For the past month, I have been writing a series of articles on Wesco for Modern Distribution Management.
In the series I took a deep dive into Wesco’s 3 key enterprise strategies
- “Extend our industry-leading scale and value proposition.”
- “Further develop our team and our culture of excellence.”
- “Digitalize and transform our B2B business.”
Wesco Analysis, Pt. 3: Digitize the Business (Free) – Modern Distribution Management (mdm.com) Link to article series – Please note this part 3 article has links to parts 1 and 2 so you can easily access the 3 part series. MDM provides great content to the overall distribution industry.
If you are not familiar with Wesco and their size in the Electrical and Communication Channel – At the end of 2019, Wesco had sales of $8.359B with an adjusted EBITDA margin of 5.2%. By the end of 2023, their sales were $22.385B with an adjusted EBITDA margin of 7.6%.
They are North America’s largest electrical distributor and the electrical channel and HVACR channel have many similarities. Wesco serves many electrical and communication contractors with local branches near the projects to deliver materials for the jobsite in a very similar fashion to an HVACR distributor.
The channels that operate with same dynamics and are the closest to the HVACR channel are electrical and plumbing.
So, what were the big takeaways from the Wesco series that might apply to the HVACR channel.
- Smart Silos and business segmentation work – Wesco has three divisions EES, CSS, and UBS and all three have distinct go to market strategies and associates who specialize inside the divisions. The electrical EES group has its own salesforce and distinct customers so does CSS and UBS. An outsider to the business might say let’s get these teams cross selling across the divisions, but as you might guess that is not a winning solution. If you have an HVACR business and sell PVF and Plumbing also which many HVACR distributors do, you know that cross selling approach is difficult.
- Expand Your Core Business Selectively – Wesco as noted in the sales numbers share above has experienced almost a tripling of their business since 2019 (driven by some key acquisitions like Anixter) but this growth has been very strategic. Every major acquisition was in their already existing core business (EES, CSS, and UBS). Wesco divested their large integrated supply business to Vallen recently as that business really did not fit well into their core business. They know what they are good at and are doubling down on their core business.
- Team culture of excellence – When you read part 2 of the series you will see that Wesco is constantly communicating with the market and their associates on their team with messages of “Why Wesco?”. They understand that for retaining the best of best and recruiting the best of the best talent they need to invest in and communicate relentlessly with everyone in the market. Their Manufacturer partners, the competitive talent, the end customers, and their team are all getting next level training and communication on why they believe Wesco is the market leader.
- Digitize and Transform the Business- In part 3 of the series you will find extensive coverage of what Wesco is doing to have digital “augment their business”. It is an accelerant to their full-service distribution business not a replacement. In my opinion that applies to the HVACR channel. Digital is an accelerant not a replacement to your traditional business, but if you don’t have a good digital platform over time your competitors who do will accelerate past you and take market share.
I would encourage you to think about what applies and doesn’t to your HVACR business from the Wesco Story. Some of what Wesco does might make sense, some things may need to be modified, and some may not probably fit your business. In my opinion analyzing what they and other leading distributors and manufacturers are doing in parallel and the HVACR channels is important.
As always, we appreciate your feedback so please feel free to reach out with any comments.
