November 1, 2016

By David Gordon

Ascend was the theme of AD’s recent North American Meeting, which brought together over 1000 distributors and manufacturers from the U.S., Canada and Mexico.

While the theme of “ascend” was defined by AD Chairman and CEO Bill Weisberg in various ways as “clarity of purpose” and “collaboration” with the intent of making better, two of the group’s 2017 initiatives highlight how AD has ascended over its 35 years.

The organization has evolved from a rebate negotiation / buying group into

a marketing group with the development of its SSP (Sales Stimulator Program) and JMA (Joint Marketing Agreement), networking groups, and business development / large account retention tools such as national accounts (now SupplyForce) and its energy initiative (EnergyForce)

a business solutions entity encompassing all of the above activities plus expanding into its newest areas … HR Services and eContent / eCommerce solutions

The organization is investing more than ever to collaboratively provide services to its membership, if the member desires, while continuing to return more than 100% of the rebate income earned from its manufacturers.

Given that this was the first industry meeting of independent distributors (some chains have already conducted major meetings with suppliers), here are some of the things we heard about the meeting as well as industry “trends.”

For the first time there were marketing network meetings which were meetings for marketing personnel to discuss in groups of non-competing members. Reports from some distributors were that this was very beneficial.

AD Canadian member “remits” were reportedly up 8%, while the Canadian market is flat. US member “remits” were up 4%. Given that commodity pricing has declined so dramatically, this indicates that member sales increased probably in the 5-7% range, which is above any similarly diversified national chain.

AD’s eContent initiative was heavily promoted and Ed Crawford shared with suppliers the differences between IDEA’s IDW data, which is the foundation for AD’s eContent,and the enriched deliverable of marketing content that AD will be making available shortly to members. Almost 50% of AD’s electrical members are involved in the program, which expects to be making content available by the beginning of the year. The AD investment in this initiative is “into the millions” and the example shown to suppliers is comparable to what one would expect to see on Grainger or Amazon’s websites.

In addition to eContent, another major initiative is HR Services as AD now has an array of HR services to support distributor needs that can supplement a distributor’s HR department. HR is also developing a networking event for this audience.

AD announced that they have recruited five new members so far this year, one of which has not been announced yet and is currently in another group.

AD’s growth goal is to be a minimum of 2x GDP (this would make growth 4-5% in 2017).

AD polled some distributors and manufacturers who feel 2017 industry growth will be between 0.7% and 3%.

AD awards

Canadian Member Performance (<US$10M through group) — Source Atlantic; Honourable mention to Gimpel and Western Equipment

Canadian Member Performance (US$10M+ through group) — Bird Stairs; Honourable mention to Eddy Group and Deschenes

Canadian Supplier of the Year for Performance (<$5M) — First Alert; Honourable mention to Panasonic and Louisville Ladder

Canadian Supplier of the Year for Performance ($5M+) — Liteline; Honourable mention to Royal Pipe and Northern Cables

Supplier of the Year for Marketing Excellence — Philips Canada; Honourable mention to Universal Lighting Technologies and Omni Cable

Best Conversion to an AD Supplier — Stanion and Thomas & Betts; Honourable mention to Marshall E. Campbell / Atlas Lighting and Bell Electric / Leviton

Member of the Year for Leadership — Greg Chun from McNaughton-McKay

Supplier of the Year for Leadership — Pat Murphy, Acuity (under the Juno banner)

AD MVP — Lauren Shovein from Van Meter

AD Giving Back Award — Border States; Honourable mention to Intermatic and Standard Products

Industry “trends”

Distributors and LED manufacturers are discussing issues relating to inventory. Manufacturers want distributors to stock. Distributors are reluctant due to the pace of product innovation. Reportedly some retailers are desiring lamps with less longevity. The bottom line is that, while everyone recognizes that these electronic products will continue to innovate, the goal of “never changing a lamp (or fixture) cannibalizes future business opportunities at an ever declining price point.”

The Internet of Things / Industrial Internet of Things was discussed by some distributors who are wondering, “How can I better participate / enhance my business model so that I can participate in the revenue stream, and add value, other than just selling the hardware?”

Some manufacturers had pricing discussions with distributors… some price increases; some discussing changing pricing models.

There were some manufacturers who, we heard, have “challenges.”

A couple of people asked about Cape Electric, a former AD member that was purchased by Graybar, joining IMARK. Commentary ranged from operating as a separate business and hence meeting IMARK regulations to seeking more acquisitions and hence developing relations to possibly benchmarking IMARK rebates vs. Graybar rebates. Only time will tell why it joined, but it was disconcerting for some manufacturers.

The industrial market is “soft”; construction market is “good” but stronger in metropolitan areas.

Looking toward 2017, manufacturer feedback re: next year went from flat to up 3%. No one, other than lighting companies, is optimistic about anything “robust” on a national basis. Some distributors are optimistic but it is geography- and company-specific (and tied to their initiatives). Copper is expected to remain stable throughout 2017; hence, no price benefits. A couple of manufacturers are trying to push through minimal price increases. A couple are trying to reduce / eliminate SPAs and go to nets. Some industrials hope oil at US$50 will help in selected markets albeit more for MRO than exploration. They have been told by their customers that they need US$60 per barrel to make investments.

If you attended the meeting, what were your observations (and feel free to comment anonymously if you want or email me your thoughts and I’ll post them confidentially for you.) Or what trends did you observe from conversations with distributors / manufacturers?

David Gordon is President of Channel Marketing Group. Channel Marketing Group develops market share and growth strategies for manufacturers and distributors and develops market research. CMG’s specialty is the electrical industry. He also authors an electrical industry blog, www.electricaltrends.com. He can be reached at 919-488-8635 or dgordon@channelmkt.com.