Wholesale Distribution Economic Trends: Headwinds Slow Revenue Growth. in partnership with:

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1 2016 Wholesale Distribution Economic Trends: Headwinds Slow Revenue Growth from: in partnership with:

2 Total revenues of wholesale distributors in 2015 fell by 4.3 percent to $5.3 trillion, reflecting a degradation in commodity prices. After price adjustments, the wholesale distribution industry grew faster than the overall U.S. economy in 2015, posting gains 0.2 percentage points higher than U.S. GDP. Wholesale Distribution Industry Snapshot The data in this whitepaper is taken from the 2016 Economic Benchmarks for Wholesale Distribution, published by Modern Distribution Management. NetSuite is the exclusive sponsor for these reports in To learn more, visit Measure Value % Change vs. Previous Year Industry Revenues ($B), 2015 $5, % Industry Revenues, 2016 Forecast Growth 2.2% Industry Inventories ($B), Non-LIFO method $ % Inventory-to-Sales Ratio, 3-Month Moving Average % Total Employment, 2015:Q4 4,996, % Average Annual Revenues per Employee $1,070, % Average Weekly Earnings (non-supervisory personnel) $1, % When adjusting for the effects of price change (inflation and deflation), revenues in the wholesale distribution industry increased by 2.6 percent. Deflation in the industry was driven by decreases in the energy and agricultural sectors. Despite weak commodity prices, the economy overall exhibited stable GDP growth, strong employment growth and record household wealth, but subdued wage growth. Wholesale Distribution Industry Revenue Trend: % % Change from Year Ago 5% 0% 10-Q1 10-Q2 10-Q3 10-Q4 11-Q1 11-Q2 11-Q3 11-Q4 12-Q1 12-Q2 12-Q3 12-Q4 13-Q1 13-Q2 13-Q3 13-Q4 14-Q1 14-Q2 14-Q3 14-Q4 15-Q1 15-Q2 15-Q3 15-Q4 2

3 Wholesale Distribution Industry Sector Trend Summary Major Sector 2015 Revenues ($B) Avg Gross Margin (2014) Change in Actual Revenues (2015) Change in Real Revenues* (2015) Change in Employment (2015: Q4) 2016 Forecast Pharmaceutical Wholesalers $ % 13.2% % 7.4% Grocery and Foodservice Electrical and Electronics Wholesalers Oil and Gas Products Wholesale Distributors Motor Vehicles and Motor Vehicle Parts $ % 0.3% 1.3% 2.3% 4.7% $ % 3.9% 4.3% 0.6% 2.0% $ % -34.8% 7.3% -3.3% -9.2% $ % 5.2% 4.1% 2.1% 5.9% Industrial Distributors $ % -2.4% -2.8% 0.4% 4.9% Other Consumer Products Computer Equipment and Software Agricultural Products Wholesale Distributors Miscellaneous Durable Goods Commercial Equipment and Supplies Apparel and Piece Goods $ % 3.6% 5.8% 2.8% 1.3% $ % -1.2% 1.6% 1.6% 2.0% $ % -13.5% 1.0% -0.8% -8.6% $ % -11.2% -4.4% -2.1% -3.0% $ % 1.9% 3.3% 0.4% 4.7% $ % 2.5% 2.2% 4.9% 0.6% Metal Service Centers $ % -15.4% -2.3% -2.3% -1.6% Beer, Wine and Liquor Wholesalers $ % 4.0% 3.7% 1.7% 5.2% Hardware, Plumbing, and Heating Equipment/Supplies Wholesalers Chemicals and Plastics Wholesale Distributors Building Material and Construction Office Product Wholesalers and Paper Merchants Furniture and Home Furnishing *Real revenues equal actual revenues adjusted for product inflation/deflation. $ % 5.2% 4.2% 3.0% 7.5% $ % -3.5% 6.1% 0.8% -3.1% $ % 3.4% 5.8% 4.3% 10.1% $ % 3.1% 4.2% 0.4% 2.1% $ % 7.5% 6.2% 0.7% 6.2% 3

4 The largest sectors in the wholesale distribution industry in 2015 were: Pharmaceutical Wholesalers ($613.8 billion) Grocery and Foodservice ($609.1 billion) Electrical and Electronics Wholesalers ($554.7 billion) Twelve of the 19 major sectors registered positive nominal revenue growth in 2015, and 16 recorded positive real rates of growth. For the growing industries, growth rates are moderate, continuing a post-recession trend seen from Modern Distribution Management forecasts that 14 of the 19 major sectors will grow in 2016, and all sectors will record revenue growth in The fastest growth is anticipated in the Building Material and Construction Wholesale Distributors the only double-digit growth sector and the related Hardware, Plumbing, and Heating Equipment/Supplies Wholesalers sector. The slowest growth is expected in the Oil and Gas Products and the Agricultural Products sectors in Oil & Gas Products stands out for its drop from the largest sector in 2014 by revenue to No. 4 in Revenues decreased 34.8 percent to $540.6 billion. Adjusting for inflation, real growth was 7.3 percent, demonstrating the deflationary price environment for oil and gas. This sector represented 10.2 percent of total wholesale distribution industry revenues in MDM forecasts that revenue will decrease 9.2 percent in 2016 and rebound 34.6 percent in 2017 off the smaller base. Oil & Gas Distributor Revenue Trend: % 60% % Change from Year Ago 40% 20% 0% -20% -40% 10-Q1 10-Q2 10-Q3 10-Q4 11-Q1 11-Q2 11-Q3 11-Q4 12-Q1 12-Q2 12-Q3 12-Q4 13-Q1 13-Q2 13-Q3 13-Q4 14-Q1 14-Q2 14-Q3 14-Q4 15-Q1 15-Q2 15-Q3 15-Q4 4

5 Total fourth quarter 2015 employment in the industry increased by 56,000 jobs (1.1 percent) over 2014 levels. The wholesale distribution industry now employs nearly 5 million people more than 1 out of 25 private sector U.S. nonfarm workers. Apparel and Piece Goods saw the largest employment gains in Q with 4.9 percent improvement, followed by Building Material and Construction (4.3 percent) and Hardware, Plumbing and Heating Equipment/Supplies Wholesalers (3 percent). Year-over-year job losses were recorded in five sectors in Q4 2015, with the largest percentage declines in Oil and Gas Products Wholesalers (-3.3 percent), Metal Service Centers (-2.3 percent) and Sporting Goods (-2.1 percent). Productivity fell to $1,070,000 per employee with decreasing revenue and increasing wages. Average weekly earnings in wholesale distribution were 30 percent higher than average earnings in all private U.S. industries and increased modestly in For the national employment outlook, the accelerated job growth that the U.S. experienced coming out of the recession slowed in 2015 and early National employment recorded million workers in April 2016, an increase of 1.9 percent year-over-year and 0.1 percent month-over-month. U.S. employment in April 2016 was 4 percent above the prerecessionary employment peak in January Wholesale Distribution Industry Employment Trend: % % Change from Year Ago 0% -5% 10-Q1 10-Q2 10-Q3 10-Q4 11-Q1 11-Q2 11-Q3 11-Q4 12-Q1 12-Q2 12-Q3 12-Q4 13-Q1 13-Q2 13-Q3 13-Q4 14-Q1 14-Q2 14-Q3 14-Q4 15-Q1 15-Q2 15-Q3 15-Q4 5

6 About the 2016 Economic Benchmarks for Wholesale Distribution The 2016 Economic Benchmarks for Wholesale Distribution, sponsored by NetSuite, is the most comprehensive source of accurate data and statistics for the U.S. wholesale distribution industry. The report uses a model originally developed by Dr. Adam Fein and Pembroke Consulting Inc. The data in this whitepaper comes from the 11th edition of this report, published by Modern Distribution Management ( in connection with the Business Research Division of the Leeds School of Business at the University of Colorado Boulder. The data is based on information collected by the U.S. Census Bureau, the Bureau of Labor Statistics and the Bureau of Economic Analysis. Some of the data is based on a proprietary model developed for these reports. The subsectors are based on the North American Industry Classification System (NAICS), though some have been combined and unbundled to better reflect the industry. For more information on this data, available for 19 sectors, visit: 6

7 About the Survey Sponsor NetSuite is the #1 cloud ERP solution for wholesale distributors, empowering tens of thousands of fast-growing companies with software to transform and accelerate their businesses. Using NetSuite, distributors can run their businesses on a single, unified platform reducing IT costs and gaining comprehensive, real-time visibility across their organizations. NetSuite gives your company customer-facing sales force automation and B2B e-commerce, as well as marketing and customer service capabilities that link seamlessly with back-office inventory management, fulfillment and accounting. In delivering NetSuite for, NetSuite has leveraged experience and lessons learned from thousands of wholesale distribution customers, complemented with a best practice professional services implementation methodology and customization services. Recognized in 2015 with a Frost and Sullivan Customer Value Leadership Award, Net- Suite leverages its 17 years of experience serving wholesale distributors to drive rapid deployment and leading practices. NetSuite for Wholesale Distribution NetSuite s Wholesale Distribution Edition is the only cloud-based, integrated business suite designed specifically for wholesale distributors. NetSuite offers distribution businesses a complete, web-based solution, allowing them to: Engage their customers everywhere with omnichannel commerce, reaching them online, by phone, over , in person and exceeding the evolving expectations of 21st century consumers. Monitor and manage their businesses with the ultimate customizable business dashboard, featuring built-in best practices for wholesale distribution. Convert leads to orders, orders to shipments and shipments to revenue with NetSuite s advanced warehouse management, inventory management and order fulfillment capabilities. Gain a real-time, 360-degree view of customers and provide better customer service through NetSuite s seamless integration of CRM with financials and other back-office systems. Grow revenues, enter new markets and improve channel partner engagements with tools for partner relationship management (PRM). Leverage demand planning to manage inventory optimally and seamlessly. For more information, please visit netsuite.com/wd 7