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New to the electrical market? Here are some things you should know about working with electrical contractors.
As the single largest group of customers for electrical supplies, electrical contractors demand and get a lot of attention from electrical distributors. As well they should: U.S. electrical contractors will purchase over $26 billion in electrical supplies, according to EW's November, 1998 Market Planning Guide. The following trends will give you a better understanding of how the world of electrical contractors is changing.
Contractors expect more from electrical distributors but aren't always willing to pay extra for these services. The most progressive electrical distributors in any market are likely to have elaborate packages of services to offer electrical contractors, such as 24-hour emergency deliveries, online ordering, trained specialists in lighting, switchgear or large-project work and customized delivery staging of orders on large projects. The problem for many distributors is that it may take years to develop these services, and costs a ton to keep highly trained personnel, run an efficient delivery and warehousing system, carry the right inventory for the market and keep all things electronic and computerized up-to-date. On top of all of these value-added services, the contractor still wants a competitive, if not rock-bottom, price.
Electrical contractors are looking at other sources of supply, but the electrical distributor is still their first stop for most traditional electrical products. Yeah, the Internet is hot, hot, hot on Wall Street, and yes, it will revolutionize your business. But if you can't offer your customers better reasons to shop at your company rather than to buy from some unknown entity on the Web, shame on you, your company doesn't deserve the business. Electrical distributors still account for over 75% of all electrical products sold, according to EC&M magazine's most recent "Reader Profile" study, despite the inroads made by alternate channels such as home centers, the Web and other types of distributors now taking an interest in the electrical market. However, contractors are shopping more actively than this in some product areas, particularly in the voice/data market, where specialists and direct sales offer other sources of supply.
Electrical contractors in remote markets are also very likely to be exploring new options, because they can't always depend on their existing sources of supply to get deliveries to them when promised due to logistical/delivery problems in the manufacturer-to-distributor link, as well as within a distributor's own operations. If you deal with electrical contractors in these areas, such as mountainous regions, islands and other remote rural areas, don't underestimate the draw of the Internet-based, electrical-supply sources as a new option for these customers. It may already be siphoning off business.
Electrical contractors are moving into voice/data installations. While some contractors have had separate subsidiaries for years that focus on this market, many other companies have gotten serious about this business, too. In a research study on new trends in the electrical contracting market published last year by EC&M and CEE News magazines, EW's sister publications, 64% of the 500 respondents said they were involved with voice/data cabling work. The respondents' experience in this market was overwhelmingly favorable, and, in many cases, more profitable than with traditional jobs, as 51% of the respondents said profits were higher than with traditional work.
Maintenance contracts at industrial, commercial and institutional facilities continue to grow in popularity. You can expect more of your contractors to be doing on-site maintenance work for industrial facilities. To cut the cost of having to employ on-staff electricians, many facilities are farming out the maintenance of their electrical systems to outside contractors. In the EC&M/CEE News survey, respondent interest in maintenance contracts was high. Nearly 70% (69.4%) of the respondents said they were either "likely" or "very likely" to be involved in voice/data work.
Design/build work is becoming increasingly popular. In design/build work, an electrical contractor has the on-staff expertise to draw the electrical plans and to do the installation. This simplifies matters for the building owner, because they will have one point of contact on the project. In the EC&M and CEE News study, 68.7% of the respondents said it was "likely" or "very likely" that they would be involved with design/build work in the next 12 months.
Consolidation is reshaping the electrical contracting business. The world of electrical contractors is not unlike the electrical wholesaling industry in that historically it's been populated by smaller, family-owned companies and has very few companies national in scope. That's no longer the case, with the formation of at least three nationwide electrical contracting firms: Integrated Electrical Services, Inc. (IES), Houston, Texas; Consolidation Capital, Inc., Washington, D.C.; and Quanta Electrical Services, Inc., also of Houston. All three firms rank among the 10 largest electrical contractors in the country.
While none of these companies has yet publicly announced centralized purchasing of electrical supplies, it's obviously a future concern to the suppliers whose customers have joined one of these consortiums.
Relationships still matter. Price will always be a big if not the biggest issue with contractors, but savvy electrical distributors don't base their entire relationship with a contractor on price. With all of the changes in the electrical contractor's world outlined in this article, you may find it hard to believe that it's still a "people" business where relationships count. Yet it's precisely because of all of these changes that your contractor customers need a dependable source of supply more than ever. It's your job tomake your company that source.