The Donut Effect: Why Distribution Companies Stall Between $20M and $100M

There’s a hidden growth problem affecting thousands of distributors—and most don’t realize it until growth starts slowing down.

Between $20M and $100M in revenue, many distribution companies hit a painful operational gap. Systems break down. Complexity spikes. Decisions slow.

This is known as the "Donut Effect" in distribution growth.

Why Distribution Companies Get Stuck in the Middle Market

At under $10–20M in revenue, most distributors operate with:

• Limited product lines and brands

• Few sales channels

• Simple pricing structures

• Lightweight distribution management software such as Shopify or BigCommerce

and at this stage, basic tools work…

But scaling a distribution business means expanding into:

• New product lines and SKUs

• Multiple brands

• Multiple channels (B2B, retail, e-commerce, hybrid sales strategies)

• Complex pricing and promotions

That’s when legacy systems fail.

When Distribution Software Stops Scaling

As complexity increases, distributors respond by adding:

• More tools and solutions

• More integrations

• More staff

What was once simple becomes slow.

What was once efficient becomes fragmented with multiple solutions.

This is the moment when many distributors realize their inventory and operations management software can’t scale with the business.

Too Big for E-commerce, Too Small for ERP

This is the core of the Donut Effect.

Mid-market distributors are:

• Too complex for e-commerce platforms

• Too small for traditional enterprise ERP systems

E-commerce platforms lack:

• Multi-channel distribution support

• Advanced pricing and inventory logic

• Operational depth

Enterprise ERPs like Netsuite require:

• Long implementations

• Heavy customization

• High cost and rigid workflows

Neither is built for the modern mid-market distributor.

Common Symptoms of the Distribution Donut Effect

Distributors stuck in the donut often experience:

• 6–10 disconnected systems

• Inconsistent inventory data

• Slow reporting and forecasting

• Expensive ERP customizations

• Teams focused on maintaining software instead of scaling operations

These are signs your business has outgrown its tools.

What Distributors Actually Need: Agile Distribution Software

Escaping the donut requires an agile distribution system—not a bigger ERP.

The right distribution platform must:

• Support multiple sales channels

• Handle complex pricing and promotions

• Scale inventory and operations seamlessly

• Support multi-brand distribution

• Act as a single source of truth

All without heavy customization or massive implementation timelines.

NicklPay: A Modern ERP Alternative for Distributors

NicklPay was built specifically as a distribution ERP alternative for mid-market companies.

It combines:

• Front-end flexibility

• Back-end operational power

• Unified inventory, pricing, and fulfillment

• A single data model across channels

NicklPay eliminates the tradeoff between flexibility and scale.

Distribution Software That Covers Every Business Model

Whether you sell:

• Online

• In-store

• Through channel partners

• Through sales reps

• Or with custom workflows

NicklPay adapts to how your distribution business actually operates.

One brand or many.

Standard pricing or customer-specific price lists.

Simple catalogs or complex made-to-order workflows.

Fast Implementation for Growing Distribution Companies

Traditional ERP systems take months—or years.

NicklPay implementations take days, allowing distributors to:

• Move faster

• Make better decisions

• Scale without friction

  
  

Agile distribution isn’t theoretical—it’s operational.

Breaking Through the $10M–$100M Distribution Gap

The Donut Effect isn’t a leadership failure.

It’s a systems problem.

Distributors that break through the $10M–$100M barrier do so by adopting distribution management software designed for growth—not legacy ERP constraints.

If your distribution business is stuck in the middle, it’s time for a better platform.