Welcome to ElectricalTrends.
ElectricalTrends is a communications vehicle, offered to the electrical distribution industry, by Allen Ray Associates and Channel Marketing Group. The purpose of ElectricalTrends is to share Allen Ray Associates’ and Channel Marketing Group’s insights on industry trends, observations on industry activities and issues and ideas that may benefit industry participants in their endeavor to improve their businesses in the areas of growth and profitability.
For more information about ElectricalTrends' purpose, moderation policy and advertising policy email email@example.com
Friday, December 6, 2013
- Overall growth - 3.97%
- Industrial growth - 4.02%
- Contractor growth - 3.20%
We also asked about:
- Key business development strategies to stimulate growth
- Key product categories / applications that will help drive growth, and
- The importance of key customer categories that will drive the growth.
We're also in the process of conducting our 2014 End-user / Contractor Outlook in conjunction with Electrical Wholesaling. If you are interested in exclusive research of what your customers are planning, email us or call Channel Marketing Group.
Tuesday, December 3, 2013
So, the arms race begins!
E-commerce has been a challenge for distributors as it has been a "chicken and the egg" situation. If you build it, will customers come. If customers aren't asking "you" for it, then why invest in it.
And then we get to the issues of
- "there is no good source for data in the industry"
- "the ERP companies have lousy storefront functionality, especially when the customer expects Grainger (or McMaster Carr, and eventually Amazon)"
- "managing the tax issue is a b?!ch"
- "my people don't understand this and I don't know how much it will cost"
While there are no simple answers, consider these thoughts:
- When you open a new branch, do you always know it will be successful? Perhaps consider resourcing your e-commerce efforts as a virtual branch?
- If you open a storefront, remember you need to market it to existing customers to get adoption and then market it within your marketplace to let others know about it (and if you want to expand your territory, there are different strategies for that).
- Attributed data has gotten much better. IDEA, and the IDW, has more data than ever. If you haven't talked to them recently you owe it to yourself, and your company, to become reacquainted. Manufacturers have made more of a commitment and it continues to get better. In fact I spoke to a distributor who compared IDW data vs. Trade Service data and they found that 30-40% of the same SKUs were different ... but I don't know which was "right or wrong". And Trade Service has reportedly 900,000 attributed SKUs. Perhaps the right solution is a combination of both companies, plus some info from manufacturers and maybe some self-generated data. Remember, there are electrical distributors and electrical manufacturers that do have storefronts, so they are getting data from somewhere without creating all of it on their own.
- Some of the ERP storefront solutions are getting better. They won't be Grainger, but they may be sufficient for now. I've seen Infor's latest version ... not bad. Serviceable. And remember, the account management functions may be what many of your existing customers want while you then deploy the storefront (but don't delay the launch too long.)
- Other "bolt on" solutions that can be integrated into your ERP system to pull pricing and other account information include
- Second Phase (and I've seen some of their system / mock-ups, again, not bad / serviceable)
- Hybris, which is doing work for Grainger, WESCO (here's an article on WESCO's Carlton-Bates initiative that was coordinated by Acquity Group and uses the Hybris platform) and Crescent (and here's info on their new site that has 200,000 SKUs)
- IDEA has a storefront solution, in conjunction with Unilog, that has already been deployed at at least 7 distributors and has some upsell, cross sell, / suggestion sell and advertising capabilities and there are mobility options (smartphone and tablet).
- and I'm sure that there are many more (and I presume Eclipse has an offering it's just that I'm not familiar with it so can't comment on it - perhaps a reader can?)
Bottom line ... there is stuff going on!
Looking for some resources -
- Baker Tilly wrote a white paper entitled "Time to See eCommerce Differently" which you can download here from the MDM website. The emphasis is on growing your business with your existing customers.
- Hybris is sponsoring a presentation on MDM this Friday, December 6 entitled Prepare for the B2B E-Commerce Revolution. It features findings from Forrester Research's "State of B2B E-Commerce" and features a distributor case study and presenter. Click here to register.
And if you think you're behind now, read this article on Grainger's mobile platform - what they are doing on tablets and the % of business they are getting via their mobile venues.
Typically it takes a distributor 12-18 months for a new branch to become profitable. And considering the lease costs (or purchasing a facility), outfitting the facility, the computers, inventory, adding a truck (or more), at least 3 people and more ... and what are the sales of that new branch in 18 months (typically)? Perhaps investing into an e-strategy should be considered ... it's using intellectual capital, technology, and some people ... perhaps the financial investment is less?
Do you have / are you planning an e-store (maybe we'll start calling them ebranches?)
And if you need some thoughts on how to develop, implement, identify customer needs, gain adoption, price and more, give either one of us a call.
Sunday, December 1, 2013
Some observations and what we heard:
- Due to the turnout there was increased discussion about changing the NAED meeting schedule. Ideas such as
- reducing the number of regionals to an East / West format was mentioned
- keeping the three meetings but moving the Eastern to January to provide more spacing from the AD, IMARK, national chain and AutomationFair meetings
- having NEMRA in the fall and the Eastern to the winter (think about the planning benefits if manufacturers could roll-out their plans to their sales organizations before the new year)
- having only 2 meetings but holding them essentially "back to back" so manufacturers could stay in the same location for a week
The challenge, according to some, is NAEDs commitment to hotel contracts over an extended time period (but this could be addressed by renegotiated agreements and/or paying cancellation fees which shouldn't be too extensive given the decline in attendance. We also heard that the amount of meeting space for manufacturers may be an issue ... here's an idea ... if there was less suites / meeting rooms for manufacturers perhaps there would be more interaction / hallway meetings!
- 2013 performance was all over the board. Many said they were essentially flat / up a little. Some were up significantly. The commonality of those who were up is that they have positioned themselves to pursuing the energy market and/or other niches, with some having LED specialists. And frequently these companies were also in urban areas or areas growing for a specific reason (i.e. shale opportunities). Most are focused on trying to take market share.
- Conversations with manufacturers and distributors revealed that there is little discussion regarding growth. More of the conversations seem to be centered around operational issues and purchasing / pricing issues. Some of this may be due to a change in attendee responsibility. Principals / ownership / senior sales management is attending, however, other attendees are operations, purchasing and finance. We heard the comment that most manufacturers are very product focused and that those who are more vertical or application-oriented are gaining greater interest. According to distributors, most manufacturers appear interested in gaining market share / obtaining conversation vs trying to grow the business. Both distributors and manufacturers are concerned about the others' ability to execute in the fielf.
- We heard positive regarding the general session speaker who talked about identifying and adapting to change. We have no idea how the educational sessions were as we did not talk to anyone who attended one.
- Feedback regarding 2014 is for 4-5% growth with uneasy sentiment for Q1 due to uncertainty about what Washington will do regarding the budget and debt ceiling.
- During the General Session, NAED mentioned a "Talent Management & Review Toolkit" and made the comment, based upon some research, that 21% of distributors expect to lose between 25-50% of their sales force in the next 5-10 years due to age (which may be low for some companies!) They then mentioned the above toolkit at www.naed.org/employeelifecycle which may be of interest to many. The need to recruit new talent vs. "retreads" was a common theme in discussions.
- We spoke to a number of people who inquired regarded our opinions on e-commerce and e-marketing - both manufacturers and distributors. Much is happening in this area and companies are actively trying to determine how to collect email addresses and what / how to use the information to market to customers / prospects.
- ElectricSmarts unveiled a new iPad application that is pretty neat. It can be branded for a distributor and is a complete resource center and currently includes about 100 manufacturer catalogs. It integrates with IDW data, can provide list pricing if the distributor is integrated with NetPricer, has many calculators, videos, customers can build product lists among multiple manufacturers and more. Distributors can choose which manufacturers to activate. For manufacturers, which can have their own app, the system can be up and running in 4-6 weeks. And for both manufacturers and distributors this also can be a great tool for sales organizations. Currently only available for iPads, in Q1 it will also be on the Android platform. Distributors who already have ElectricSmarts integrated into their websites should definitely look into this (and no, we're not paid for an endorsement!)
- There was some conversation about IMARK gaining access to about 15 security and A/V oriented lines from EDGE, a marketing group in the security, broadcast, datacomm and a/v industry. We've never heard of most, if not all, of the companies. It appears that IMARK members will essentially purchase from these companies with the rebate being paid from EDGE to IMARK to its members as EDGE has the deals with these manufacturers. We spoke to a few IMARK distributors who said that the relationship didn't have much interest to them as they didn't participate in these product categories.
- LEDs remain a big topic with a growing percentage of lighting fixture sales moving this way. Estimates, and they vary by distributor, is that 10-40% of lighting fixture sales are LEDs!
What did you hear? And if you attended an educational session, what and how was it?
Sunday, November 24, 2013
red flag about the long term viability of Epicor's products as many clients and friends have struggled to complete installs and gain or continue support. Recently Pemeco Consulting's Jonathan Gross ( click his name for his article) threw his comment's into the ring and essentially predicts that with new management, Apax Partners, the owner of Epicor, would eventually sell the company.
Allen Ray Associates, after warning it's client base about Epicor's unstable financial condition, began to field major distributor concerns that they were seeing and hearing support phones go unanswered and the slowing down of current installations. In about the same time frame long time Epicor personnel began to leave, and to a certain extent this continues today.
Several ET posts have been written (Mothership ERP Revisited, Epicor's High Yield Bonds Mean, Changing of the Guard and ERP Hangovers, Is Your ERP system a Mother-ship or a Satellite? to name a few) which drew a fair number of responses as their then President and CEO told the public, through publicly filed documents, that Epicor might not be in business. To a fair number of distributors that had "bet the ranch" on a Epicor ERP purchase (Eclipse, Activant, P-21, Prelude and several other packages) they now had an essential portion of their business operation threatened. Naturally distributors began to ask hard questions and many of them were not pleasant.
- What do I do to escape the pain of a possible Epicor bankruptcy? I have a business to run and money to be made and don't want to worry about my ERP system
- How do I keep it running when the phone don't answer at Epicor?
- With is my plan if I want to grow my business? Do I actually have to rip out the old Epicor system quickly? What are my options / choices?
- Why should I continue to pay for support? (since I'm not receiving any)
Distributors go forward
While the cracks were being troweled over, a number of distributors large and small still have a business to run and plans to make. Some of my clients are making plans to use middleware software so they can plug into other systems.
About 20% are looking at a complete replacement with newer coded ERP systems and with plans to add on SalesForce.com.
While others are looking at other ERPs with a eye on financial stability.
So the question from your viewpoint is "how much disruption does the potential of Epicor being sold again, raise questions in your future plans?"
Monday, November 18, 2013
- CED purchased Davis Wholesale in Hollywood, CA
- Steiner Electric purchase State Electrical in Wisconsin
- Graybar opened 2 locations in Texas and another in Montgomery, AL
And we know other distributors that are looking for "small" acquisitions.
So, we started thinking ... why all the activity and started to ask around.
A few thoughts...
- There are some who don't feel the market, in general, is growing. Yes, there is growth in the energy efficiency / lighting market, but this is not benefiting all distributors. Yes there is growth in some cities. Yes those in the shale and petrochem markets are growing as are those who are residentially-oriented in markets that were significantly down since 2007, but...there are many distributors who are not either in these marketplaces or benefiting from niche markets. Consider, if the marketing groups are growing at about or less than 4% and some of the national chains are in the 3% or less range, and that there is some price appreciation, there isn't much organic market growth (or we could say, it's hard work getting growth!)
- There are others who say that to increase revenues, given essentially a flat market, it requires taking share. To take share either "buy it" or "build it" (new locations). The mere presence of a new location will generate "some" business and take business away from others.
- And sometimes you open a branch to support a customer or take advantage of opportunities in a market segment (petrochem / shale for example).
- In the case of the Graybar locations in Texas, from what we have heard, there are opportunities that are initiated based upon new business opportunities. Opening a location that is anchored with a large client who commits significant dollars for multiple years does help.
- For Steiner, it appears that it was an opportunity to expand into a geographic area.
- For CED, who already has a strong presence in California, if someone was going to buy Davis, why not CED who operates each of their profit centers (branches) as individual entities, so it wasn't a case of cannibalizing business from another profit center.