The name of the game is information, and electrical distributors must provide information on products and jobs in the formats their customers want.
In Shakespeare's play Hamlet, there's a scene where Hamlet is in a graveyard and finds a skull. He picks it up and recognizes it as Yorick, one of his buddies. He says the now-famous line: “Alas, poor Yorick! I knew him.” He then goes on to feel bad and talks about what's in store for all of us. That is what the line is associated with — the passing of someone you knew, and how short life is. Though written in 1603, that line is especially applicable to today's distributor and the distribution business. Here's why.
One of our clients was approached by a magazine and told they had the greatest thing since sliced bread — that the client would be “missing a tremendous opportunity” to reach this important audience unless serious advertising dollars were committed. Now our client utilizes two-step distribution, and our client had reached out to their customers' customers before. It would be an opportunity to support the distributor customer base.
But, do contractors read magazines anymore? Like all of our clients, the Internet is playing havoc with beliefs about how information is shared, and like all of our clients, doubt has crept into their consciousness about the viability of how information gets shared. So, we were asked to do research to find out before the advertising investment was spent if contractor habits had changed. Doing these types of projects in the past, magazines always scored in the top five for sources of information; moreover, the distributors were always one of the top sources of information for contractors. Would anything have changed because of the Internet?
We did an e-mail survey to thousands of contractors, received a significant return, and about fell off our chairs with the results. I wanted to share these results with you, before distributors end up skulls in a graveyard.
We asked contractors two simple questions: where do they go for job information? And where do they go for product information? Imagine our surprise when we found that besides trade magazines falling off significantly in terms of being sources of job and product information for contractors, we were told the following:
For product information, contractors go to the Internet first.
For job information, while they will still come to distributors first, the Internet is not far behind.
Our client was surprised that we were surprised; however, it has been our contention for many years that the magazine itself was one of the most useful sources of information for contractors (or any audience for that matter). But what we overlooked is that the definition of a magazine itself is changing and along with it, how the contractor — or any audience — gets its information. This is essential to understand because the ebb and flow of information is redefining distribution itself.
Look at Chart One, “Where Contractors Go for Product Information.” Our research showed the Internet draws almost twice as many contractors as the “first stop” for product information than distributors. How did this happen?
I believe distributors let it happen. In fact, there is no way it could have happened except that the distributor went to sleep at the switch. Indeed, the 25 percent “other” sources contractors mentioned they used for product information included: building departments, services such as McGraw-Hill Dodge, associations, meetings and other professionals. How is it possible that “other sources” are easier for your customers to tap for product information than you?
It may seem perfectly logical for contractors to hit the Web for product information before anything else; after all, the Web is convenient and accessible. What could be easier than for a contractor to go directly to a manufacturer for information on a product?
But the ease of use of the Internet is not enough to explain why distributors are dropping off as a source for product information.
Part of your role as a distributor is to “sort things out” for your customers, isn't it? To tell him the good, the bad and the ugly about products — information that isn't available anywhere else! That's how you beat the Internet.
Distributors can take the lead back. With a little imagination, ample opportunities exist to re-gain their role as the key product information source for their customers. But before we go into detail, let's examine the second question we asked: Where do contractors go for job information?
As you can see in the chart, “Where Contractors Go for Job Information,” the distributor is on top — but not by much. Yet, who does know more than the distributor about what is going on in the market? How can the Internet be creeping up and closing the gap with the distributor on job information? The answer is again as with product information — the distributor is allowing it to happen.
Information is the lifeblood of the Internet, and its currency. Information is what your customers are after. How can the Internet do it better than you when it comes to job and product information? For example, how can your customer find information about the shipment of the product he ordered faster on the Internet than from you? How can your customer find out about changes in the requirements of a product or project on the Internet faster than from you? The answer? Only if you let him. Here are some ideas to regain your role as the product- and job-information provider.
Monitor jobs in your area and provide a daily briefing to contractors. Instead of starting off the day with pickups, start training your contractors to show up for information on the latest projects. Get your information from sources like building permits in your locality. Your contractors cannot possibly know everything that is going on, but you should.
Give your customers ideas to help them with their jobs. Take the opportunity to utilize manufacturer product information and training. There isn't a manufacturer you represent that wouldn't offer to provide a trainer to show up at your place to show the latest and the greatest. When is the last time you tapped that for your customers?
Partner with other distributors. It's not all about electrical, you know. Partner with a plumbing distributor and go to market together, sharing lists, promotions and, information. Or, find an industrial distributor to be your partner. Bundle your services, think outside the box and go get them.
The Future is Now
If contractors are going to the Internet for information more than they are going to you, and you don't do anything about it, you will become Yorick. What is your value in the business mix? How long will it be before the contractor starts purchasing on the Internet — maybe even purchasing directly from manufacturers? And before you answer that will never happen, have you looked at E-bay lately? Type in “switchgear” in the search-engine component, and you'll see something like:
GE 1600 AMP CIRCUIT BREAKER SWITCHGEAR SKPA36AT0800 $2,100.00
And what about private labeling? A recent article in EW talked about how even distributors who will “never” offer their own brands of products face the same pressures as those who do. I put “never” in quotation marks is because my mother used to tell me: “Never say never.” In plumbing, for example, one of the largest distributors is doing just that: offering their own products under their own brand. And if you think that private labeling is a strategy simply for customers who don't value “the brand,” think again. What is any brand but a private label? A brand is built with sweat equity and money. With those ingredients, you can build any label for any price the market will bear.
The key is to understand your market. Five years ago, who would have believed we would be using cell phones to text message, or download videos ago to reach end users? The world is changing. As trite as that sounds, it's the distributor as the “middle man” who is in the most jeopardy of these changes. The Internet erases the middle; it provides direct one-to-one access between buyers and sellers of stuff. To preserve your position, you must have control over your local market, and that means you must control information. You must know more about your market and you must control the ebb and flow of information with your customers.
Jim Nowakowski is president of Accountability Information Management Inc., Palatine, Ill., a marketing firm with experience shaping marketing, public relations, advertising, direct mail and promotional campaigns in the electrical wholesaling industry. You can contact Nowakowski at (847) 358-8558 or e-mail him at email@example.com.