Distributors, Where Will Your Growth Come From?

\"\"By now many have zeroed in on their 2018 sales goals.  With DISC, Electrical Wholesaling and many manufacturers coalescing around 4-6% numbers (some a little higher, some a little lower) and recognizing that it can change a little due to commercial or industrial focus as well as, for manufacturers, by product category, we have a “ballpark” for 2018.  The number is a little higher than last year and is rationalized by a continued improvement in the economy.
But, the key question becomes, how are you going to exceed your 2017 given that:

  • Copper was up 25-27% last year. Will your wire / cable sales continue to artificially increase based upon copper pricing? Are you expecting copper to be $4.00+ in 2018?
    • In some markets distributors are actively promoting colored wire. There are productivity benefits but, is there a premium? Are there any restrictions on who offers it in a market? Does it cannibalize other wire sales?  Will more overall wire be sold?
  • Lamp unit sales continue to decline but realistically are challenged to go much lower in dollars. Think of what the price of an LED lamp, screw-ins or linears, were 2 years ago? Last year? Price erosion means you need to sell more units to offset the loss, so you start in the hole.
    • We heard of a distributor who said his lighting (lamp and fixture) business was up 6% in dollars but 20% in units!
  • Lighting fixtures continue to have price erosion. This is driven by customer demands of lower pricing, customer acceptance of lower priced product (especially when they don’t perceive a branded products differentiation) and increased distributor competition. Distributors have migrated to lower-priced unfamiliar lines to enable them to capture business as they’ve had difficulty in selling the branded difference.  Consider: Acuity was up mid-single digits in 2017, Eaton Lighting was +/- 1%, Hubbell Lighting was down, Philips Lighting we’ve been told was down, Cree was down … so where is the business going?  According to a few distributors, they need to grow this business 10% to offset the price decline.
    • Yes, you can increase sales by increasing your lighting business, but how do you grow this business profitably?
  • Recent research we’ve done, which will be available for purchase shortly (call to get on the early notification list), reveals that electrical buyers are first going to MRO distributors then to product specialists / eDistributors for their electrical online purchases. The bottom line … as an industry, electrical distributors are losing share due to eCommerce (albeit a little now given the % of electrical material business online.

And this is comparing 2018 to 2017 and does not take into account any benefits from the recent tax cuts / reform and any potential infrastructure investment and precludes any local market-specific conditions that will increase opportunities for everyone in that geographic area.

Distribution is still a share game

It begs questions of:

  • How do you reinforce customer loyalty so you retain the business you already have?
  • What services do you offer that are not supported by your sales organization (meaning they don’t proactively promote) to capture business?
  • Do you have business development-oriented salespeople or do you have account managers?
  • How can your in-house marketing group be a revenue generator and have responsibility for house / unassigned accounts?
  • What product categories do you need to focus on as they are more profitable for you?
  • Consider if you have \”the right\”, and/or enough, revenue generating people (salespeople)?
    • Most surveys we do asking electrical buyers why they purchase from their existing distributor (or favor certain ones) is due to the inside salesperson!
    • Your website can service customers, it can even accept orders, and you need to be omni-channel, but it can\’t knock on a door of a company that is being satisfied by another company and convince them that they should buy from you for XYZ reasons.  There is a reason why leading companies are hiring salespeople and, surprisingly, opening stores in new areas and remodeling branches

At the core the answer to growth is:

  1. Sell more of the same stuff to the same people?
  2. Sell new stuff to the same people?
  3. Sell the same stuff to new people?
  4. Sell new stuff to new people?

The question is \”how\”?

  • WIIFM initiatives? – Yes, you can offer trips and frequent buyer programs but developing WIIFM programs can lend themselves to “rent a distributor” strategies\” and “who has the best trip this year”. Turning these passive marketing initiatives into comprehensive, living, marketing strategies to targeted customer groups can make a difference and can be developed to targer industrial and institutional accounts as well as the contractor community.
  • eCommerce? – Most distributors are already behind the 8-ball regarding eCommerce as they haven’t launched their system yet (perhaps 2018 will be the year of more sites going live), but, if you have an eCommerce system, does it have its own sales and marketing plan? Are you resourcing it with marketing tools? Improving and maintaining your product data?
  • Account targeting?
  • Out-manning the competition?
  • And there are different initiatives based upon the audience, objectives, competitive environment and more.  Hint … your marketing strategy, initiatives, communications and programs is critical to reaching a large number of your customers (more cost-efficiently than salespeople) and communicating your value proposition. And you can not not afford it … otherwise you are a product-driven company with a small percent of your customer base responsible for a large percent of company sales and you are at risk of large revenue swings!

Bottom line … need to rethink the business … quickly … otherwise you\’ll get what you\’ve gotten and rise with the tide.
How will you\’re growth be accelerated?
We can help

  • Do you know what your customers think of your service and where you can improve? Our customer assessment initiative, Uncover, can help you learn where you need to improve?
  • Need help in envisioning a customer relationship marketing initiative?  We have 30 years experience in developing customer incentive and frequent buyer programs and can help you evaluate current programs and recommend unbiased approaches to out-perform the market and turn a standard program into a strategy?
  • Analyze your customer base to identify revenue opportunities and recommend acceleration initiatives.
  • Brainstorm ideas through our ideation process

Manufacturers / Reps – your issues are the same, albeit a little different given the product focus, but the questions are similar. Want a different outcome, a better outcome, that last year? Perhaps a different view can help? Give us a call.

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