Wholesale Trade Industry in the Rogue Valley

by Guy Tauer

May 30, 2018

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 2017 for a growth rate of 14 percent. This was slightly slower but comparable to the all-industry average of 16.9 percent. In the Rogue Valley this industry has been generally underperforming compared with the broader economy and recovery from the past recession. Higher than average wages mean that the share of total payroll is larger than the overall share of employment. Wholesale trade accounted for 5.7 percent of the state’s total Gross Domestic Product in 2016, or total economic output of $11.6 billion. In Josephine County, wholesale trade accounted for 4.1 percent of total GDP in 2016. Data for Jackson County’s wholesale trade contribution to total GDP is not published. The share of total industry employment in wholesale trade in Oregon and the Rogue Valley 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 when a big-box store purchases inventory in bulk and then sells 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 customers. 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; Pape’ Machinery; and Subaru of America.
  2. Merchant Wholesalers, Nondurable 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; Doctor Martens; Fred Meyer; Food Services of America; Sysco Foods and Columbia Sportswear. Not necessarily all of these businesses’ Oregon employment is included in wholesale trade, but some portions of their operations jobs are counted in this industry.
  3. Wholesale Electronic Markets and Agents and Brokers 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 in Jackson County

In 2017, there were about 2,400 nonfarm payroll jobs in Jackson County’s wholesale trade industry, representing about 2.7 percent of payroll employment. Due to higher than average wages, this industry accounts for 3.4 percent of total payroll. About 1,230 jobs were in merchant wholesalers of durable goods, with another 960 in merchant wholesalers of nondurable goods. The smallest portion was electronic markets and agents and brokers with about 220 jobs.

Employment with merchant wholesalers generally mirrored the overall business cycle. Durable goods employment peaked in 2007 at 1,418 and then contracted as the recession hit to reach 1,044 in 2012. By 2017 employment had rebounded, but it still lags the previous pre-recession peak by about 200 jobs. On the other hand, merchant wholesalers of nondurable goods employment attained the previous pre-recession peak by 2016 and then lost about 40 jobs in 2017. Electronic markets and agents and brokers charted a more recession-resistant path, but hasn’t really seen any employment gains in over a decade in Jackson County.
Josephine County Payroll Employment

Josephine County experienced its peak wholesale trade employment in 2006, reaching 1,080 jobs. Employment only declined slightly during the Great Recession, to plateau at about 1,020 jobs in 2010 through 2012. In the past few years, overall wholesale trade declined to reach an 800 job annual average in 2017. Nearly all of the gains Josephine County had in wholesale trade from 2002 to 2006 were in the durable-goods portion.  From 2008 to 2017, merchant wholesalers of durable goods have given back some – but not all – of the employment growth seen between 2002 and 2006. Merchant wholesalers of nondurable goods employment peaked in 2005 at about 220 and since has declined slowly to reach about 150 jobs in 2017. Electronic markets and agents and brokers had slow growth, climbing from 35 jobs in 2001 to about 90 jobs in 2017.
Wages and Firm Age

While retail trade jobs pay lower wages than the average for all jobs, the opposite is true for the wholesale trade industry. The average annual pay per job in wholesale trade was $51,009 in Jackson County and $48,538 in Josephine County in 2017, compared with all-industry averages of $41,404 and $35,920, respectively. Merchant wholesalers of durable goods wages were $49,330 in Jackson County and a bit lower in Josephine County at $40,531. Jackson County average wages were slightly lower for nondurable goods, at $44,931, but still above the all-industry average. Josephine County was the opposite with wages for nondurable goods ($44,713) above the merchant wholesalers durable goods annual average wage. Electronic markets and agents and brokers had the highest average pay per job within wholesale trade, at $87,276 in Jackson County and $104,382 in Josephine. Electronic markets, agents and brokers was the highest-paying private-sector industry in Josephine County and the second highest paying in Jackson County in 2017.

Wholesale trade had a higher percent of older firms than the all-industry average. About 88 percent of all Rogue Valley wholesale trade firms were 11 years or older in 2017 compared with 80 percent for all industries. On the other hand, only 4.3 percent of local wholesale trade firms were three years old or less. Across all industries, 8.5 percent of firms were less than three years old. 

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 69 percent of jobs in this industry. These data also show that those between the ages of 45 and 54 years had the most jobs for men, followed closely by the 35 to 44 years cohort. Baby-boomer women had the most jobs in wholesale trade, those between 55 and 64 years old, closely followed by workers ages 45 to 54.
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 27 percent of wholesale trade employment compared with about 26 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 percent of wholesale trade workers, compared with about 13 percent for Oregon’s all-industry average.

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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