Electrical distributors and suppliers reflect on their successes in 2018, discuss their key challenges, and reveal what’s continually driving their annual sales numbers to new “high” levels.
Tariffs, trade wars, Brexit, and the skilled labor shortage all repeatedly made headlines in 2018, threatening to cool the nation’s economy and send consumers and businesses skittering back under their shells to wait out the storm. Fortunately, even these disruptive forces couldn’t snuff out the candle for NAED members and preferred suppliers, the majority of which either saw sales increase or stay even with 2017.
Some of those sales lifts were self-propelled, spurred on by new market exploration, investments in e-commerce, or innovative customer programs. In other cases, it was just a matter of a “rising tide lifting all boats,” so to speak. In other words, in a year when a robust national construction market drove the need for more electrical products, parts, and services, independent electrical distributors and their suppliers kept busy.
At Border States, Jason Stein, executive VP of sales and marketing, says the company posted very strong, double-digit sales growth through its third quarter (the distributor’s fiscal year ends March 31). Serving the construction, industrial, and utility markets, the company saw the most growth in the first two and single-digit growth in the utility sector. “2018 was a very, very good year for us,” says Stein.
With a national skilled labor shortage in full swing, Stein says Border States is effectively positioning itself as the “go to” company for contractors and other customers that are getting hit hard by the low unemployment situation. “As distributors, we can certainly help,” says Stein. “We have the people and the knowledge to help find more efficient ways to get materials to the point of installation by offering material management solutions.”
Getting a Box to the Jobsite Isn’t Good Enough
Reflecting on how the electrical distribution business was conducted in the past, Stein says simply “getting a box to a jobsite was good enough.” Now, the same customers are expecting distributors like Border States to bring a specific kit of materials to the third floor of a building, Room 311. “That sounds relatively easy in theory, but to make that all come together logistically can be challenging,” says Stein. “It’ much different than just dropping a box off at the front of the jobsite.”
This year, Border States plans to dial its material management focus in even tighter, having already received good customer feedback from its early efforts in this area. “This is not a simple challenge to solve, but it an exciting one”, says Stein, “but as we get closer, we see it providing a lot of value to our customers.”
Stein says the company’s material management approach will also help accelerate its growth going into 2019—a year when the national skilled labor shortage isn’t expected to wane or go away. “Our customers need this service because they no longer have the manpower they need to be able to do it all themselves,” says Stein, pointing to a recent NECA study, which revealed that anywhere from 25% to 40% of jobsite labor is spent moving materials around.
“Imagine being able to reallocate all of that labor to installing material versus moving it around the jobsite,” says Stein, “and think about just how much more efficient contractors would be. We’re trying to help them get there.”
Preferred suppliers also saw their share of new business opportunities and sales increases in 2018. At Milbank Manufacturing Co., in Kansas City, Mo., VP of Sales and Marketing Chris Buelow says the maker of metering, enclosed controls, meter pedestals, and other electrical products spent much of the year uncovering new markets and taking advantage of new opportunities.
“Overall it was a pretty good year for us,” says Buelow, whose firm experienced a high number of supply chain challenges over the last 12 months. Most of them involved component shortages at their suppliers’ level. “Getting the components we needed to build our products was challenging,” says Buelow, who credits a robust market with creating some of that dearth of raw materials. “Our suppliers are running a little behind because they’re so busy.”
Milbank, which refers to its electrical distributors as “partners,” says the manufacturer has been working with those partners to help create a win-win growth proposition in the marketplace. In some cases, that’s meant contributing marketing funds that distributors can use to advertise and market Milbank’s product line. In other situations, the manufacturer has been helping its partners grow specific product lines with its own sales reps.
“From what I’m hearing, distribution has been very positive this year in terms of business,” Buelow says. “I haven’t heard many negatives.” What Buelow has heard is rumblings over supply chain issues, the tariff situation, and rising construction costs. “Those are the things that we’re really keeping an eye on 2019,” he says.
Hitting Their Budget Numbers
When the team at Rexel’s San Diego location sat down to outline its 2018 sales projections last year, it came up with a pretty aggressive budget that Maxwell Gabin wasn’t sure it would be able to meet. Fast-forward to the end of 2018 and lo and behold, the distributor not only met its goal, but it also grew its sales in the process. “It wasn’t a record-breaking year, but it was definitely strong for us,” says Gabin, branch manager.
Rexel, which opened a new branch in Oceanside, Calif., in 2018, added more people to its staff and explored some new market opportunities (e.g., more solar and school projects) along the way. “We landed some big school projects here,” says Gabin, who points to a local utility rebate program as another avenue that the distributor has been exploring. “We’ve been pushing a lot of projects through that rebate program recently.”
Also in 2018, Rexel launched a new lighting catalog company-wide. In it, customers can find all of the inventory that’s in the distributor’s distribution centers. Gabin says putting this information—which doesn’t include specific pricing—at the sales reps’ and customers’ fingertips helps both make better decisions about lighting applications (i.e., high-bay, exterior, etc.) and the inventory that’s available to support those applications.
“Whenever a customer comes into the branch or calls in, our inside and counter reps go right to the catalog for the most updated information,” Gabin explains. Once they know the application, they can quickly see what’s in stock and come up with a competitive price on it instead of having to hunt further for the information or even call the lighting manufacturer’s rep for it.
“We can attack customer problems right away with the correct, available solutions. In the past, that information wasn’t readily available,” says Gabin. “This streamlined process really helps our sales reps; it’s been a big success for Rexel.”
Combined, these moves helped contribute to Rexel’s continued growth in the Southern California marketplace. “Business is moving in the right direction,” says Gabin, who is keeping an eye on interest rates and inflation in 2019. “These issues haven’t really created any headwinds yet; maybe sometime down the line they will.”
These are the Good Old Days
At K/E Electric Supply Co., in Mt. Clemens, Mich., General Manager Rock Kuchenmeister says every new year is starting to feel like the “good old days” for his generation of Gen Xers, who just may one day look back and—in an Al Bundy-like moment—reflect on how these truly were “the good old days” of their lives. “The Baby Boomers remember the 1990s and how great those years were,” says Kuchenmeister. “Well, this is the 1990s for the Millennials and Gen Xers.”
This reality is pushing Kuchenmeister and his team to ferret out new opportunities, grow its customer base, and take full advantage of the rising economic tide. Coming off a very good sales year in 2017, the company was expecting more of the same in 2018. “We were expecting some growth or maybe even a leveling off in sales, based on the amount of growth we posted in 2017,” Kuchenmeister explains. “It turns out, we had another exceptional year in 2018.”
Locally, Kuchenmeister expects that most electrical distributors had a similar experience, and he guesses that the same sentiment radiated across much of the nation. For K/E Electric at least, much of the growth can be attributed to investments that the company’s owners made in the business. For example, it opened a new branch in 2018 and also invested in a new web store, new trucks (to increase its delivery wingspan), and new employee training programs.
“We’re continually investing in the business,” he says, “and funneling profits back into our company in an effort to grow our footprint and our market share.”
Those moves also help K/E Electric fend off new competitors and the new competitive forces that are trying to erode its market share. Distinguished from traditional electric distributors that Kuchenmeister mingles with at NAED meetings, these new forces are pushing independent companies to rethink their go-to-market and business models.
“Ever since distribution has been around, there have been competitors to go up against one another and then sit down and have a drink together at a conference. We usually know them personally, like them, and even like competing with them,” Kuchenmeister says. “But those aren’t the competitors that we should feel threatened by. It’s the Amazon Businesses of the world or the lighting manufacturers from China that are shipping direct (or outside of distribution). That’s who we’ll be keeping an eye on and strategizing against in 2019.”Tagged with 2018