After 100 years, change still in the air for D&H

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For their 100-year-old Harrisburg company, D&H Distributing, change is the name of the game. The consumer electronics and IT wholesaler has ridden evolving trends to nearly $4 billion in annual sales, making it the largest known private company in Central Pennsylvania, according to Business Journal records.

Some things hit, others miss. Trends shift. Manufacturers and retailers come and go.

At D&H’s North Seventh Street headquarters, the history and progression of consumer electronic devices and IT products is on full display in the company museum — from old video gaming consoles to early computers and digital cameras.

But the headquarters display also highlights new gear like virtual-reality headsets and 3-D printing machines, areas of current and future growth.

“You have to bring it all to market,” said Michael Schwab, who is co-president with his brother and a third-generation owner.

Diversification pays off

D&H sells tens of thousands of different products from more than 600 different manufacturers. That list of products spans computer notebooks and tablets, gaming consoles and video streaming devices, networking and security products and other tech gear.

On any given day, up to 10 manufacturers are meeting with company officials, hoping to get their latest products picked up by the distributor, which has warehouse operations across the U.S. and in Canada.

D&H has relationships with some of the biggest manufacturers and retail names in the country, including HP, Intel, Microsoft, Samsung, Amazon, Google and Best Buy.

As leaders of a company that started out as a tire retreading business in 1918 and later depended heavily on RCA and Whirlpool for much of its business, the Schwabs are big on diversification and making bets on new areas that might lift future sales.

“We want to find incremental opportunities,” Michael Schwab said.

The company ended its last fiscal year in April with 11 percent revenue growth, driven largely by sales of premium notebooks, network security solutions, professional audio and visual commercial displays and office workstations.

Opportunities

The Schwabs said they believe D&H can build on its growth through opportunities in augmented-reality and virtual-reality products, digital signage and video conferencing, as well as hosted IT services.

Smart-home automation has been another priority for the company.

D&H has been adding new smart-home manufacturers and products, including door-monitoring systems that can be integrated with smart-speaker devices like Amazon Alexa and Google Home.

“We haven’t hit critical mass yet,” said Dan Schwab.

Market research company eMarketer has forecasted that 76.5 million smart speakers will be in use by 2020, a compounded annual rate of growth of nearly 50 percent, according to investor website The Motley Fool.

Known for distributing physical products, D&H also is moving into device-as-a-service programs, or device subscriptions.

The programs allow customers to pay a monthly fee for fully outfitted computers and other hardware, offering more financial flexibility to companies that scale their workforce up and down throughout the year and may not need devices for long periods. It also helps small businesses that may need the latest equipment but can’t always afford the large upfront cost of buying and replacing hardware.

“We want to be the conduit between the tech provider and their end user,” Dan Schwab said.

D&H has started a solutions and services team to help train tech provider partners as they sell and integrate more advanced services to businesses.

D&H also is leading sponsorship efforts to help Harrisburg University of Science and Technology get its esports team ready for the start of its first season this fall.

Gaming-device sales have been a growth area for D&H, especially as online gaming has grown in recent years and more gamers are looking to buy high-end computer monitors and video cards.

“Certainly the market will be there for D&H,” HU President Eric Darr said, adding that he expects more colleges and universities to embrace competitive esports.

Virtual reality, or VR, arcades also are on the rise nationally and the augmented-reality/virtual-reality market is growing globally as more people seek immersive experiences.

As areas of growth, they could propel additional hires at D&H. The Harrisburg company has about 1,200 employees, including about 800 in the Harrisburg area. The Schwabs intend to continue expanding the operation even as the labor market tightens in a rising economy and D&H invests more in warehouse automation.

In early June, the company had about 50 open positions in sales, IT support and finance. More than half were new positions.

D&H already has a strong worker retention rate, with the average employee tenure being 10 years. One benefit: employees own 36 percent of the company under D&H’s employee stock ownership plan, or ESOP.

D&H also just launched a college summer internship for seven students in hopes the program can find long-term talent for the company.

Michael, Dan and their sister also became part owners of the Harrisburg Senators baseball team this season, which has raised the company’s visibility in the community.

The Schwabs, who now have a fourth generation in the business with Michael’s son, Brandon, said they expect to continue growing, though double-digit increases get harder as a company expands. D&H has no plans to grow internationally.

“In the U.S. and Canada, there is tremendous upside,” Michael said, noting that over the last 10 years, the company’s Canadian operation has grown to more than $300 million in annual sales.