Solar, LEDs, Diversification, Inventory Management and More

A little bit of a reading roundup before this weekend’s NAED Leadership Summit.  Recently there has been array of news from 3M, GE, Home Depot, Rexel, Square D, Datalliance, CED and Hilti to get us going (or at least cause some discussion).  And as always, we’re adding some commentary.

To get started:

Solar

• Distributors and manufacturers are seeing opportunities in the solar industry. This is definitely a diversification play as well as jumping out to an emerging market.
• Check out this CED solar branch, CED Greentech, a CED profit center in San Diego.  Definitily a niche strategy, but they are shipping around the country.
• In speaking to some larger distributors, they are recognizing that the commercial solar market is a good fit for the more technically inclined distributor … those who are compentent in providing engineering services as well as managing projects … and no inventory is needed.
• Hilti expanded their efforts into the solar market by acquiring Unirac, which was trying to make inroads with electrical distributors.  In an industry that is still trying to determine its preferred channel strategy, Hilti offers lots of alternatives to reach customers.

Diversification

• A key to success in this very slowly recovering economy is diversification … what markets represent opportunity for you to leverage your core competency to gain greater share of wallet.  Manufacturers also play this game through product family extensions.  3M is getting into the labeling business, essentially trying to capitalize on its name to take sales from T&B, Panduit, Brady and others. Distributors have seen this game before … whom to support (or a better question – what does your customer want, or do they care?)

LEDs

• Home Depot made an announcement that it will be offering a 9W LED in stores for only $20.  Hopefully the product quality is good so that consumers aren’t disappointed like they were when CFLs were first brought to market.  And here is information on GE’s “fin-shaped” LED that is coming out this year. While the design is patented, hopefully they received extensive end-user input on the design. CFLs showed that consumers have an image of what the shape of a lamp is and what fits into their fixtures.
• At the same time, a GE press release announced that replaced 12,000 incandescent and halogen lamps for Red Robin (a hamburger joint).  Wonder which distributor they worked with for this project?!

Inventory Management

• Datalliance gained a huge endorsement this week with the announcement that it will be replacing Schneider Electric / Square D’s internal VMI strategy.  According to Bill Snyder, “Our internal system is costly to maintain when you consider the programming, technical support, and hardware costs. It’s also a challenge to keep our VMI functionality up-to-date. With Datalliance, we feel that we can lower the total cost of our VMI program. At the same time, we will gain more comprehensive and robust VMI functionality that is continuously updated by Datalliance. Datalliance is the proven leader in the electrical industry and they have a very strong reference base of successful customers. Our focus is on our core business, and Datalliance has the expertise in VMI. Likewise, we plan to work with Datalliance to increase the functionality of the inventory tools and reporting that we offer to non-VMI distributors.” For manufacturers and distributors looking to optimize their inventory relationships, VMI can be an effective solution, and Datalliance appears to be becoming an “industry solution.”

Rexel
Rexel announced Q1 earnings this week.  On the surface, their 5.7% decline appears to be in line with what we have heard from a number of distributors.  Traditionally we would attribute this to winter weather, credit conditions, and the weak contractor market.  As “proof”, WESCO’s Q1 was off 3%.  Digging deeper into Rexel’s report reveals that the U.S. (the area of interest to us) was down 16.7%.  Rexel also closed 39 locations in 2009.  They reported deterioration in the commercial end-markets (contractor) and some improvement in the industrial and resi markets (but resi is a small percentage of the U.S. electrical market).  From talking to distributors, industrial business in many markets is pretty good, some companies are seeing energy retrofits, and some are benefiting from government spending.  So … what’s the issue?

What are you seeing in your markets?