By Bridget McCrea
Looking back in 2012, distributors posted mixed results depending on which customer verticals and geographic markets they serve. Some posted positive sales growth while others say their revenues remained flat or even declined compared to 2011. Still shaking off the effects of a national recession, an election year, and looming issues, most distributors are cautiously optimistic about what lies ahead in 2013.
At Dickman Supply in Sidney, Ohio, Doug Borchers says that company had a “very nice year” in terms of sales growth. “We were fortunate in that we hit the ground running on a lot of cylinders and wound up having a great year,” says Borchers, vice president of sales and marketing. The distributor’s key growth areas included several green energy lighting/retrofit projects and various industrial automation opportunities with large equipment manufacturers. Borchers credits Dickman Supply’s hiring of an industrial automation sales engineer with helping to drive business in that segment. “That really started paying off for us in 2012.”
Also helping to drive the distributor’s healthy bottom line over the past year was a stepped-up training program for inside sales representatives and the introduction of a customer inventory management program as a valued-added service for clients. “We hired someone who is dedicated to helping our end customers manage their own stores,” says Borchers. “That’s yet another channel that helped enhance sales in 2012.”
Not all of Dickman Supply’s customer segments are in growth mode right now. “Within our contractor business there’s a dividing line between the haves and the have-nots,” says Borchers. Contractors that largely rely on public bid work, for example, saw business slow to a trickle in 2012. On the flip side, Borchers says contractors involved with large, private projects managed to keep themselves pretty busy.
Economic uncertainty also took its toll on Dickman Supply’s customers over the last year. “At first the contractors were waiting for the presidential election to take place and they weren’t spending any money leading up to it,” says Borchers. “Then it was the fiscal cliff. The contractors working public bid jobs just aren’t pulling the trigger right now.” Looking ahead, Borchers anticipates improvement in that sector and continued growth for Dickman Supply as the distributor finds and leverages new business opportunities.
Burt Schraga, CEO at Santa Clara, Calif.-based Bell Electrical Supply, says that Silicon Valley, one of his firm’s prime geographic markets, is “on fire right now due to growth in the tech sector.” Large, electrical contractors in the region are grappling with 2- to 3-year job backlogs, says Schraga, who sees that rapid growth as a double-edged sword for Bell Electrical Supply, which has found itself going head-to-head with the tech firms in its quest to fill everything from warehouse to leadership positions.
“Our biggest issue right now is hiring people,” says Schraga, who has been hearing similar complaints from other electrical distributors in the area. “We’re competing with Apple, Facebook, and Google for the best job candidates. Making headway in that area is pretty tough.”
Despite its human resource challenges, Bell Electrical Supply posted moderate growth in 2012 by working mainly with small- to midsized electrical contractors, facilities, and original equipment manufacturers (OEMs). Contractor business is up, facilities are stable, and OEMs are “way down,” according to Schraga, who says many solar energy and capital equipment projects remained on hold through much of the year. “A lot of our customers are waiting to see what happens with this fiscal cliff situation.”
An optimistic, Schraga says he’s been keeping an eye on the predictions made by economic forecasters Alan and Brian Beaulieu of ITR Economics. Frequent speakers at NAED meetings, the Beaulieus recently released a podcast. In it they forecasted 3-4 percent growth in GDP in 2013. “It’s going to be a fair year made even better if we can find good candidates to fill our open outside sales positions,” he added.
Zero Sales Growth
When the going gets tough for independent distributorships, the survivors find ways to gain efficiencies and cut back in areas that don’t impact customer service or performance. That’s the scenario that Granite Electrical Supply in Sacramento had to manage through most of 2012 – a year when sales remained at the exact same level as 2011’s numbers. “Our year was completely flat,” says Bob Powers, president. “We had zero sales growth.”
To offset the plateau, Granite Electrical Supply’s management team worked on the company’s pricing structure, operating system, and other elements where “efficiencies could be attained to help the company perform better,” says Powers, who adds that he wasn’t surprised by 2012’s flat returns. “In late-2011 a number of jobs that we had lined up were cancelled, and some came out of the blue and helped buoy our sales. It was all over the map with no consistency.”
On a positive note, Powers says initiatives like California’s Building Energy Efficiency Program are pushing contractors and building owners to retrofit existing spaces and build new, green facilities. “We’re seeing a number of owners putting new LED lighting and dimmers in their buildings in order to save on energy and get a return on investment,” remarks Powers. “That side of our business is doing pretty well.”
In assessing Granite Electrical Supply’s lack of sales growth in 2012, Powers says it really just comes down to the fact that there’s less business out there to be had by the same number of wholesalers, most of whom are dealing with flat market growth and the need for extreme margin control. Powers doesn’t expect much pickup in the year ahead, but is optimistic about new markets and the slow-but-sure overall economic recovery. “At this point we’re hopeful that the market and business will pickup,” says Powers, “but we’re not going to count on it.”
A Year Divided
When Jim Dunn looks back on 2012 he sees a very clear dividing line on October 29th. Up until that fateful day, Tinton Falls, N.J.-based Warshauer Electric Supply Co., was on track to post single-digit sales growth for 2012. Business certainly wasn’t brisk, says Dunn, executive vice president of sales and marketing, but things weren’t as bad as they were a few years earlier during the national recession. “We were excited because we were outpacing our projections,” says Dunn. “It wasn’t meteoric growth, but things were definitely improving business-wise.”
Everything changed when Hurricane Sandy took a swing at the Eastern Seaboard in late-October. “We were Ground Zero for Sandy and for the Nor’easter that followed on her heels,” says Dunn. “Our world flipped upside down overnight and so did our business.” Now, with a fiscal year that ends on January 31, Warshauer Electric Supply’s sales will likely be up 20 percent over the prior year – a growth rate that will probably carry over into 2014.
With demand coming from contractors, municipalities, hotels, hospitals, and “anyone else who needs us,” Dunn says the company is deep in the throes of a rebuilding effort that could take 2-3 years to complete. Right now, Dunn says much of the distributor’s business is coming from builders who are trying to stave off a growing housing shortage in the wake of the massive storm.
As a company that not only sells emergency generators – but that also engineers, designs, and services them – Warshauer Electric is making itself extremely useful during the rebuilding effort. “Our customers need everything right now and we’re working hard to fill those needs,” says Dunn. “It’s a very challenging environment, but we are up to it.”
One electrical distributor that saw its sales grow by double digits in 2012 was Frontier Electric Supply of Bensenville, Ill. Brad Van De Sompele, president, says the firm’s core OEM business was up about 15%. “I’m very happy because the growth was spread throughout our business,” Van De Sompele explains. “Existing customer sales were up and we also have grown our new customer base.”
Van De Sompele says his company hasn’t taken any steps to adjust to the current business environment, and adds that Frontier Electric Supply simply relies on a relationship-selling model that finds the distributor forming strong, lasting ties with its customers and business partners. “We’re in a business where relationships are still king,” says Van De Sompele. “On a daily basis we just focus on growing and nurturing those bonds. When we do that, good things happen.”
Looking ahead to 2013, Van De Sompele says he’s keeping a close eye on national economic issues and other events that may impact end users. “There are a lot of things going on around the world that affect our customers and suppliers, and therefore those events impact our business too,” says Van De Sompele, who anticipates company growth to be in the 8-10 percent range during the year ahead. “I’m fairly optimistic about that growth rate but I’m also aware that things could change in a hurry because of the ‘big world’ that we now operate in.”
McCrea is a Florida-based writer who covers business, industrial, and educational topics for a variety of magazines and journals. You can reach her at email@example.com or visit her website at www.expertghostwriter.net.Tagged with tED