2003 Distributor Sales Trends Report

Based on a new report from DMIA, Distributors continue gradual diversification of their product lines and have lessened their dependence on conventional forms, which will continue to pose challenges for manufacturers of unit sets and continuous forms.

The report shows that distributors remain focused predominantly on product sales. While many distributors offer some print-related services, only a few distributors pursue services as a major part of their business. One indication of the secondary role of services is the low reported proportion of total sales derived from digital printing, electronic forms and statement processing. However, it should be noted that the data shows that some of these areas are on the rise for many distributors. A related indication of limited service capabilities is the small proportion of survey participants that report significant number of systems specialists and programmers (IT employees) on their staff. These results may signal an opportunity for manufacturers with strong computer technology capabilities to form alliances with distributors for an expanded range of print-related services.

A significant number of all survey participants indicate three dominant methods of reaching their customers. The following summary shows the percent of all firms that derive 50 percent or more of total annual volume from the three dominant sales methods:

What are the Dominant Products for Distributors?
Forms still remain one of the main product lines for a sizeable proportion of distributors. In this DMIA study, products that constitute over 30 percent of total annual distributorship sales have been designated "dominant products". The following are the top six products identified as "dominant" by the largest proportion of all survey participants:

Forms manufacturers serving the Independent segment should be concerned about the low proportion of large survey participants who identified continuous custom and stock forms as a "dominant" product. Another concern should be the very low proportion of all distributors who identified unit sets as a "dominant" product group.

Large distributors appear to be the Independent segment leaders in product diversification. Conventional forms have become a secondary product group for many large distributors. Product mix shifts that are evident from this survey are due partly to declining demand for continuous and unit set forms and partly to distributor volume growth in other products.

The "dominant product" summary shows that a sizeable proportion of large distributors are pursuing volume growth opportunities in cut sheet forms & mailers, commercial & quick printing, and stationery, envelopes & business cards. This also provides an indication of new opportunities for trade manufacturers.

Conventional continuous, unit set and cut sheet forms are still a dominant or important secondary product line for many large and small distributors. The percentage of distributors who do not sell forms is very small. This indicates that forms manufacturers planning to diversify their product lines should be careful not to neglect conventional forms, diminish service levels or otherwise impair their competitive position in forms and related products.

Form-label-card combination products have been recognized as a growth segment of the forms industry, but only a small proportion of survey participants indicate that sales exceed 5 percent of total annual volume. This signals a major marketing challenge for trade manufacturers who have invested in expensive equipment to produce form-label-card combination products. These trade manufacturers have to find a large number of distributors with limited sales of these products, or the small number of specialists with high sales volume in this category. Manufacturers considering investment in production capabilities for these products should also be concerned by the high number of survey participants who reported no sales (23.7 percent) or did not provide a response (18.5 percent).

In this study, product groups that account for 5% to 20 percent of total annual sales volume have been designated secondary products. The following products were listed by survey participants as making up 5% to 20 percent of their total annual volume:

With the exception of continuous and unit set forms, a sizeable proportion of distributors plan to increase their sales in these secondary product categories over the next two years and indicate that the profitability of these products is increasing.

Another significant indication of distributor product mix, and a message that trade manufacturers should be careful about some diversification options, is the high percentage of survey participants who report no sales in the following six product categories:

Three of the above product groups—digital printing, form-label-card combinations and direct mail—represent an opportunity for trade manufacturers with the appropriate capabilities to expand their customer base by educating and assisting some of the distributors who currently do not participate in these industry growth segments.

As can be expected, the number of employees varies by company size. In the large distributor group, 87.5 percent of survey participants have a total of 11 or more employees and 47.2 percent of firms have more than 30 employees. In the largest distributor group with over $ 8.0 million in annual sales, 84.9 percent of participants have more than 30 employees. Among small distributors, 73.2 percent of participants have 6 or fewer employees.

Among the smallest distributors with annual sales under $ 400,000, over 55 percent of survey participants have 1 person sharing or dedicated to outside sales. In this group, 26.1 percent of firms indicate that they do not have outside sales employees, which means that these are probably one-person distributorships. At the other end of the survey scale, in the largest distributor group with annual sales over $ 8 million, close to 85 percent of participants have 7 or more outside sales employees, including 15.2 percent of participants with more than 30 sales representatives.

A high proportion of small distributors does not employ computer specialists and programmers or did not provide a response. This suggests that manufacturers have an opportunity to form technology-based alliances with distributors that would improve market access, transaction costs and ability to pursue new products and services for both partners. In the large distributor group, the number of information technology employees tend to increase with company size and 12.2 percent of the largest firms (over $8 million annual sales) have more than 7 people in this category.

Increasing and Decreasing Vertical Markets
The following is a summary of vertical markets where the largest percentage of all survey participants expect sales to increase and decrease over the next two years:

Increasing and Decreasing Vendors
The following is a summary of product and service categories where the largest percentage of all survey participants have increased and decreased the number of vendors during 2002:

Conventional forms outrank all other products in distributor responses indicating no change or decrease in product profitability. This has a serious negative implication for trade manufacturers of forms, because more distributors can be expected to focus their sales efforts on higher margin and higher growth opportunity products.

Cut sheet forms and mailers are among the top six product groups where distributors report increased profitability. A sizeable percentage of distributors also indicate that cut sheet and mailer order sizes have increased. This signals an opportunity for trade manufactures who have or can develop cut sheet product manufacturing capabilities.

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