9/24/2012 2:34:00 PM
HEADLINES
Report: Fastenal Refocusing on Core Fastener Sales
In its review of industrial distributor growth drivers at the 2012 International Manufacturing Technology Show, BB&T Capital Markets found signs of a strong potential for distribution market consolidation.
Interviewing field personnel of Fastenal, MSC Industrial and Grainger, BB&T Capital Markets concluded that big distributors “have tremendous runway to gain share and expand the market and are doing the things necessary to facilitate this.”
BB&T warned against thinking of Fastenal’s vending program as “pushing candy machines” — a phrase BB&T referred to as “an antiquated and not entirely fair description.”
BB&T noted that Fastenal has begun to address the “Achilles’ Heel” of its vending strategy: the marginalization of high margin fastener lines.
“Fasteners have suffered in the vending push,” according to the BB&T report. “Fastenal has begun to recognize this and is making the sale of core fasteners a point of emphasis.”
While Fastenal’s vending opportunity “appears bigger than its peers” based on the company’s ability to control costs, BB&T found that vending is a proven penetration tool for each distributor.
“By all accounts, the volume pick-up is substantial, which basically represents market share gains; vending has proven to be effective at penetrating existing customers.”
The downside to this trend involves squeezing smaller players out of the market.
“Vending will put still more pressure on small distributors as the big distributors use the investment to push them out of served facilities. It is driving bigger share of wallet for big distributors.”
BB&T found that all of the distributors are investing in similar ways: vending, inventory management, broadening the product offering, etc.
“Nonetheless, the market remains fragmented, the smaller competition has never been under more pressure, and all three models are making investments that should further their capturing of market share and consolidation of the market.” ©2012 GlobalFastenerNews.com
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