Fads Can Fade

Like most industries of any kind, and human culture in general, the electrical industry over the years seems to pass from buzzword to buzzword as the threat or opportunity of the moment captures widespread attention. Publications such as Electrical Wholesaling certainly play a role in the process, with extended features, special sections and ongoing coverage of the hype versus the reality and the nuances of change as it takes hold. Our editors have always given a cautious eye to new-fangled things, or we try to, but we’re by no means immune to the excitement of radical new opportunities or overwhelming threats that promise to bring major changes to the industry as we know it and the lives of the business owners, managers, salespeople, support teams, associates and friends who make up our reader family. Also, big change is fun to write about.

But if there’s a rule about these big stories, it would be that they almost never go the way either their proponents or opponents foretell. The truth is many of the buzzwords that have arisen over the 95 years we and our counterparts of the past have covered the wholesale electrical products market have in fact left a substantial lasting impression on the electrical business.

In many cases, they morphed and continued to grow under new names or new models. Some were successful enough that they were absorbed into the standard operating procedure of the industry.  We may not use the original jargon anymore, but the lessons they taught have persisted.

With that in mind, and in no particular order, here’s a look back at some of the more interesting trends that captured everyone’s attention for a time and the way they changed or didn’t change the industry according to predictions when they emerged. The good news is that electrical distributors seem to have learned something from every single one.

TVs and Toasters as Major Lines. Most of us have no personal recollection of the days when electrical appliances and televisions were commonly sold by electrical wholesalers. Those markets were taken away by other channels. In our 1970 celebration of the magazine’s 50th year, general descriptions of electrical distributors’ primary markets focused on electrical contractors, industrials and dealers. Dealers sold appliances and other electrical goods to the general public at retail. The dealers and the appliance business were a nice chunk of volume and diversification for electrical distributors then, and various articles back through our history offered distributors good advice on things like lighting their showrooms to make the appliances more attractive.

This history of distributors losing their hold on the appliance categories does still come up now and then as a cautionary tale about how the market can shift away from traditional distribution. It came up when home theater and security systems emerged as a distinct market and again lately in regard to solid-state lighting, distributed solar and wind generation and energy storage. It’s a lingering lesson of seeing a market shift to a different pattern that takes away a sizable segment of a distributor’s sales, a shift we are all but certain to see again.

Web-Driven Disintermediation. It seemed likely in the early days of the web that the increased information flow and advanced logistics made possible by new information technologies would take a chunk out of most forms of distribution or eliminate them entirely. Web retail portals and reverse auctions would make the whole buying and selling process fundamentally different than what had gone before. The dot-com boom looked like a proliferation of threats and tech advocates’ predictions of a sea change of colossal proportions seemed very credible.

It didn’t happen, and the lesson reinforced the value of local brick-and-mortar suppliers with staffs of experts and helpful flesh-and-blood people you can punch in the nose if things go wrong. (You don’t actually throw the punch, but it’s reassuring to know you could – I mean, where do you even look for the nose on an algorithm?)

All the same, the concern that whole markets with business models based on using technology to circumvent traditional distribution altogether arises again and again. It has made a recent comeback with Amazon showing renewed interest in the business-to-business market.

The Integrated Supply Revolution. Electrical distributors serving the industrial market sweated through some dark times in the late 1990s and early 2000s when many of their largest customers moved aggressively to consolidate their purchasing with as few suppliers as they could. The responses varied from strings of acquisitions combining distributors from different MRO verticals under one name, to alliances of various kinds.

The alliances turned out to be very difficult to manage, but some who stuck with integrated supply gained a loyal following. Some of the acquisitions driven by this urge to diversify have also seen solid success. For these distributors, integrated supply remains a valuable market. But on the whole, purchasing at large factories appears to have shifted back toward a concentration on best-in-class suppliers in more traditional vertical markets. No doubt that pendulum will swing again.

Residential Datacom and the Smart House. There was a time in the early 1990s when new residential developments sported prominent signs that the homes were wired with CAT5 ethernet cable and network ports in every room. We would all need them to network our personal computers and our new flat-screen televisions.

Residential datacom installations, of course, were mooted by WiFi routers and broad bandwidth connections. And yet the idea of the Smart House is now being revived and embellished with the bigger and incomprehensibly more ambitious idea of the Internet of Things. The widespread conviction that wearable computing and ubiquitous sensor networks will provide enough convenience and entertainment to allay concerns about constant surveillance is inspiring companies from diverse corners of the lighting and networking and other technology markets to devote research and development dollars to the fight for their slice of the IoT’s backbone.

Most of the IoT products seen thus far use wireless methods to transmit data. Interestingly, it may be the Internet of Things that revives interest in hard-wired residential data networks. Once your toaster claims a slice of wireless so it can talk to your Stairmaster, and you can’t turn on the lights because your son is downloading a video, the value of low-voltage wiring may again prevail. Bob Karlicek, who leads the Smart Lighting Engineering Research Center at Rennselaer Polytechnic in Troy, N.Y., sees lighting-over-ethernet and new bids to revive power-line carrier data transmission as promising technologies for avoiding problems of wireless bandwidth bottlenecks.

Total Quality Management. In late 20th century when Total Quality Management was the biggest buzzword in management circles, inspired by W. Edwards Demming, Philip Crosby and a handful of other management consultants who had put the concepts to work helping Japan build the most envied and feared manufacturing juggernaut of the time, a number of electrical distributors such as Coughlin Electric and United Electric Supply embraced the principles of TQM.

TQM as a buzzword faded after a few years, but the idea morphed and branched into various modes of addressing consistency and performance and continuous improvement such as Six Sigma and Kaizen and Lean Manufacturing. Many of these approaches, well implemented, have proven useful in making manufacturers and service providers more productive, efficient and profitable, and the lessons were fairly quickly integrated into baseline assumptions about doing business well. The principles of empowering line employees and commitment to constant iterative improvements in products and processes are part of the basic fabric of production these days.

Some customers continue to look for third-party verification of quality improvement processes through ISO 9000 or other forms. Many of the best distributors have and maintain their certifications but it makes fewer waves than it did.

Crashing Waves of Distributor Consolidation. Again and again through the history of the electrical industry, people have made predictions that the electrical distributor market will consolidate to the point that three or so major national players would dominate.

It has yet to happen, and there’s no sign that it will soon. The electrical distribution market remains highly fragmented despite brief waves of consolidation over the years. The entire Top 200 list of the largest electrical distributors in the land still accounts for just 65% of the overall electrical sales through distribution. The combination of greater leverage for negotiating pricing and access to capital at lower rates on top of all the economies of scale to be gained from nationwide companies still are offset by the values offered by smaller, local and more agile suppliers.