Many Top 200 distributors aren't seeing any action in energy-efficient electrical products.
This magazine's annual ranking of the largest electrical distributors highlights the companies on the fast track and analyzes the steady growth of the electrical industry. In addition to featuring the largest and fastest-growing companies in the electrical market, this annual benchmark explores the most important trends shaping the electrical business. When surveying distributors for the listing, EW's editors ask respondents about the impact of various trends on their businesses. One of the questions we asked in this year's survey was, “Has all this talk about the green market made any tangible impact on your sales?”
As an admitted “greenie” who thinks the installation and sale of energy-efficient electrical products has been, is and will be one of the best market opportunities ever for distributors, reps and manufacturers, I was stunned with the responses. Of the several dozen electrical distributors who answered this question, less than half said the green market had increased their sales at all.
With so many real-world incentives to spark sales of these products — and the barrels of ink and reams of paper EW has devoted to talking about this market — it astounds me that so many large distributors say green doesn't mean sales for them.
Admittedly, this was a very unscientific survey that only went out to several hundred distributors, but the respondents were all large enough to be ranked on this year's listing. This question only appeared on the survey mailed to distributors and not on the electronic survey at www.surveymonkey.com.
Sure, some electrical distributors have been profitably mining the green market for years without attracting much attention to themselves outside of their local market areas. But many more seem content with business as usual — selling a large volume of product at next-to-nothing net margins. That's not a real innovative strategy, but for many distributors, it pays bills.
Why all the fuss about the green market right now? A renewed energy consciousness; plentiful utility-rebate programs; new federal energy legislation; green building standards and rapid R&D are the primary market drivers.
While these market drivers have injected new life into this market segment, it's not as if the green market should be taking the electrical market by surprise. With lighting products accounting for approximately one-quarter of all distributors' sales, and motors, drives and building controls as “A” inventory for many companies, the industry has always had the opportunity to sell plenty of energy-efficient electrical products.
The key stumbling blocks have always been training distributors' salespeople about the technical nuances of these products and the different sales strategies they will need to sell green products.
Salespeople must convince customers that the money they spend on green electrical products will come back to the bottom line. The problem is that many of their traditional customers, including contractors, purchasing agents and plant managers, don't necessarily care about future cost savings.
An electrical contractor's key concern is installing an electrical system as safely and cost effectively as possible and then moving onto the next job. Plant managers are usually more concerned with keeping their facilities operating than in saving watts, and purchasing agents are paid in part based on how much they save on what they buy and not on slashing energy costs.
The people who do care or can be convinced of the benefits of energy-efficient electrical systems are a little further up the pipeline. The owner of a building where an electrical contractor is working may care about saving money or providing a more pleasant working environment with a top-shelf green lighting system. CFOs will want to learn about the financial benefits of the right lighting system. Energy-service companies (ESCOs) own the market for large lighting retrofits in government facilities and the offices of Fortune 500 companies in large part because of their expertise in selling the financial benefits of energy-efficient building systems to these buying influences.
Selling green electrical products isn't rocket science, but it's definitely a different type of sale than what electrical distributors are normally asked to make. But it's a sale they must make to participate in one of the best market opportunities in years.