As digital disrupts distribution, gap widens between industry leaders and laggards

Hardly a day goes by without news of an acquisition in the wholesale distribution space. This trend has been in high gear for the last few years and shows no signs of slowing down as digital transformation in distribution ramps up.

This acquisition spree spans sectors: building products, electrical, food & beverage, MRO (maintenance, repair, operations), jan-san (cleaning/sanitation products), and HVAC. Some notable transactions include Home Depot’s $18 billion acquisition of SRS Distribution and QXO shelling out $11 billion to absorb Beacon Roofing Supply.

While the verticals differ, the winners share one common characteristic. They’ve all invested heavily in digital transformation and delivering differentiated customer experiences.

Why is digital such a critical component of competitive advantage in distribution and wholesale? As in many things, the strategies of the future can be learned from the lessons of the past.

From niche to national: Digital transformation in distribution

Historically, distribution and wholesale were local or regional businesses built around a specific sector. Specialized knowledge and skills were accumulated. Longstanding business relationships were formed. These companies were predominantly family-owned businesses handed down across generations. This incumbent model worked great for many decades, until it suddenly didn’t.

Early movers like Grainger, which had already built a nationwide footprint, invested heavily in digital and solidified their market leadership position. Amazon Business was launched in 2015 and went from $0 to $35 billion in revenue by 2023. Interestingly, Amazon recently sued the Consumer Products Safety Commission claiming they are not a distributor.

Still, many legacy businesses remained risk-averse and resisted the call to embrace digital. As recently as 2023, among distributors with over $1 billion in annual revenue, it was estimated that one-half didn’t have e-commerce capabilities, according to Distribution Strategy Group.

This seems incomprehensible in a rapidly changing world of robotic process automation and agentic commerce, but for many of these businesses, the focus was on protecting their territory and incumbent business models rather than innovation.

Seeing the massive opportunity up for grabs in a growing $11.4 trillion industry in the U.S. alone, a second wave of forward-thinking businesses have taken action. Private equity investors have also recognized this potential and contributed to the ongoing buying frenzy.

Scale matters, and when it comes to geographic expansion, it’s easier to buy than build. In cases like SRS and Beacon, acquisitions were made to incorporate the digital capabilities and physical footprints those companies had already built. In many others, however, the laggards got lapped. Now, they’re getting lapped up.

Digital-first doesn’t mean digital only

By and large, those that are succeeding in specialized distribution and wholesale understand that it’s not about digital commerce in isolation. It’s about omnichannel commerce and digital transformation in distribution as a whole.

With a few exceptions, the leaders in the distribution space have learned that digital serves as the hub of all sales channels and has the power to drive business growth and operational efficiencies across all sales channels. To get there, these companies invested heavily in digital solutions, then used data generated by their efforts to secure ongoing program funding.

These category leaders understand that the modern B2B buyer’s journey is largely self-directed, and the bulk of the buying journey takes place through digital channels.

Whether the final sale flows through the e-commerce platform or not is secondary. What matters is the amount of influence digital plays in driving the conversion, something the maturation of B2B attribution models is helping to quantify.

These companies are making better use of acquired customer data to reduce churn and grow customer lifetime value by:

• Applying B2B personalization beyond individuals—which can turn over upwards of 30% a year—to customize experiences across buying groups.
• Using generative search to remove barriers to purchase and drive conversion.
• Rolling out sophisticated AI-powered self-service tools to provide real-time information and reduce cost per interaction.

Wholesale distribution trends 2025: Doubling down on transformation

Increased competition, e-commerce growth, rising customer expectations, and new technologies have put pressure on distributors to transform their business to remain competitive.

Distributor digital transformation: The divide widens

Digital makes newly acquired local branches and distribution centers more valuable. This provides more efficient fulfillment options, creates new delivery models, and brings products closer to the end user.

Digital also serves to enable custom quoting for made-to-order components and scheduling of value-added services— key differentiators that smaller or online-only distributors cannot compete with.

As technology continues to evolve, the digital divide between the haves and have-nots will only grow wider. With more than 400,000 such businesses in the U.S., the future of commerce, at least in the wholesale distribution space, will include a steady diet of M&A activity for years to come.