Distributors

Exclusive Economic Research Shows Some Momentum

While still far from reaching pre-pandemic levels, respondents to the tED magazine/Baird research for the third quarter of 2020 report some positive momentum heading into the final three months of the year, and potentially some stability in the first quarter of 2021.

86 respondents, which represent annual revenue around $15 billion answered the third quarter survey. For the third quarter, electrical revenue was down 4.9%, while Datacomm dropped 4.2% compared to revenue during the third quarter of 2019, which was obviously before the pandemic impacted our economy.

The results also show significant improvement over the second quarter of 2020, when revenue fell more than 10% compared to last year. When breaking down the quarter by months, July saw a 3.1% loss in electrical, then a significant 7% drop in August, but a rebound to being almost flat in September when compared to last year. On the Datacomm side, a smaller 1.6% drop in July, followed by a larger 8.5% dip in August, and then a 2.8% dip in September.

Some of the respondent’s comments included:

  • “Jobs that have been on hold finally moved forward. Also, (customers in) the industrial business started to re-invest.”
  • “Revenue has generally stabilized and begun to increase.”
  • “Getting better, however, demand may be falling due to lack of new projects.”
  • “September definitely was a good month compared to July and August. Getting a little more aggressive on projects to land new business. Some of the benefits from competitors not being able to deliver.”

The tED magazine/Baird study showed pricing had a significant increase in the third quarter, mainly due to increases in costs for copper and PVC.

Electrical pricing was up .6% in the quarter, while Datacomm saw a 2.4% increase. NAED members who responded to the survey say they expect some pushback from customers about the price increases in the future, but also expect their suppliers to increase prices by the end of this year.

As far as the revenue outlook for the 4th quarter of this year, our respondents believe it will be much closer to revenue from last year, with a predicted revenue drop of 1.2% on the electrical side and just .4% in Datacomm.

Respondents shared some optimism about the fourth quarter, saying:

  • “We feel a little more confident that the worst is behind us, but some end markets will be slow to recover.”
  • “It appears market demand has stabilized at the 85% to 90% rate of pre-COVID.”
  • “It remains the same. We expected momentum to build into September.”

And, when looking at a forecast for all of 2021, responses show a flat year of revenue next year in electrical, while a drop of 2.4% in Datacomm.

Many of the respondents are beginning to worry about backlog, and they are expressing some concern about the first quarter of 2021.

  • “Construction will be our weakest vertical in 2021. Our plan would be if we get close to 2019 sales dollars, that would be a victory.”
  • “We are expecting a slower first half, and a sales pickup in the second half.”
  • “We are starting to see a slow down in new orders and a depletion of backlog. Quote activity is also slowing, which leads me to believe the beginning of 2021 will be tough.”
  • “Since COVID started, we have drained our backlog by 8%. That says that 2021 is going to be a challenging year in the construction world.”
  • “Some contractors still feel good about where things are going. Others are more concerned because jobs are ending and they don’t have the backlog. It’s a little hit and miss.”

Distributors have made a number of significant strategic changes over the past seven months, and when responding to the research, say some of those changes may be permanent.

70% of the respondents say virtual customer meetings will continue, while 41% say they will continue their investment in e-commerce. One-third said they will continue their work from home policies.

When it comes to business travel, 63% of the respondents said they will wait until at least the second quarter of 2021 to return to traveling, with 19% saying they will wait until they are comfortable with some form of a COVID vaccine before travel resumes.

However, when it comes to virtual trade shows and conferences, 83% says they are not as effective as in-person events.

 

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