The green bandwagon has clearly left the station and has been seen all over the world, but it's not too late for distributors to catch it and jump aboard. Part 2 of 2.
The electrical industry's role in improving energy efficiency is so fundamental one could argue that it should be a core competency of every electrical distributor in the country. In fact, according to some of the leading lights of the green market, electrical distributors missed an opportunity to establish themselves as efficiency experts early in the game, ceding a lot of potential business to upstart energy service companies (ESCOs). It's not too late for distributors to join the fun, but the explosion of interest in green technologies is well underway and waiting much longer could mean missing significant sales opportunities. Fortunately, electrical manufacturers are cranking out all kinds of training and promotional materials and generating demand at the end-user level, so this may be the last best opportunity to establish your company in this market.
The green gurus profiled below and in the February issue of EW have lots of ideas and encouragement for distributors interested in finding their place on the bandwagon.
President, Attardi Marketing, Colts Neck, N.J.
During his 40 years in the lighting industry, Bill Attardi, president, Attardi Marketing, Colts Neck, N.J., has seen the energy movement in the electrical wholesaling industry gain momentum. As a senior executive with Westinghouse Lamps, Philips Lighting, USI Lighting and Wellmade Products, and as a consultant who helps distributors, manufacturers and reps unearth marketing opportunities in the green market, he says electrical marketers should definitely be selling more energy-efficient products. “Upselling electrical products to the more energy-efficient technologies should be a core competency of the electrical distributor,” he says. “The challenge going forward is for electrical distributors to train and educate their people to do a better job.”
Historically speaking, he believes electrical distributors struggled to position themselves as knowledgeable resources in this market segment in the early years of the energy movement, and that because of this energy-service companies (ESCOs) were able to siphon off sales of electrical products. “Initially, maybe 15 years ago, electrical distributors struggled with this,” he says. “When you create a vacuum in any industry, the vacuum will be filled by someone else if it's viable — thus the emergence of the ESCO. Electrical manufacturers have invested many dollars developing energy-efficient products since the energy crisis of the mid-70s. They looked first to their traditional channels of distribution to market these technologies. But instead of creating demand for them, filling orders with ‘commodity/satisfy-demand’ products was the prevailing activity.”
However, he senses this is changing and that electrical distributors are looking for ways to work with manufacturers in building a cohesive green image. Attardi says the industry's buying/marketing groups now all have green initiatives for their members because energy has become such a hot issue.
Attardi believes electrical distributors shouldn't wait for electrical contractors to create demand for these products because “it's not in their DNA.” “They typically respond to and satisfy what the market dictates,” he says. “Their core business is new construction that responds to initial cost, cost-per-square-foot, specifications, request for bid, project costs, labor and material, price and delivery. The upgrade energy project is a money deal that responds to investment, ROI (return on investment), simple payback, net present value and energy savings, a language not spoken by electrical contractors.
“They prefer new construction projects, as they are created by property owners and architects/specifiers with whom they have relationships. Energy projects are created by ESCOs, utilities and energy providers. Electrical contractors will work with them, but someone else has to create the project before a contractor is called. They are just not proactive in this market niche.”
To be taken seriously in this market, Attardi says an electrical distributor must think green and begin to build an image of their company as an “energy-efficient electrical supply house.” Training and educating all their people to market the more energy-efficient technologies more effectively is the biggest challenge, he says, and he urges electrical distributors to partner with suppliers who want to help. “Upselling is core to a distributor, and every inside and outside salesperson should be skilled in improving the business of their customers with the advanced technologies,” says Attardi. “My concern has always been in managing energy projects, and for that they may need to partner with an ESCO.”
As part of their positioning as total energy providers that provide solutions for energy savings not only related to electrical systems, but with heating and air conditioning, windows and the building envelope, backup power and renewable energy sources, the largest “tier 1” ESCOs will often subcontract lighting upgrades to “tier 2” smaller/regional ESCOs. “Tier I ESCOs (Johnson Control, Honeywell, Chevron, Noresco, Ameresco, etc.) only focus on million dollar projects and up,” he says. “Tier II ESCOs are very active in smaller projects when lighting is involved, and are subcontractors of the Tier I ESCO to provide material, labor and project management.”
Attardi says while these smaller ESCOS often rely on electrical distributors as a source of supply for these jobs, they have specific needs beyond price. If distributors don't recognize and serve those needs, electrical manufacturers will feel the pressure to sell these ESCOs direct, he says.
Still, Attardi is quite bullish on opportunities for electrical distributors in the green market. “Marketers are always looking for one thing that can make an impact,” he says. “Right now compact fluorescent lamps are very hot. EPA has indicated that the U.S. market bought over 290 million units in 2007 and that CFLs now represent 20 percent of the lighting market. Utilities all over the country, along with Wal-Mart, Home Depot, Lowe's and other big-box retailers, are practically giving them away to encourage the change to energy-efficient products. It's a terrific symbol to what can be done as we drive to energy independence.”
Channel Marketing Manager, Advance Transformer Co., Rosemont, Ill.
Doug Stoneman, Advance Transformer's channel marketing manager, urges electrical distributors to take a more proactive role in the green market. He says distributors typically have the closest relationships with MRO end-users, and proposing more efficient solutions for current maintenance and repair needs is a value-add that distributors should routinely offer their customers.
For electrical distributors to enhance their standing in the green market, Stoneman says they will need to develop stronger relationships with architects, owners and specifying engineers, and demonstrate expertise in current and leading-edge lighting technology. “Educating the influencers on product and distributor capabilities is a key means of demonstrating that expertise and can be accomplished by hosting seminars and workshops that feature subject matter experts in lighting technology,” he says.
Electrical contractors have a different challenge, he says. While he believes electrical contractors can create demand for green products, it can be difficult because the target audiences for energy-saving proposals are often very different from the day-to-day working relationships that contractors have with end-users. “While there are many proactive and energy-savvy contractors helping to drive upgrade opportunities in the market, such propositions are often outside the comfort zone of many ‘maintenance-minded’ contractors,” he says. “That said, when the marketplace slows, the creation of upgrade demand is an excellent way for contractors to expand their businesses and create lucrative and long-term partnerships. Such a scenario suggests that training for small/medium contractors on how to tap into these opportunities would be of great benefit.”Stoneman also believes distributors can still be an effective source of supply for ESCOs, because larger ESCOs that act as the general contractor typically specify the product but leave the procurement to the installer. “In those cases, there is still a strong relationship between the installing contractor and distribution,” he says. “From a lighting perspective, product is rarely purchased directly from a manufacturer by an ESCO.”
Director of Sales and Marketing, Eiko Ltd., Shawnee, Kan.
In its 30 years in the lighting industry, Eiko Ltd., Shawnee, Kan., has seen the lighting market evolve quite a bit. The company, which sells its 4,000-SKU product line through full-line distributors and lamp specialists, recently joined the National Association of Electrical Distributors (NAED), St. Louis, and has for years been an active member of the National Association of Independent Lighting Distributors (NAILD), Buffalo, N.Y. Along with general lighting products, the company sells speciality lamps for automotive, audio-visual, projection, health-care and photographic applications, as well as miniature lamps for a broad array of markets.
Andy Poorman, the company's director of sales and marketing, urges electrical distributors to use the promotional tools at their disposal to market energy-efficient products.? “There is?a lot of point-of- sale (POS) material, signs and displays that can help the distributor,” he says. “Unfortunately, many distributors do not take a proactive approach to this.”
He also says distributors should expand their sales efforts to include architects, engineers and end-user accounts. “This is where much of the demand for efficient products is generated,” he says.
Down the road, Poorman believes the federal energy legislation outlawing inefficient electrical equipment will have the most impact on the green market, followed by rebates offered by large utilities and rural co-ops; federal tax breaks for the construction of energy-efficient buildings; local incentives such as rebates, loans and other incentives offered by municipalities, counties and other local or state agencies; and LEED certification.