A new McKinsey analysis describes the US distribution sector as entering a phase of “permanent volatility,” with AI acting as the defining force. While the findings focus on US distributors, the structural shifts—digital expectations, M&A dynamics, and the erosion of traditional advantages—carry clear implications for city logistics and supply chain players globally.
Theme 1: AI moves from pilot to necessity. Around 60 percent of publicly traded distributors now reference AI in earnings calls, and 25 percent name it an explicit strategic priority. Yet a sharp gap persists between ambition and execution: 90 percent report active AI initiatives, but only 11 percent have fully scaled them, and among adopters just 25 percent realize expected cost savings and 31 percent realize expected revenue gains. The distributors seeing real impact aren’t automating isolated tasks—they’re embedding AI directly into pricing, procurement, inventory, and commercial decision-making. One building-materials distributor with 400+ branches unified fragmented data into a single platform and uncovered over $4 billion in opportunity value within weeks.
Theme 2: M&A economics have fundamentally changed. Despite deal volume falling from 276 to 153 transactions between 2024 and 2025, average deal value rose roughly 260 percent, from $85 million to $310 million, driven by large strategic platform plays (Home Depot–SRS/GMS, Lowe’s–FBM, QXO–Beacon/Kodiak) rather than traditional roll-ups. The era of value creation through scale and multiple arbitrage alone is over; sustained returns now depend on integration depth—unified pricing, shared data infrastructure, and operating-model redesign, as illustrated by Wesco’s 2020 merger with Anixter.
Theme 3: E-commerce has become the operating model, not a channel. Some 57 percent of buyers now rank digital as their primary purchasing channel, up from 33 percent in 2022, and 93 percent of major distributors report significant digital investment. However, most treat digital as a cost center rather than a growth engine, and legacy systems keep pricing, inventory, and sales disconnected from digital platforms—creating a widening gap between spend and impact.
Theme 4: D2C continues to expand. Some 86 percent of suppliers plan to expand direct-to-consumer investment, and 65 percent of distributors expect at least 10 percent of current sales to bypass them within 12 months. AI accelerates this by letting suppliers and buyers aggregate pricing and availability data without intermediaries. Distributors responding best aren’t resisting this trend but deepening their logistics infrastructure, technical expertise, and customer relationships to remain indispensable.
Theme 5: Trust becomes the premium. As service breadth loses its differentiating power, customers increasingly prioritize reliable execution, accurate ETAs, and transparent pricing over optionality or lowest price. Some 49 percent now rank value-added services among their top buying criteria—1.7 times higher than five years ago.
The takeaway: scale alone no longer guarantees advantage. The next era favors distributors who integrate AI, digital, M&A, and reliability into one coherent execution strategy—a lesson equally relevant for urban freight and logistics operators navigating their own consolidation and digitalization pressures.
Source: McKinsey