1、February 2023Industrials&Electronics PracticeLessons from transformers:How some distributors reset and wonIn an exceptionally challenging marketplace,a few distributors are outperforming others by wide margins.Heres what they do differently.This article is a collaborative effort by Alex Abdelnour,Br

2、ooke Daniels,Brandon Heriford,Rob McCarthy,and Kevin Sachs,representing views from McKinseys Distribution service line.Disruption is accelerating in distribution.For years,distributors have faced the threats of disintermediation,ever-rising customer expectations,and pressure from e-commerce and omni

3、channel competitors.Then came a global pandemic and unprecedented supply chain challenges,labor shortages,and geopolitical tensions,as well as sharply higher interest rates and the specter of recession.The industry as a whole has always been resilient,but these and other challenges have truly tested

4、 its resolve.Some distributors have faltered in the face of declining revenues and narrowing margins;others have weathered the storms and held their ground.A fewroughly one in tenhave thrived,improving their ROIC by almost 30 percent and increasing their revenues by an average of almost 9 percent CA

5、GR,their profits by around five percentage points,and their EBITDA margins by nearly seven percentage points in the past few years(Exhibit 1).What do these outperformers have in common?Our research shows that the winning distributors dont just outperformthey transform.They use strategic M&A to build

6、 economies of scale,acquire talent,and gain access to new customers and markets.They maintain a relentless focus on the customer,increase their profits holistically,improve and expand their product assortments,and offer more value-added services and a better digital experience.In this article,we not