In a panel discussion at the recent annual conference of the National Association of Electrical Distributors (NAED), St. Louis, senior executives from all facets of the electrical industry did a fine job of summarizing the market's biggest challenges now and in the future.
During the opening session of the NAED Annual, held April 22-26 in Orlando, Fla., two electrical distributors, an independent manufacturers' representative, an electrical manufacturer and the head of the industry's largest buying/marketing group discussed the impact of industry consolidation on independent electrical distributors; Home Depot's acquisition of Hughes; and attracting and motivating young talent.
The panel discussion was moderated by Michael Workman, principal of Michael E. Workman Associates in College Station, Texas, and a well-known professor during his days at the Texas A&M University School of Industrial Distribution. Participating in the panel were Dean Bursch, president, Consolidated Electrical Distributors (CED), Westlake Village, Calif.; Bill Elliott, president, Elliott Electric Supply, Nacogdoches, Texas; Michael Gambino, president and CEO, Pass & Seymour/Wiremold/Legrand, Syracuse, N.Y.; Ron Haedt, CEO of ElectroRep, Inc., Sausalito, Calif.; Robert Lane, president and CEO, Ideal Industries Inc., Sycamore, Ill.; and Bill Weisberg, chairman and CEO, Affiliated Distributors (A-D), King of Prussia, Pa.
The panelists agreed consolidation has been a way of life in the electrical wholesaling industry for many years, and that independent electrical distributors have always adapted to tough competition from larger competitors. A-D's Weisberg said members of the A-D buying/marketing group find that “nine times out of ten” it's easier to compete with a company after it's acquired because it usually takes a while for the acquirer to digest the acquisition and for employees to figure out how to operate in the new regime.
Gambino of Pass & Seymour/Wiremold/Legrand said smaller distributors survive because they tend to be local market veterans closer to customers than out-of-state regional or national chains. He urged smaller distributors to build on their local feel for the market and said many of them have been successful against larger competitors by opening small branches with extended operating hours.
Bill Elliott of Elliott Electric Supply said one of the advantages of independent electrical distributors is that they tend to empower branch managers and other local personnel with many key decisions, in contrast to the operating procedures at branches of large chains, where decisions are often made hundreds of miles away from a branch. He said a notable exception amongst the national distributors is how CED allows its branch managers to run their own businesses, and that his company tries to emulate CED in that respect.
As could be expected, Atlanta-based Home Depot's purchase of Hughes Supply Inc., Orlando, Fla., was a hot topic of discussion for the panel. Bob Lane of Ideal Industries said the current buzz about Home Depot's entrance into the electrical market reminded him of the uproar that seems to rise up every few years over some new competitor or market that's expected to completely revolutionize the electrical wholesaling industry but never seems to be quite as big as expected.
He said this was the case most recently with the Web-based companies that were supposed to replace electrical distributors as the market's channel of choice. Although Lane expects Home Depot to be a formidable competitor for electrical distributors, he thinks much of the hoopla over Home Depot is a bit overblown.
One very real challenge over the years has been attracting and motivating young employees, and selling them on this industry as a career. ElectroRep's Ron Haedt says he has had success hiring experienced salespeople from outside the electrical business because they don't limit their sales calls just to their buddies and enjoy the challenge of building their territories.
It will be interesting to look back at this panel discussion in a few years to see if the future plays out as these industry leaders expect.