Minnesota-based Digi-Key is one of the world’s fastest growing electronic component distributors

Digi-Key Corporation is one of the world’s fastest growing electronic component distributors. Digi-Key has more than 500,000 customers and more than 2,600 employees with approximately $ 1.5 billion in sales. Digi-Key resells more than 960,000 products ranging from integrated circuits to connectors, capacitors, resistors, relays, power supplies and potentially almost every type of electronic component manufactured today. Digi-Key does this from the small town of Thief River Falls, Minnesota, which has a population of about 8,500 and is about 6 hours north (northwest) of Minneapolis. The vast majority of Digi-Key’s workforce lives in Thief River Falls.

Story

Digi-Key was founded in 1969 by Dr. Ronald A. Stordahl. Dr. Stordahl’s interest in amateur radio is the reason Digi-Key exists today. Upon obtaining his PhD in Electrical Engineering from the University of Minnesota, Dr. Stordahl began selling a digital electronic keyer kit for sending radio code to amateur radio operators. This device was called IC Keyer which incorporated the logic of digital ISs and it was used to send Morse code to amateur radios. After college, Dr. Stordahl returned to his hometown of Thief River Falls. Eventually the keyer kit was discontinued, so it started selling electronic components in 1972.

Digi-Key has used direct marketing as the exclusive means of reaching potential customers. For the first 10 years, the company focused on marketing to electronics hobbyists, but then began directing catalog shipments to the commercial market in 1982.

“As the business grew, we became a classic catalog electronics company,” said Mark Larson, president of Digi-Key, in a telephone interview. “Over time, we have developed a formidable clientele.

Larson told me that he got involved with the business in 1976 when the company’s sales were around $ 800,000 and it had about 14 employees. In 1996, Larson noted that the company set up a website.

“We had our inventory in a catalog and then we finally decided to put all the parts we sold on the web,” Larson added. “We were one of the first catalog distributors. About 4,000,000 catalogs were mailed out, weighing the size of a telephone book. After the website was created, we no longer had to post catalogs.

When I asked Larson what their top selling products were, he told me they were integrated circuits. Integrated circuits represent about 50% of their sales. Major cell phone manufacturers use Digi-Key for prototypes, followed by direct manufacturers for mass volumes.

International growth

Larson told me that today about 2% of their business is in Minnesota and 40% in the form of exports to overseas markets through air traffic. About a quarter of a billion dollars of their business is in Europe and the business is expanding in Asia.

Pros / cons of being in the Midwest

When I asked Larson what he thought of the pros and cons of being based in the Midwest, he said that “people have a strong work ethic here.” They also have “a lot of pride in their work”. He added that Thief River Falls has a lower cost of living and cost of doing business.

One of the main drawbacks is that it is difficult to recruit talent in Thief River Falls because they do not have as many amenities as the big cities.

Larson told me the area is very beautiful and the nearest lake is less than 20 minutes away. In fact, there are 100 lakes within an hour of Thief River Falls, which is great for fishing.

Another downside was that the infrastructure was not as strong to initially run a mass electronic component manufacturing business. Thief River Falls now has an airport located approximately 5 minutes from the company’s office. This airport is the third busiest airport in Minnesota in terms of cargo traffic, thanks to DHL,

FedEx
, and UPS.

Digi-Key has reached many milestones over the past decades and it’s amazing to see great ideas flourish in small towns, especially in this economy. I look forward to seeing Digi-Key continue to grow and expand.


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