Use this guide to calculate market share, evaluate potential new markets and analyze changes in market segments.
The electrical distributors that responded to Electrical Wholesaling’s annual Market Planning Guide (MPG) survey reported a 9.6 percent average increase in sales for 2005 and a 7.9 percent increase for 2006, which will bring sales through electrical distributors to $73.3 billion in 2005 and $80.2 billion in 2006.
The Market Planning Guide survey asked for 2004 sales results, how sales for the first six months of 2005 compared to the first six months of 2004, predictions for the full-year 2005 and predictions for the full-year 2006. Electrical Wholesaling mailed 3,227 surveys on July 29, 2005, to Electrical Wholesaling subscribers in the domestic United States with a title of chairman/president/vice president. There were 202 surveys returned by the post office, and we received 10 incomplete surveys. The 385 usable surveys garnered a response rate of 12.7 percent.
Meanwhile, DISC Corp., Orange, Conn., a leading electrical industry market analysis and forecasting firm, expects total industry sales in 2005 to increase 6.8 percent over 2004. For 2006, the firm currently anticipates growth of 10.3 percent over 2005.
For sales through mid-year 2005 compared to sales from the first half of 2004, respondents reported a 9.9 percent increase. Respondents reported an average sales-per-employee number of $482,756 for 2004. Contrast that number with $540,638, the Top 200 average-sales-per employee number for 2004.
The complete 2006 Market Planning Guide includes sales forecasts at the national, regional and state level for 2005 and 2006, plus final sales numbers for 2002, 2003 and 2004; percentages of sales for electrical wholesalers by product, customer and market segments; Electrical Wholesaling’s multipliers, which allow electrical distributors to estimate potential sales and assess market opportunities; and more.
The complete 2006 Market Planning Guide can be purchased on EW’s Resources Page.
Read on for a more thorough explanation of what’s included in the 2006 Market Planning Guide and ways to use the data.
HOW TO USE THE MARKET PLANNING GUIDE
The market-planning data is divided into nine regions of the United States. For each region and state, you’ll find sales forecasts for this year and next year, along with the three prior years’ sales. In addition to the sales forecasts, which are prepared by Electrical Wholesaling’s research department, you’ll also find employment statistics for four of electrical wholesalers’ major customer groups, and an economic snapshot of the region.
The employment numbers help develop forecasts for customer buying potential. The basis for employment data comes from the Bureau of Labor Statistics or the Census Bureau.
If you’re looking for sales breakdowns for full-line distributors’ key customer and market segments, you’ll find the Customer Mix and Market Mix. The Product Mix data found gives valuable insight into the product areas that have the most mind share with electrical distributors.
Getting the full picture on a market area isn’t that difficult. When developing any market forecast, gathering some basic data on the size and makeup of the market is the first step. Much of the data you need is at your fingertips in the pages of this Market Planning Guide.
Let’s take a look at some of the ways you can crunch the numbers we’ve provided to tailor them to your specific business and market.
Sales Estimates. Are you wondering how you can use these sales estimates? One of the most common uses of this resource is for a business plan, whether it be for internal use as your guide for next year or for a presentation to an investor or banker. You will need something that states the size of the local market, and these sales figures are a documented source you can use “as is.”
This data will also be helpful in establishing a sales forecast for your company and your region, comparing nearby or far-flung markets with an eye to opening or closing a branch, and evaluating promising areas of new business.
One question distributors should ask themselves — and suppliers will be asking — is: “Are our sales into the market at the level they should be?” Look at the estimate of the overall sales in your market in comparison with your company’s sales.
Employment in Major Customer Markets. In addition to sales forecasts, employment numbers make up a large part of the regional profiles. The number of people employed by a company or in an industry tends to rise and fall with the volume of business it’s doing. Employment figures, therefore, act as a kind of gauge to business prospects and conditions in end-user markets.
With the employee counts from each market, you can compare the relative sizes of various end-user groups in your area. You can also compare the makeup of one market area to another, and reflect on whether there are new customer markets or ones that you could be serving better.
If you track the employment figures for each market over time, you’ll see broad economic trends unfolding in your market. You can also use these employment figures to make your own multipliers or you can use the national multipliers we’ve already calculated.
Multipliers. Each multiplier is a dollar figure that represents the average amount of electrical products that electrical distributors sell to each particular type of customer, on a per-employee basis or other “economic factor.”
When used with the employment figures in the regional profiles, the multipliers help you establish the amount of business electrical distributors (could) do with major customer groups in your area, and in total.
For instance, you can go into greater detail by using locally available sources of information on employment or other measures in end-user industries. The professionals at the nearest business library should be able to direct you to a source for the numbers you need.
These multipliers are also a good option for determining sales in an area of the country not covered in the list of major metropolitan areas in the regional profiles. The same approach applies if you want to look at one county in an MSA that covers six counties. You would have to obtain employment figures or economic factors from local sources.
For instance, to find the number of electrical contractor employees in a place like Addison, Ill., a city not detailed in the East North Central regional profile, you could contact the local Chamber of Commerce, a nearby union chapter, the state university, the state’s department of commerce or the local library to track it down.
These multipliers come in handy if you want to approximate the amount of sales available from a particular account. For example, if a manufacturer employs 250 people, by applying the national multiplier of $634, you would expect that the unit purchases about $158,500 worth of electrical MRO product.
You can use the multiplier approach to tailor your own multipliers. You might want to do that if you feel your area differs significantly from the national or regional average.
The multipliers are useful if you want to assess the relative size of various customer markets in dollars in the defined area. You can go on from there to do such things as select markets for new or increased sales efforts, advertising and promotion.
These forecasts give you handy ballpark figures for your business plans and general thinking.
Estimating the size of the market with multipliers is a process of building up a sales potential, piece by piece. Electrical contractors in Tulsa, Okla., employ around 3,177 people, so the potential market for electrical contractor sales there would be 3,177 times the electrical contractor multiplier of $37,453 for a total of nearly $119 million potential electrical contractor sales. You would do the same for each of the other customer markets electrical distributors serve to reach a grand total for Tulsa.
Using multipliers results in a dollar figure for market size that tells the level of business electrical wholesalers in the area could do if every potential customer there bought a typical amount of product from them. It tends to be a larger number than actual distributor sales.