The industrial market continues to be one the economic highlights and that, coupled with data centers, is helping to drive the industrial distribution segment.
While many may wonder how data center construction benefits the industrial distribution industry, there are three elements:
- Within the construction phase there are tools, safety equipment and more.
- Within a data center, there are standard “MRO” needs as data centers are, essentially, “factories” with their product being data, so there are standard MRO needs.
- And then there is the data center ecosystem. Consider all of the equipment used in constructing and maintaining a data center. Everything from Caterpillar equipment to the production of circuit breakers, chips, servers, and racks. All of this “equipment” gets manufactured somewhere and these industrial companies have standard industrial equipment supply needs.
Fastenal reported a strong August. They were up 16.6% (15.5% in the US) with their OEM segment up 19.1%! This is according to their disclosure which also shared that 70% of their top 100 national accounts reported growth, contract customers were up 19% whereas non-contract customers were up 11%. Fastenal managed inventory was also up 15%.
- Of interesting note, contract customers, which are their largest customers, are driving the highest growth rate. A reinforcement to focus on key customers. This is a case of “land and expand” to grow the business, and that these segments are probably growing their business.
William Blair recently held an investor call with Grainger who shared:
- They feel they continue to gain share within their large accounts
- They are projecting, excluding any foreign currency issues, 11.5% second half growth. In July they were up 13% (and remember, they are on a larger base than Fastenal.)
- There customers are experiencing a “broad recovery,” which they are benefiting from. Heavy manufacturing is “very strong.”
- Some freight headwinds (not surprising given increased fuel costs.)
- Recently increased pricing by 1% to cover higher freight costs, which they have, and they are experiencing higher freight / fuel costs from suppliers.
So, with the market appearing to be strong, it’s time for our Q3 Pulse of Industrial Supply survey to get a broader picture of the industrial supply market. Not everyone can focus on the largest of customers such as Grainger, Fastenal or MSC does. There are lots of small and mid-size customers being served by other industrial supply distributors. And there is a wealth of manufacturers in the industry who can benefit from broader insights.
All we ask is that you take 1-2 minutes to complete our survey. We’ll share the results with respondents at the end of the month. We need your response by October 1
All questions are multiple choice, and no confidential information is requested. The insights help everyone benchmark their performance.
Thank you for your support
Didn’t see the Q2 results? Click here.
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