NAED Eastern Observations

About 10 days ago we attended the NAED Eastern and met with a number of manufacturers and distributors. The tenor of the meeting was interesting as distributors and manufacturers had differing views regarding their 2009 outlook and green remained the color of discussion.

Some observations (in no particular order):

• Manufacturers appear to be pessimistic about next year with many talking about being down 5-15% (when was the last time that manufacturers weren’t expecting the standard “10%” increase?) There is little expectation that they will be able to push through price increases (and some distributors are asking about last year’s increases due to “commodity costs”). Distributors, on the other hand, aside from those in residential markets, were looking at + / – 5%, on average. We also noticed that distributors in larger metropolitan areas were more optimistic than those in smaller marketplaces (more opportunities). While business is tapering off (end of projects, end of year), everyone knew of projects that were being put on hold, although the sense is that this will be temporary. The moral? When manufacturers try to set goals with distributors for 2009, the standard answer should be “Is last year enough of a stretch?” No distributor should agree to a 10% increase. Distributor “growth” segments – healthcare, education, government, green / energy efficiency
• A number of manufacturers were “rumored” to have had layoffs (Lithonia, Cooper, Coleman Cable, Hubbell, Rockwell and more.)
• Along with employee reductions, manufacturers are cutting marketing and investment. This leads to the question of “If manufacturers cut staff, salespeople, product development and marketing, what will they have left to promote themselves and drive business?” The answer many came up with …. price.
• Manufacturers are debating whether the electrical industry is the “channel of chatter” or the “channel of choice” as it relates to green / energy efficiency. They are essentially saying “much talk, not much action.” They sense that distributors either want manufacturers to bring the business to them or provide them with a business plan to pursue this market. They don’t see much investment by many. NAED’s CAP council presented their first research project on the topic, however, only 18 people attended the afternoon session, where an end-user perspective was shared (but the word “contractor” was not mentioned) but not a sense of how to pursue the market (to be fair, the session competed against an afternoon of golf!!).
• To help distributors understand what their customers want, we’re offering our Greening of the Electrical Channel at only $249 for the remainder of the year. Email us for details.
• NAED had its best general session speaker that we’ve seen in many a year … Stuart Varney from FOX. His session ended with a bang … a blackout at the hotel (and no emergency lighting in the room!) NAED debuted some videos highlighting training and upgrades. A couple of manufacturers were prominently displayed (Greenlee, Lutron and someone else).
• A few distributors mentioned that their large contractors are interested in productivity / labor saving products. The key is getting to the right person at the right distributor. Most of the rest are focusing on price.
• The booth sessions on Thursday were “quiet”. Only about 50% of the booths were manned. A first time distributor attendee commented “I was surprised that there are not more distributors here. Manufacturers outnumber distributors by 3:1.” (note: this is normal, but the number of distributors is <80).>
• A couple of manufacturers expressed a need for a change in the rep model. Too many reps carrying too many lines; need to differentiate between distributor and end-user focus (difficult to do both with declining commissions.
• A number of people expect this to be a year of increased consolidation – many small distributors either closing or being forced to sell. A few mid-large deals are also currently on the table.

The bottom line … concern for next year, concern for being the channel of choice. Coincidentally, neither one of these are issues for distributors who have a longer-term outlook, are prudently investing and manage for profitability (the topic of a series of webinars we are currently running entitled “Planning for Profit in 2009”)

And best wishes to Ed Mazzetta who is recovering from heart surgery.