Surprisingly, infamous supply chain delays have not spelled disaster for some business sectors. Numbers-wise, 2021 was actually a great year for wholesale trade. A quick definition: wholesale trade is the selling of goods to retailers, organizations, or other wholesalers.
Typically, wholesalers act as intermediaries between manufacturers and retailers. The U.S. Census Bureau reported that wholesale trade raked in over $7.1 trillion in sales last year. The number towers over 2020’s $5.8 trillion in revenues and represents a whopping 22% increase over the previous year.
2021 set a new record for the wholesale trade industry. To put it into perspective, before the pandemic in 2019, the industry collected ~$6.1 trillion in revenues (compared to 2021’s $7.1 trillion). Inflation, spurred by labor shortages and supply chain delays, has had a big influence on these record-breaking numbers. In general, the continued pandemic has caused demand to go up but also for supply to go down.
As warehouses and manufacturers closed factories due to COVID outbreaks, supply tightened and prices rose. In addition to supply chain delays, increased production costs have been passed on forcing retailers to bump up prices. According to the U.S. Bureau of Labor Statistics, the Consumer Price Index rose 0.6% in January on a seasonally adjusted basis. That may not seem like a lot, but it adds up. Over the last 12 months, the index increased 7.5% collectively before any seasonal adjustment in the largest jump since 1982. Food, electricity, and shelter faced the largest increases.
Sales & Inventory
There may be some signs of returning normalcy. Both sales and inventories of merchant wholesalers are up, too. The December 2021 sales of wholesalers rose 21.8% from the revised December 2020 level. Total sales in December 2021 rang up at $634.6 billion, which was also up 0.2% from the revised November level.
Importantly, wholesalers saw an increase in available inventory of 18.5% from the revised December 2020 level, while at the same time reporting a decrease in stockout rates. The December 2021 number of $790.8 billion in inventory also represented a healthy 2.2% increase from the revised November 2021 level. What does this mean? Lately, wholesalers have been able to sell and restock what they need despite the supply chain issues they’ve faced.
A Powerful but Static Industry
These new, staggering numbers prove the wholesale trade’s dominance as an industry and the reliance the world has on it. For an industry making $7.1 trillion in sales, you’d think it would have the most innovative technology. Think again. Most wholesale distributors rely on severely outdated enterprise resource planning (ERP) systems that slow their business down. As inventory levels continue to rise and we hopefully near the end of our global supply shock, there is a premium on business intelligence and smart supply levels. For distributors armed only with legacy ERPs, it will be tough to keep up. And don’t expect old, standard ERP companies to wake up from the last two decades ready to innovate. As ever, their focus will be on selling seat licenses and renewals.
Recurrency, an ERP automation platform, doubles down on delivering what distributors have been historically struggling with. We use artificial intelligence to streamline workflows, provide smart business recommendations, and clean data. It’s innovative software made by a team of world-class engineers and product specialists who understand the wholesale distribution industry. If you’re looking to take some credit for the next uptick in the wholesale trade report, check us out and book a demo today.