11 things we think for 2012

In the spirit of welcoming in the New Year, first we wanted to wish you a Happy New year and best wishes for a happy, healthy and prosperous one.

Secondly, we recently talked about the coming year and thought we’d take the opportunity to share some thoughts on what we think we are thinking (currently) about issues for the coming year (in no particular order):

• Sonepar, now the largest electrical distributor in North America with its 2011 acquisitions, is poised to further grow – organically, but more importantly, through acquisition. We expect by the end of 2012 they’ll still be the largest, driven by more acquisitions. Questions become – how do distributors compete against someone who looks like them? As the company grows, what is the impact on manufacturers? What will other chains do? How will this impact the buying groups from which these distributors come from?

• Electrical distributors may become electrical specialists with other types of distribution seeking to enter into the electrical space and offer a “one stop shop” service as their core value-added (think Grainger, Fastenal, MSC, Motion Industries, Kaman, etc). What else should you be selling?

• The solar market is exploding ($12 billion in 2011). Will more electrical distributors finally jump into the fastest growing energy market segment? Is it to late? Or is it a market left to larger distributors / groups that can fund specialists, manage volatile industries and finance large projects?

• There are contractors who are smarter than the average bear.  Understanding your customer is critical. Some more advanced contractors are diversifying into other markets, market segments, trades; maximizing usage of technology (systems and hardware – iPads); becoming more professional at purchasing and more. Our upcoming 2012 Contractor Insights research will share more info.

• Customer intimacy will become more important. Knowing if you are servicing your customers better than your competition is critical to delivering on your service promise (otherwise promises are just words). Customer intimacy relates to really understanding your customers’ needs, business issues, processes and how you can benefit them. (And we’ll be launching a strategy to support clients in this area during the first quarter.)

• Margins will continue to be under pressure. Technology utilization and process improvement, especially in the back of the house, is required to achieve acceptable profitability.  
• With everyone carrying essentially the same thing, and saying that they offer the same service (and remembering that people’s perception equals their reality), marketing is becoming more and more important for distributors

• Sales processes, and channels, are becoming more complex and diffused. Multi-sales channels, for distributors and manufacturers, will be necessary to sustain growth.

• With distributors marketing themselves more rather than promoting the benefits of their manufacturers, essentially marginalizing manufacturer brands, manufacturers need to ensure that they reach their end-user market … the person making the brand / product decision. The usage of technology from a sales and marketing application viewpoint will accelerate and be more prominent.

• Data is more important. Market research to understand customer needs, product opportunities, competitive positioning, share opportunities, product sales gaps and much more is becoming more important as ingredients to develop sales and marketing strategies. Gone are the days where “gut feel” should be solely used for making decisions. Research will become the mantra in the coming year for progressive distributors or those seeking to make changes.

• Targeting niches will continue to be essential to growth for manufacturers and distributors. Reaching those segments is the real challenge.

We’ve kept this limited to sales and marketing related initiatives as affecting the “front of the house” is critical to ensuring the “back of the house” has business to process.

What do you see as key issues for distributors and /or manufacturers in 2012?