ASI’s most recent data on distributor sales numbers indicates that North American firms increased revenue in 2018 to $24.7 billion. That’s a 4.9% rise over 2017’s growth at 3.2%, and marks the ninth year in a row that saw a new sales record.

ASI Canada spoke with Canadian distributors who make up part of this increase in revenue. Scott Hulbert, managing director at ideavation (asi/229801) in Toronto, told ASI Canada he’s not surprised at the rate of growth; he says revenue at his own company was up 40%. “The business climate overall is positive,” he says. “It’s much more favorable and less doomsday.”

Amanda Dudek, owner of A Dudek Promotions (asi/101207), said the growth is most likely the result of a strong North American economy. Her company in Maple, ON, has grown year-over-year for the past several years, and she expects the same in 2019.

“As businesses continue to flourish, they’re finding marketing dollars to spend on generating more revenue,” she told ASI Canada. “Promotional products have proven to be a successful way of attracting new customers.”

ASI’s data shows that 48% of all distributors saw an increase in revenue in 2018, while 30% reported that sales stayed the same. Meanwhile, 70% of large distributors (those with revenue of $1 million or more) said they experienced a year-over-year sales increase from 2017 to 2018.

Merger and acquisition announcements, much of it driven by outside investors, have dominated industry news recently. Hulbert said the larger companies will continue to grow this year, particularly as M&A activity continues in the coming months.

“The companies that are getting bought are enjoying better economies of scale and better pricing,” he said. “I’m not surprised small and medium businesses (SMBs) are suffering. They can’t win the price game, they can’t offer the same services as the bigger guys. The larger companies win the RFPs, while potential clients of smaller companies shop online and that’s money taken right out of SMBs’ pockets. SMBs are getting pushed out of the business.”

In 2018, 40% of small distributors ($250,000 or less in revenue) reported a year-over-year sales increase, while 48% of mid-sized companies (those with revenue between $250,001 and $1 million) said sales increased. At the same time, 14% of large firms, 27% of mid-sized companies and 22% of small companies reported a decline for 2018.

In Q4 of 2018, approximately 40% of all distributors reported an increase over Q4 in 2017. At the same time, about 20% saw a decline and 42% said sales stayed consistent. More than half (55%) of large distributors said quarter-over-quarter sales were up; 39% of mid-sized distributors and 28% of small distributors reported the same.

Sam Singh, president & CEO of Full Line Specialties (asi/199688) in Surrey, BC, said his company is competing with larger firms by offering more value-added services for clients, including fulfillment, warehousing and kitting, along with web design, customized software solutions and scalability to keep up with growing clients. “We’re preparing for another growth year with added services that are outside of the traditional distributorship model,” he said.

Dudek said her company actually has an edge over larger companies because of the hands-on customer service she offers. “Large distributors start out of the gate each year with more revenue and the ability to have more feet on the ground closing more sales, often with larger clients,” she said. “However, as an SMB, my customer service and ability to focus on my clients allows me to provide unique ideas as opposed to just having them order off a site.”

In Q4, the Counselor Confidence Index, which measures distributors’ optimism regarding the industry, fell slightly as a reaction to import tariffs, unpredictability in the stock market, and concerns about domestic and global economies, as well as apprehension about industry competition. “There appears to be concern in the market related to the impact that tariffs are going to have in 2019,” said Nathaniel Kucsma, ASI’s executive director of research and corporate marketing. “There’s also an increasing fear that the economy is slowing down and online competition is rising, so I’m definitely looking at 2019 more cautiously.”

However, the Index read 115 in Q4, which was down just slightly from 117 in Q3, a record high. Despite significant economic and industry concerns, distributors are optimistic for this year, using words such as “hopeful,” “optimistic,” “better,” and “growth” when referring to their 2019 outlook, according to ASI’s study.

“I’m very optimistic for 2019,” says Hulbert. “I’m predicting we’ll be up 20% for the year. We’ve been operating a little leaner and meaner this year, and we spent a little more on marketing in 2018. We’re finding niches to exploit, those point of differences in the industry.”

Meanwhile, Singh says he’s anticipating a 10-15% increase for his company. “Even with the industry price increases due to tariffs, a well-managed distributorship should experience year-over-year growth,” he said.