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How fragmented is the electrical b2b distribution industry?
Hello! Thanks for asking Wonder about the fragmentation in the US electrical b2b distribution industry. It's my pleasure to respond to your query.
In short, the top 25 companies make up between 69-82% of the total electrical distribution industry, and the top ten companies make up 60-72% of the market. Companies with under 100 employees appear to make up as much as 98.6% of the overall industry. Below, please find the results of my research, along with my research methodology.
METHODOLOGY
To respond to your query, I began by researching the market size of the industry as a whole. Then, using the list you provided, I searched for the NAICS code for one of the example companies to ensure I was looking at the right industry/sector. I have used this NAICS code for all research. I've searched through reports and data at the US Census FactFinder, Bureau of Labor Statistics, and the Small Business Administration. I've also examines company websites and documents. Gathering data from various sources has presented a few discrepancies, likely based on differences in how these sources define companies or the possibility that some companies may fall into other NAICS codes and, therefore, are not consistently captured by all sources.
MARKET SIZE
By looking up data on WESCO, one of the companies on the list you provided, I identified the NAICS code for electrical distributors is 423610 (Electrical Apparatus and Equipment, Wiring Supplies, and Related Equipment Merchant Wholesalers). The SIC code is 5063 (Electrical Apparatus and Equipment Wiring Supplies, and Construction Materials).
According to IBIS, the Electrical Equipment Wholesaling (NAICS 42361) was worth an estimated $160 billion and is growing at a CAGR of 3.1%.
The US Census FactFinder (NAICS 42361), however, shows total revenues of $136 billion in 2012, the most recent year for which the data was gathered.
NUMBER OF BUSINESSES
I have found some discrepancies in the number of businesses reported to be in this industry. The NAICS Association website shows the total number of businesses in this industry as 20,050. The SIC Code website shows the number of businesses as
29,025.
However, the US Census FactFinder shows 14,544 establishments, using the NAICS code. Since this source offers the most complete data on industry breakdown by business size, I believe it is the best figure to use to provide you with estimates for the overall industry to ensure we are comparing apple to apples.
FRAGMENTATION
Based on the list of top companies at Electric Wholesaling, the top 10 companies have combined revenues of approximately $97.52 billion, which would make up about 60% of the industry, based on overall industry revenues of $160 billion. If the FactFinder revenue data ($136 billion) is correct, then these companies would make up close to 72% of the market.
Going through the rest of the top 25 list, I have looked up the revenues for those privately-held companies whose revenues were listed as N/A to calculate the total revenues for the companies ranked 11-25. Some of the revenues missing from the list you provided were found here. The revenues I located for those not provided in the list are:
Therefore, adding up all the revenues for companies ranked 11-25, their revenues come to $13.9 billion. So, the top 25 companies have total revenues of $111.42 billion, which is about 69% of total industry revenues. If we use the FactFinder industry total of $136 billion, the top 25 companies would make up about 82% of the market, based on revenue.
BUSINESSES BY SIZE
The top 10 companies in the industry have the following number of employees:
The US Census FactFinder provides data on the breakdown of the industry by company size. This source shows the industry totals under Wholesale Trade (by searching for NAICS code 423610), then it breaks down the industry into two business types. But we will focus on the Wholesale Trade numbers since those provide the overall industry numbers. This data is based on 2012 figures. This information is gathered every five years, so new figures should be coming out sometime this year.
Of the 14,544 businesses listed at the Census FactFinder, 13,604 operated the entire year during 2012. Of those, 13,413 of them have fewer than 100 employees, while 191 have over 100 employees. Therefore, small businesses with fewer than 100 employees make up a whopping 98.6% of the market in terms of the total number of businesses.
According to the Census FactFinder, companies with over 100 employees had total revenues of $37.34 billion, which would be approximately 27% of the industry. However, I am puzzled by this figure since it differs greatly from the calculations I made earlier based on the actual revenues I found for the top 10 companies, all of which have more than 100 employees. The only thing I can assume is that some of the top ten companies may fall into other NAICS categories and, therefore, may not have been captured by FactFinder.
According to the Small Business Administration, small businesses in the NAICS 423601 sector are defined as those with 200 or fewer employees. However, the American FactFinder data does not segment out the 100-200 employee segment. However, the smallest company in list of top 25 companies, in terms of number of employees, is Van Meter, Inc, which has 390 employees.
ADDITIONAL INFO
IBIS World provides a full industry report, but it is behind a paywall, so I cannot access it. This report can be downloaded if you sign up for a free 30-day trial here. The report provides a deep dive of the industry, including market share concentration, which would likely provide some of the details you need.
SUMMARY
To sum up, electrical distributors with fewer than 100 employees make over 98% of all businesses in this sector. The top ten companies may make up anywhere from 60-72% of the overall market, based on total revenues.
Thanks for using Wonder for your research needs! Please let us know if we can be of further assistance.