While 2022 has been dominated by topics such as supply chain issues, possible recession and inflation, ASA distributors are plowing full steam ahead.
That diagnosis comes from the results of the recently released inaugural ASA Quarterly Market Survey. As background, prior the survey’s deployment, ASA’s Business Intelligence unit asked a group of association distributor members what questions and topics they would like asked in the survey.
Both multiple-choice and open-ended questions were asked, allowing respondents to further elaborate on their responses.
Full results of the survey were sent to ASA distributor members and can be found in the MyASA members-only portal at www.asa.net/myasa (log-in credentials required) or by emailing Mike Miazga at email@example.com.
Questions in the survey ranged from standard sales and business-condition topics to more specific queries such as what companies are doing to help their employees combat inflation, vendor-managed inventory, incentives used for employee training, best practices being used to maintain current employees and resist resignations and what is the biggest known you would like to have data on, among others.
CURRENT MARKET CONDITIONS
As chronicled in ASA’s monthly sales reports throughout this year, business conditions continue to be favorable. More than 90% of respondents to the survey report sales have increased over the past six months, while only 9.7% report a decline in sales.
One respondent cautioned that much of the uptick can be traced to price increases, while another distributor noted it was up in terms of dollars, but volume is closer to flat vs. the prior year. “Dollars more than units,” another distributor wrote.
In terms of recession talk, just more than 58% of respondents say recent recession talk has minimally impacted their business, while 22.6% report it has somewhat had an impact, while nearly 13% say recession chatter has had no impact.
“Prices are higher, but the amount of projects started does not seem to stop,” a respondent noted.
Distributors were asked if they pay more attention currently to week-over-week sales or gross-profit trends, and 74.2% of respondents say gross-profit trends hold more importance currently than week-over-week sales.
“Margin is one of the to-two importance factors of a successful business,” one respondent wrote. “We can control margin and expense, but sales are what they are at the current time.”
One distributor noted they watch both, as well as open orders.
When posed the question if Home Depot or other big-box stores have had a greater impact on business since the start of the pandemic, 33% of distributor respondents responded either with “minimally” or “no impact” with 16.1% saying “greatly” and 19.3% responding “somewhat.”
“The big-box tends to push price increases through slower than the wholesale channel,” one distributor said.
Respondents noted PVC, fittings and water heater pricing are the most common pain points when it comes to losing business to big box stores.
Following up on that question, 51.6% said they do not see a continued increase in big-box store market share in the industry with 48.4 saying they do see a continued increase in big-box store prevalence.
“The big-box stores created some pricing pressures with certain products,” one respondent said. “They are selling products for less than we can buy them.”
As far as current inflation conditions, the response from ASA distributors was a positive one.
“It’s stabilizing overall,” one company wrote. “I expect price increases to return to a more normal cadence and see current prices as a new set of normal in terms of a baseline.”
“Some prices are going up, but my real concern is looming deflation, such as with water heaters,” another distributor wrote.
One key question posed to ASA distributors was how they are handling the inflationary pressures with employees? Almost 75% say they issued salary increases to help, while other remedies mentioned included bonuses and a one-time inflationary stipend check.
VENDOR LEAD TIMES
Distributors were asked how they are best managing vendor lead times as the supply chain heads toward better stability?
“We are trying to hedge and manage inventory and only buying what we need at this time,” one respondent wrote.
“Increasing the number of vendors used,” was another response.
“I was ordering more inventory than I normally would to mitigate stock outages, but with deflationary pressures mounting, I dare not do that,” one distributor explained.
“We have way too much inventory,” another distributor lamented.
One distributor brought up the topic of freight with this topic. “Lead times are much more reliable, however vendor minimums for free freight are increasing,” the distributor noted. “This has forced buyers to purchase less frequently.”
In terms of still problematic product categories, PVC pipe, flex duct and valves ranked at the top of list among survey respondents.
Looking at the next six months, nearly 60% of respondents say they expect sales to slightly grow, while a little more than 25% say they expect sales to slightly decline. The good news is only a little more than 3% say the expect a strong decline in sales over the next six months.
Fast-forwarding to 2023, more than 61% of respondents say they predict an economic decline, project delays/cancellations next year.
Digging a little deeper on that topic, more than 67% of respondents say if a decline/disruption in 2023 occurs, it will happen in the first six months of 2023, while just more than 32% say if there is a decline, it will happen in the backend of 2023.