 4.2 3.2-30 3MMT 12MMT 2.2-60 0.918 1.2-90 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 0.2 Millions of Units www.itreconomics.com
Private Nonresidential Construction 27 R-O-C 60 MMT 700 3/12 12/12 0 1.6-4.3 500-60 3MMT 12MMT $298.6 300-120 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 100 Billions of $ www.itreconomics.com
Wholesale Trade Nondurable Goods R-O-C 30 MMT 6 28 15 0 3/12 12/12 4.4 3.6 4-15 $2.742-30 3MMT 12MMT 2-45 -60 Trillions of $ '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 0 www.itreconomics.com
Mortgage Rates to Federal Funds 22 22 29 18 18 14 14 10 10 6 6 2 Mortgage Rates Federal Funds -2 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2-2 Raw Data www.itreconomics.com
FOMC Member Interest Rate Projections 30 3 participants project 0.25% at year-end 2015 www.itreconomics.com Source: Federal Reserve
Consumer Price Index All Items 31 6 5 4 3 2 1 0-1 -2-3 '06 '07 '08 '09 '10 '11 '12 '13 6 5 4 3 2 1 0-1 -2-3 1/12 rate-of-change www.itreconomics.com
Cost of Healthcare Reform 32 Increase as % of GDP Source: Ezra Klein, Washington Post www.itreconomics.com
Costs by Age Categories 33 www.itreconomics.com
One (or many) bright spot(s): the shale gale 34 www.itreconomics.com Source: EIA Annual Energy Outlook, 2008 to 2011
US Manufacturing as a % of GDP (Value Added) 35 18 18 16 16 14 14 12 11.9% 12 10 3MMA 11.0% '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 10 3MMA www.itreconomics.com
What to do in this business cycle? 36 2014 Stay realistic beware of linear budgets Make sure growth is organic and leveraged Build in efficiencies to maintain margins Look for countercyclical and developing markets Cross-train key staff Assess capacity with an eye for the business cycle upturn in 2015 Lock in costs ahead of rising interest rates and inflation www.itreconomics.com
ITR Economics Continue Your Quest in Seeing Tomorrow Today Email to learn more about: 37 ITR Advisor Monthly Newsletter Twitter Feed ITR Outlook Blog @ITROutlook contact andrew@itreconomics.com or visit www.itreconomics.com www.itreconomics.com
5 Predictions for Distribution in 2014 MDM Editor Lindsay Konzak with Ranga Bodla of NetSuite
MDM Research Team Sources Interviews with distributors & industry consultants Ongoing MDM reader surveys Public distributor reports 2014 Wholesale Distribution Industry Outlook Report from MDM and NetSuite
2014 Revenue Outlook Down less than 5% Down 5%- 10% Flat Up more than 10% Up less than 5% Up 5%-10% Source: MDM-NetSuite 2014 Industry Outlook Survey www.mdm.com/2014outlook
2014 Revenue Outlook Source: MDM-NetSuite 2014 Industry Outlook Survey www.mdm.com/2014outlook
#1 Distributors will continue to expand product portfolios and geographic reach.
Plans for Building Revenue in 2014 Source: MDM-NetSuite 2014 Industry Outlook Survey www.mdm.com/2014outlook
#1 Product expansion is facilitated by shifts in the channel E-commerce & master distributors allow broader reach and expands drop-ship capabilities There are a lot of folks focusing on product expansion, this concept of endless aisle, different supply chain linkages so they can offer more through online portals. Interline Brands President Ken Sweder
#1 Safety & jan-san still big targets With a flat market, more nationals will continue to add adjacent product categories, and safety has seemed like the most prime category. Mallory Safety & Supply President Tim Loy Interline Brands big push into jan-san: Jan-san is a consumable and stable business It complements end-markets distributor already serves It offers opportunity to cross-sell to more customers
#1 Strategic acquisitions
#1 Customer-driven Customers understand that it costs them money to have multiple suppliers in different areas. If, for example, a company can buy their mechanical products and their electrical products from one distributor, it will be more cost effective for them. Van Meter Inc. Chief Growth Officer Mike Gassman
#2 Gap will widen between those who implement inventory management services well and those who don t.
#2 Defining inventory management services
#2 Fastenal, MSC, Grainger are all targeting vending and inventory management services as key growth drivers.
#2 35,000 32,248 30,000 25,000 20,000 Cumulative Vending Machines Installed 1Q11-3Q13 15,000 10,000 5,000 2,659 0 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 Source: MDM analysis; Fastenal 3Q13 earnings report
#2 Distributors need to ask: Which solution is best? Will vending solve the customer s problem? Get more on industrial vending in the MDM Special Report: The Industrial Vending Boom
#2 All the data and research that we have done, the customer cares most about having the right product when and where they need it, and there are some products that they want to understand who is using what so they can reduce it or they can limit the amount of products that they re taking. Brian Norris, Grainger s vice president for inventory management
#2 Internal drive to more aggressively manage inventory better in 2014
#3 Competitive lines will continue to blur between channels.
#3 Four walls and the local market are no longer limits Drivers Technology Global competition Entrepreneurs Converging channels Retail outlets: Home Depot, Lowes, Staples
AmazonSupply #3 Aggressive push to grow number of SKUs & product categories When scale is achieved, what happens next?
September 2013 January 2014
#4 Customers will continue to demand multichannel capabilities from suppliers.
The Amazonization of Customer Expectations Functionality Ease of ordering Technical infrastructure Speed of delivery #4
Generational shift #4
#4 Multichannel is Grainger s priority Web platform that can handle customer interactions across: Mobile, website & inventory management solutions Start transaction on one and finish on another
#4 MSC Industrial Supply VP of E-Commerce: Many of its customers use two or three different channels in a single transaction Requires consistent information across platforms
#4 Most small to mid-sized distributors do not yet do multichannel well A seamless customer service experience is about more than just having a functional e- commerce website
Technology Plans in 2014
#5 Data management will become more practical.
#5 Clean and standardized data Impact of the Web Big Data vs. Little Data Accessing data remotely
Interest in Cloud Computing
Devices Used in Business
#5 Mobile devices facilitating data and cloud trend
#5 Distributors want to get data into the hands of their salespeople people Inventory availability Pricing Video/literature on product application
Moving Forward MDM s Distribution Trends for 2014 Your market impact 1 (Low) to 4 (high) Your competitive position 1 (ignoring it) to 4 (Leading it) Table Source: Distributor Innovation in 2013 Mike Marks
Get more Ongoing trend analysis in MDM Premium If you re not a subscriber, join us at www.mdm.com/subscribe Look for the 2014 Distribution Trends Report, released with the 2014 MDM Market Leaders lists in June.
Who is NetSuite Background Founded 1998 Publicly traded on NYSE: N Offices in 10 countries 2,300+ employees Performance Used by 16,000+ global organizations World s most deployed cloud ERP Top 10 highest growth ERP solution according to Gartner and IDC NetSuite runs NetSuite #1 Cloud ERP Suite Powers Distribution
THE 2014 DISTRIBUTION INDUSTRY OUTLOOK Questions? Download handouts (PDF) : www.mdm.com/slides or contact info@mdm.com Produced by: Event Sponsor: 77