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New tED Magazine Research Looks Into Pricing, Labor Shortage

New tED Magazine Research Looks Into Pricing, Labor Shortage

52% of electrical distributors say price increases will remain, even if current tariffs with China are rolled back.  And, the skilled labor shortage is having little impact on some distributors, even though it remains a concern in the future.

The latest tED magazine/Baird research asked the question, “Assuming tariffs are rolled back as part of a US/China trade deal, what pricing changes (if any) would you implement on the impacted products?” 

13% of the respondents said they will reduce prices immediately, while 35% said they would reduce prices when inventory costs normalize.  But 52% said there would be no change in pricing.

Some of the distributors who said they would reduce prices when inventory costs normalized said:

  • “Who knows what’s going to happen and how it happens. If steel tariffs are removed we will see a fairly significant impact sooner than later.” 
  • “We would change prices when manufacturers increase/decrease prices. Otherwise no change.” 
  • “It could kill us. Competitors will be better able to turn inventory if tariffs suddenly vanish and I am stuck with expensive inventory.”

Some of the distributors who said they would not change their prices if there was a tariff rollback commented:

  • “No change. It’s hard to differentiate which ones are really tariffs vs. normal price increases.” 
  • “I’ve been asked by our suppliers and have strongly encouraged that we don’t give it (tariffs) up. You get few opportunities in this business to make a little more money.” 
  • “I really would rather not take my prices back down.” 
  • “I sense that there wouldn’t be a whole lot of rollback.” 
  • “We will keep as much of the realized price as we can.” 

As far as skilled labor shortages, tED magazine and Baird asked distributors how they expect to see an impact for the rest of 2019.  A few of the comments from distributors who are seeing little impact include:

  • “While it is difficult to find qualified people, we don’t expect an impact for [the] balance of 2019.” 
  • “It has not significantly affected our business to this point.” 

But, there are distributors who are seeing an impact, with some distributors commenting:

  • “Delaying 20% of projects; losing 5-10% of projects.” 
  • “Our customers are experiencing spot shortages of electricians.” 
  • “For contractors, finding qualified people is a very big issue – not just in electrical, it’s all the trades.” 
  • “It is extremely challenging to find new talent, train them and retain them long term. #1 priority.” 
  • “Truck drivers were the first to hit us hard, but warehouse and entry-level sales positions are hard to fill.” 
  • “Labor is just an ongoing battle for everybody. People who are aggressive and willing to pay are doing a good job [managing it].” 

Some of the distributors who responded to the survey said the labor shortage creates an opportunity for automation and value-added services:

  • “We are investing in more capital machinery and looking at robotics to help mitigate the ongoing problem.” 
  • “Gives us the opportunity to look for additional ways to add value to our customer relationships… a higher level of service which may or may not be compensated for, but solidifies our relationship.” 
  • “It should increase demand for prefabricated products and other labor-saving solutions.” 
  • “It’s our (the distributor’s) and manufacturer’s opportunity to create value by displacing the labor component.” 
  • “Our customers are really just demanding more – the lowest price possible plus more services.” 

For more on the tED magazine/Baird research, make sure you read the article on page 16 in the July edition of tED magazine. It includes results of how distributors are expecting to see revenue increases for the rest of the year and how weather impacted the first half of this year.

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