Oregon’s Wholesale Trade Industry

by Guy Tauer

August 15, 2019

Oregon’s wholesale trade industry has generally followed Oregon’s overall recovery from the Great Recession. Employment in this small but integral part of our economy rose by 9,400 jobs from 2010 to 2018 for a growth rate of 14 percent. This was slightly slower than the all-industry average of 19.3 percent. Higher than average wages mean that the share of total payroll is larger than the overall share of employment. Wholesale trade accounted for 5.5 percent of the state’s total Gross Domestic Product in 2018, with a total economic output of $13.1 billion. The concentration of employment in wholesale trade in Oregon was similar to the U.S. average.

We’ve all heard the sales pitch that goes something like this, “Direct from the factory savings to you, cut out the middle man and save!” So who are these middle men (and women) that are vilified in these ads for adding to the cost of consumer goods? The wholesale trade industry is one of the intermediaries between manufacturers and consumers. Consumers purchase goods most often from retail trade businesses. Businesses, government agencies, hospitals, and universities, for example, often purchase goods from wholesale trade companies.

Wholesale trade firms sell essentially every type of good. Customers of a wholesale trade business might use goods in their daily operations, like when a company buys office furniture, printers, and computers. Other wholesale trade customers purchase goods to resell to retail customers. For example, a big-box store will purchase inventory in bulk and then sell those items individually to retail trade customers. Some wholesalers may only offer a few items for sale, maybe from just one manufacturer. Others might offer thousands of products made by hundreds of different suppliers.

Wholesale trade companies are an integral part of the economy, functioning as intermediaries between manufacturers and the final end user. Another function is to store goods that neither the manufacturer nor the retailer can hold until consumers demand those products. From a manufacturer’s perspective, wholesalers create a manageable network of distribution channels to get their products into the hands of consumers. Wholesalers can also share some of the functions involved in marketing and advertising, customer relations, and technical support that would otherwise fall on manufacturers. Wholesale trade firms might have staff who provide direct customer support, installation, and service of goods produced by the manufacturers they represent.

Wholesalers sell merchandise to other businesses and normally operate from a warehouse or office. These warehouses and offices are characterized by having little or no display of merchandise. In addition, neither the design nor the location of the premises is intended to solicit walk-in traffic. Wholesalers do not normally use advertising directed to the general public. Customers are generally reached initially via telephone, in-person marketing, or by specialized advertising that may include Internet and other electronic means. Follow-up orders are either vendor-initiated or client-initiated, generally based on previous sales, and typically exhibit strong ties between sellers and buyers. In fact, transactions are often conducted between wholesalers and clients that have long-standing business relationships. This sector comprises two main types of wholesalers: merchant wholesalers that sell goods on their own account and business-to-business electronic markets, agents, and brokers that arrange sales and purchases for others generally for a commission or fee.

There are three main components to this industry:

  1. Merchant Wholesalers, Durable Goods: Durable goods are new or used items generally with a normal life expectancy of three years or more such as motor vehicles, furniture, construction materials, machinery and equipment (including household-type appliances), metals and minerals (except petroleum), sporting goods, toys and hobby goods, recyclable materials, and parts. Firms with Oregon employment in this category you may be familiar with include Les Schwab Tires; Fire Mountain Gems; Papé Machinery; and Apple Inc.
  2. Merchant Wholesalers, Non-Durable Goods: These are items generally with a normal life expectancy of less than three years, such as paper and paper products, chemicals and chemical products, drugs, textiles and textile products, apparel, footwear, groceries, farm products, petroleum and petroleum products, alcoholic beverages, books, magazines, newspapers, flowers and nursery stock, and tobacco products. Oregon companies in this industry include Adidas; Pacific Seafood; Pepsi Cola Bottling Company; Nike; Dr. Martens; Fred Meyer; Food Services of America; Sysco Foods; and Columbia Sportswear. Not necessarily all of these businesses’ Oregon employment is in wholesale trade, but some portions of their operations jobs are counted in this industry.
  3. Wholesale Electronic Markets, Agents and Brokers: These firms arrange for the sale of goods owned by others, generally on a fee or commission basis. They act on behalf of the buyers and sellers of goods. This subsector contains agents and brokers as well as business-to-business electronic markets that facilitate wholesale trade.
Payroll Employment and Wages

In 2018, there were about 76,500 nonfarm payroll jobs in Oregon’s wholesale trade industry, representing about 4.0 percent of Oregon’s payroll employment. Due to higher than average wages, this industry accounts for 5.4 percent of Oregon’s total payroll.  About 37,100 jobs were in merchant wholesalers of durable goods, another 30,800 in merchant wholesalers of nondurable goods. The smallest portion was electronic markets, agents and brokers with about 7,700 jobs in Oregon.

Employment with merchant wholesalers of durable goods generally trended with the overall business cycle. Durable goods employment peaked in 2007 at 40,200 and then contracted to reach 33,500 in 2010. By 2018, employment rebounded, but still lags the previous pre-recession peak by about 3,100 jobs. On the other hand, merchant wholesalers of non-durable goods employment is above the previous pre-recession peak by about 2,800 jobs. Employment reached a prior peak in 2005 of 28,000 jobs and then declined to 25,500 in 2010. Employment rose steadily after 2010 to hit 30,800 by 2017 and equaled that number in 2018. Electronic markets, agents and brokers charted a more recession-resistant path since about the year 2000 in Oregon. After declining from 1990 to 2000 when there were 3,300 payroll jobs, employment in this wholesale trade component climbed steadily to reach 7,700 jobs in 2018.
< Wages, Number, and Size of Firms

While retail trade jobs pay less ($31,484) than the average for all jobs in Oregon ($53,053), the opposite is true for the wholesale trade industry. The average annual pay per job in wholesale trade was $72,950 in 2018. Merchant wholesalers of durable goods had wages close to that figure, at $76,567. Average wages were slightly lower for non-durable goods, at $65,750, but still above the all-industry average. Electronic markets, agents and brokers had the highest average pay per job within wholesale trade, at $84,391.
There were 7,885 wholesale trade firms in the first quarter of 2019 in Oregon. Firms with fewer than 10 workers were the most common, accounting for 83.6 percent of wholesale trade firms compared with 81.8 percent of firms across all industries. On the other extreme, firms with 100 or more workers represented a similar share of firms in wholesale trade and across industries. These larger firms accounted for 40.7 percent of wholesale trade jobs, which was lower than the 50.8 percent of jobs across industries that occurred in firms with 100 or more workers.

Wholesale trade had a larger share of older firms than the average in Oregon. About 89 percent of all firms were 11 years or older in the first quarter of 2017 compared with 80.3 percent for all industries. On the other hand, only 3.7 percent of wholesale trade firms were three years old or less. Across all industries, 7.7 percent of firms were three years old or less.

Workforce Data from Census Bureau Local Employment Dynamics

Data on employment by age and sex – from the U.S. Census Bureau’s Local Employment Dynamics Program – show that men hold about 71 percent of jobs in this industry. These data also show that millennials and gen X’ers had the largest share of total jobs, those between the ages of 35 to 44 years had the greatest total jobs, followed closely by the 45 to 54 years cohort.

The distribution of employment by education level in wholesale trade essentially mirrored the all-industry average for Oregon. Those with a bachelor’s degree or greater accounted for 26.8 percent of wholesale trade employment compared with about 26.9
percent for the all-industry average. Those with some college or an associate’s degree had a slightly greater concentration in wholesale trade compared with the all-industry average. Those with less than a high school diploma accounted for about 11.5 percent of wholesale trade workers, compared with about 13 percent for Oregon’s all-industry average.
Oregon’s wholesale trade workforce was just slightly less racially diverse that the all-industry average. Those reporting being white alone accounted for 89.5 percent of the wholesale trade sector in the third quarter of 2018, compared with 87 percent for all industries. In most other racial groups, wholesale trade had shares similar to the all-industry average. Hispanics and Latinos comprised 10.2 percent of wholesale trade workers, slightly less than the Oregon all-industry average of 12.3 percent.

Outlook

The Bureau of Labor Statistics recently published their 2016 to 2026 employment projections by industry. They project the compound annual rate of change for wholesale trade increasing by 0.2 percent over that period, compared with 0.7 percent for all industries. This is also slightly lower than the annual rate of growth for retail trade, which is forecast to grow slowly at 0.3 percent over the 10-year horizon.

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