Runners check their time splits during races so they can judge if their predicted finish times are still attainable. A stopwatch doesn't lie, and runners dread the occasions when their time splits tell them their races will not finish as well as they expected.
As the industry races through 2005, some of the economic “splits” have disappointed distributors, reps, manufacturers and end users. Here are some key mileposts to check that may help or hinder your company's growth during the remainder of 2005:
An economic bump in the road slows down projected industry growth. We had the highest of hopes that 2005 was going to be a great year. It may well still be that, but few electrical companies have found that to be the case so far. The mood at the recent annual conference of the National Association of Electrical Distributors (NAED), St. Louis, was cautious at best, but some attendees reported that construction activity was finally waking up in May.
At least one construction economist agrees with that analysis. Robert Murray, vice president of economic affairs, McGraw-Hill Construction, New York, believes the recent pause in nonresidential construction activity was, “likely related to an adjustment period for developers and owners, as they modify plans in response to last year's sharp increase in materials costs.” Advice: Don't panic. 2005 will be a decent year.
Copper and steel prices settle into the new normal. Fluctuation in 2005 prices for copper and steel won't match last year's wild ride, but it will be a while before we see copper prices at less than $1 per pound or dramatic relief in steel pricing. Copper prices are still near all-time highs of more than $1.50 cents per pound. Analysts tracking the pricing of these basic metals for use in construction products and industrial applications seem resigned to historically high prices for these critical commodities for the foreseeable future, but they see some relief by year-end.
The urge to merge continues. Expect acquisition activity to kick into high gear sometime this year. Some big-time deals are reportedly in the works, and the NAED annual meeting was buzzing with rumors on which companies were for sale. In “M&A Update,” (p. 18), C.A. “Burke” Burkhardt, senior managing director, HT Capital Advisors, New York, explains why the stage is set for more mergers and acquisitions.
Sagging attendance at annual conventions in distribution trades. Association officials at the Industrial Distributors Association (IDA), Cleveland, Electronics Distribution Show (EDS), Chicago, and National Association of Electrical Distributors (NAED), St. Louis, must be wondering if a sea change is underway in how members and non-attendees view these annual events. Sources in the electronics and industrial markets said attendance at this year's key shows in those markets was way off, and while overall attendance figures were bearable at the NAED Annual, less than one-third of the 470-plus NAED distributor members registered for the meeting.
Trade show and convention attendance reflects more than just the economic conditions in a market segment. You can't replace the face-to-face networking opportunities that national association trade shows and conferences offer, or the touch-and-feel benefits of exhibiting new products in conventional trade shows. But industry consolidation, the growing importance of buying/marketing group meetings, baby boomer and generation X views on the importance of customer entertainment, tight travel budgets, and Web conferencing are having an impact on trade shows and conferences.
IDEA releases a study documenting the major-league cost savings that IDW can produce. With all the disturbing news about slower-than-expected sales growth in 2005 and the ongoing concern about declining net profits for distributors, it's refreshing to hear about the potential of some profit-boosting tools for electrical distributors and electrical manufacturers: IDEA's industry data warehouse (IDW) and IDX2 value-added network (VAN). A new IDEA study reports on the cost savings achieved by five distributors through the IDW and IDX2. The full study is a must-read and is available at www.idea-inc.org.
The electrical wholesaling industry is resilient, and has been through much bigger challenges than what we have seen so far this year. Don't despair.