How top wholesalers succeed: secrets of a brutal business

Wholesaling is a brutal business. Only 20 percent of all wholesale distributors managed to beat the S&P 500 over the last five years, while more than 50 percent consistently destroyed shareholder value. To understand what drove a 1,000 percent difference in returns between the best and worst distribution performer, the author interviewed the managers of firms that have consistently out performed the market. One counterintuitive insight ‐ distribution must focus on local business. Local, not national, market share drives profitability. The interviewers also learned the ingenious tactics the most successful companies have adopted to capture higher gross margins than their competitors, and how these leading companies have reduced operating expenses. The best distributors share a three‐legged strategy: they focus investments to gain local market share, they select their service offering carefully to pump up gross margins and they slice operating expenses to the bone.