Home market dynamics in the security wiring business are opening up this $16 billion industry to electrical contractors, and that may be great news to electrical distributors who position themselves as a source of supply for contractors in this market.
*While the software programming and troubleshooting end of the security game may be a bit much for electrical contractors to tackle, pulling cable for security wiring on a job is a natural extension of their core business.
*Multi-conductor composite cable with fiber-optic cable, twisted-pair, coaxial and other low-voltage "spaghetti wire" simplifies the job.
*The integration of security features into home automation and building automation systems makes the market a natural for contractors already installing these systems.
One Houston-based wire specialist already sees electrical contractors moving into the security market. "Electrical contractors are becoming multi-faceted," says John Myers, president and CEO, Houston Wire & Cable Co. "Instead of just doing his normal electrical work, he also is pulling in access control, security and fire alarm and safety cables, as well as the voice, video and data cables. They are coming to the counter of the traditional electrical distributor and sometimes find out that the distributor does not carry those products. Then they have to go to the ADI and specialty distributors to buy them."
Myers says Houston Wire & Cable has a line of wiring for residential and commercial security wiring applications that electrical distributors can sell to electrical contractors. "Distributors are searching for a single source," he said. "We put together a product line for that."
You can break down the security market into four distinct areas: access control; burglar alarms; fire and smoke alarm (life-safety) systems; and closed-circuit television. In 1999, security dealers/distributors sold $7.36 billion in burglar alarm systems alone, according to Security Distributing and Marketing magazine.
While residential and commercial/industrial applications exist for all of these systems, the bigger security specialists gravitate toward the commercial/industrial side because as the systems become more complex and require more customization, software programming and troubleshooting, the profit margins increase.
Rich Galgano, vice president, Windy City Wire, Inc., Chicago, Ill., says while it's common in the security market for security distributors to have their own installation crews, they do sub out work, particularly if they need a union contractor on a job site.
"These security companies focus on the software, and the troubleshooting - where the money is - as opposed to the installation and the cabling. They want to get somebody who can get in there and pull the cable for them."
Union membership can be a big selling point in this market, agrees Bill Aaron, systems specialist, Guarantee Electric, St. Louis, Aaron said the fact that Guarantee Electric is a union contractor in the heavily unionized St. Louis market is a big selling point for security dealer/distributors looking to subcontract installation of their systems.
For many years, much of the installation work was done through ADI, a large distributor owned by Pittway Corp., Chicago, a large manufacturer of security products. ADI sells Pittway products and, as a "captive distribution arm" of the corporation, it recruits local installers to install these products.
According to industry sources, this scenario left manufacturers of security products and their distributors scrambling for whatever business ADI/Pittway did not get. "If you weren't a Pittway guy, ADI would play with you, but they would sub you at every chance," said one manufacturers' rep now looking to build a business in the security market. "You were relegated to some sort of second-tier operation."
The picture seems to have changed when Honeywell bought Pittway earlier this year. According to several sources, Honeywell isn't happy with ADI's performance and is looking to sell the company.
There will be a channel shift," says Byron Brewer Jr., vice president, Northeast Marketing Group, Wallingford, Conn. "It will open up the channel to other non-Pittway manufacturers who had been selling through a hodgepodge dealer network. The dealer's universe tends to be as far as a tank of gas."
He has found that many manufacturers of security products are now very willing to consider alternate methods of distribution-a welcome turn of events for electrical distributors and their contractor customers.