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Success in a ‘David and Goliath’ Environment

By Neil Feldman

With increased consolidation and larger regional and national distributors present in nearly every domestic market, is there still a place for small, independent players? The answer is a resounding “yes.” While there are many challenges in being a small independent, there are also numerous advantages that put them in a position to succeed.

Without a big corporate structure and rigid protocols, decisions can be made in split seconds by small independents that in some cases would not be feasible in a larger corporation. “As a family owned business we have the ability to makes decisions immediately weather it’s a pricing issue, stock issue, or just to make an immediate special delivery,” said Richie DeMarco, owner of Medford, Massachusetts-based Beacon Electrical, a distributor with two locations and 14 employees.

One of keys DeMarco highlights is having the right inventory on hand. “Both locations are fully stocked with inventory,” he said. “I came from a background where inventory and good competitive pricing as well as unparalleled service were what kept our customers coming back to us.” DeMarco runs a total of four trucks out of his Medford and Tewksbury, Mass., locations and underscored the importance of going above and beyond for customers. DeMarco has the ability, for example, to make a same-day delivery to a customer.

Vendor relationships are also vital, and most smaller independents emphasize the importance of maintaining excellent relationships with a select group rather than trying to carry every product line.

“We have some great relationships and long-time friends with both factories and their agents,” said DeMarco. “Some of the vendors will come to us when they need to move material and know how I feel about having inventory and getting a good deal. It could be any vendor looking to write a large order maybe to make a quarterly or year-end sales incentive.”  It’s this ability to be nimble and make quick decisions to unload the inventory that makes vendors reach out to Beacon, DeMarco noted.

Carving out niches is another way small independents can succeed in today’s market. Some independent distributors will focus on smaller contractors that are less likely to be the wheelhouse of big players, while others will focus on a particular industry.

“There’s a place for small organizations in lots of industries,” said Caroline Bartel, an Associate Professor at the University of Texas at Austin McCombs School of Business.  “But there’s little room for a ‘me too’ philosophy. If you’re offering the same service at the same price to the same customer base, you will lose out to big, more powerful companies that have much more leverage.”

She also noted that, as with a customer base, it’s important to select vendor partners wisely. A small distributor will never have enough clout and volume to foster relationships with every key vendor.

“A smaller organization needs to illustrate value to vendors, especially larger ones,” Bartel noted. “Maybe it’s a specialized service or a few really good relationships that allow the company to drive customer product selections.” She cautioned not to rely on a historical relationship too much since one upper level management change can quickly alter the landscape.

Electrical contractors can also appreciate the value of what a smaller independent brings to the table. “What I really appreciate with the smaller distributors we work is that I have one contact for just about everything,” said Chad Kennell, estimating manager at Leer Electric, Dillsburg, Pa. “With some of the bigger guys, I never know who I’m going to speak with if it’s a lighting bid or a gear bid or I need a number of some cable tray. Sometimes I’ll be waiting for return calls from three or four individuals within the same distributorship. And if I get a gear quote and I’m waiting on a lighting number, the gear person isn’t going to follow-up and see what’s going on with lighting.”

That can be a different story with small independent distributors. “With a couple of the smaller local [distributorship], I typically run everything through the salesperson who calls on us. It makes things a lot easier for follow-up, especially on bid day when things get hectic.” Kennell said that he doesn’t diminish the huge value in having specialists and engineers on staff, “but I’m not thinking about that when I’m putting together a bid that’s due in a couple hours,” he noted.

And while there will always be work awarded purely on price, many electrical contractors do appreciate consistent efforts that go above and beyond.

“Projects are bid with razor thin margins and we cannot be buying out work for more money because we like them,” said Kennell. “But I will do what I can to steer business towards the guys who I can really rely on for service and small orders. I will give them last look over someone who’s just throwing in a bid because it’s a bigger project. I rely on the service and like to reward that when I can.”

Neil Feldman is a senior manager in the distribution industry and a freelance writer whose byline has appeared in “The New York Times,” “The Boston Globe,” and numerous magazines. He can be reached at neil.evan.feldm

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