The impact of tariffs announcements is unsettling the market and the short term and long-term impact and prognostications are dominating the news cycle for the Industrial Channel.
The tariff impact on sentiment is clearly having an effect on channel planning and programs. Our Industrial Supply Trends Q1 IST Pulse of Industrial Supply survey early returns are interesting and informative and give great insight into the current market sentiment. The survey is still open so the results that we publish are not finalized, but I thought I would share some early returns for the IST audience.
Q. Are you stocking more, the same, or less material in this quarter versus last quarter? This answer is trending that the channel is stocking more inventory and that percentage is growing every day. It will be interesting to see if the continued tariff news causes this number to grow before our survey closes.
Q. Have you stocked up with forward buys this quarter? The answers here have been interesting, and it is trending upward that more channel partners are executing forward buys. The gamble of getting lower first cost product with a forward buy is often hotly debated, but it appears more channel partners are willing to make that bet today.
Q. In thinking about pricing how much did it change on average in Q1? This question has multiple answers and it is clear that prices are climbing overall and the final percentages for the channel are going to be interesting to see.
First cost changes are always stressful on the channel teams as when buy-side costs goes up that increase has to work its way through the channel. How are the channel partners changing prices to their customer (manufacturer/rep to distributor and distributor to end customer)? Price side changes generate a lot of work for your teams, but if done right the new sell side prices can create sales growth and share gain versus the competition.
How you establish sell price based off your cost basis is a key win-or-lose point in times of price increase and volatility.
Are you using a replacement cost basis – where the sell price is calculated on the price to buy that SKU today?
Are you using an average cost system where the purchase price of all SKUs is averaged to set Sell side pricing?
Are you using a Standard cost-basis system?
The risk and reward of each sell-side price setting system from your cost basis is crucial in times of price change, and price increases are historically the best opportunity for your Purchasing and Price teams to collaborate on the “buy side” and the “sell side” to grow profits and take share.
In my distribution career as pricing leader it was daunting for our team to face buy side price changes as the work to change thousands of SKU sell prices for thousands of effected customers was heavy lifting and daunting. The rewards of executing those price changes for the business were simultaneously high risk and high reward.
When you do it right, you take share and can grow profits at record levels.
Further, we’re hearing directly from key channel leaders that:
- Some manufacturers are not sure if they can “hold” pricing until May or June … which basically tells you they have material in their warehouse / that has no tariff impact, but that the impact of future material purchase prices are in flux.
- Some major manufacturers already have announced mid to upper single digit increases
- We talked with a number of industrial distributors who did some extra “stock” buying
- In the contraction channels we serve some contractors have moved project ordering up to get in front of tariffs. Is that trend of forward ordering and commitments to hold sell prices coming to the industrial channel?
We will find out what the sentiment is when our survey closes, as our Q1 Pulse of Industrial Supply survey is still open. We need your responses by April 11, 2025 please.
If you can spare 1-2 minutes to complete the confidential survey, we’ll share a copy of the results with you shortly thereafter.
Channel Marketing Group and Industrial Supply Trends produces this confidential survey in partnership with William Blair | Homepage
As always, we appreciate the feedback and comments. So, feel free to reach out at jgunderson@channelmkt.com
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