The electrical industry has a number of entities that essentially act as “middlemen” between either manufacturers and distributors or distributors and their end customers. These companies provide value-added services to the channel.
In the instance of companies such as All Current, Houston Wire & Cable, Omni Cable and WireXpress (and there are others in other segments of the industry), these companies act as master distributors and help distributors procure material for their customers. These companies provide distributors access to lines that the distributor does not carry, enable distributors increased access to C and D items, offer products / services that could be non-core to the distributor and potentially more.
Additionally, there are companies like SupplyForce and Vantage Group which can provide distributors with a resource to compete with national chains for what is known as “national accounts” which are essentially multi-location accounts that require multiple distributors to serve them (and also help distributors avoid price fixing situations. Vantage is essentially, if not wholly, owned by Rexel and Crescent due to acquisitions. It was started by a group of regional distributors and still involves non-chain distributors on a contract-specific basis.
All provide a role.
Recently three companies in this space have made moves to grow their business.
- Omni Cable and TE Connectivity came to an agreement where TE Connectivity will sell products (Raychem and ALR) through Omni Cable. The relationship is designed to support distributors who require smaller orders, or occasionally make an order to support a customer. This relationship opens up the question of “could Omni diversify into a full-scale master distributor, such as which is seen in other industries?”
- Houston Wire & Cable just rejoined Affiliated Distributors as a supplier. The company had been a affiliated “manufacturer”. The relationship had been terminated a year or so ago reportedly because HWC was competing too frequently with AD’s distributor affiliates. HWC reportedly has been known for selling direct, which is a practice which AD discourages. IMARK maintained its long-term relationship with HWC (and Omni) and it’s presumed that AD felt itself, and its affiliated, disadvantaged financially by not having a rebate relationship for its affiliates. This should help HWC retain, and possibly increase, sales.
- SupplyForce, which has helped independent electrical distributors compete for national accounts for over 15 years, merged / acquired Vanguard National Alliance, which was a national account solution focused around distributors aligned with Rockwell Automation. Combined the surviving organization, SupplyForce, will reportedly have about $400M in revenues and will be the strongest national account solution to support independent distributors. While most distributors affiliated with SupplyForce are AD distributors, as AD originally started SupplyForce and most independent Rockwell distributors are AD members, the network does involve non-AD distributors. While national chains feel that this segment of the market “should” be theirs, with effective branding and lead generation, organizations with MRO needs would be remiss in not considering an independent distributor solution due to historical service benefits.
- Distributors benefit from increased access to TE Connectivity products through Omni Cable. Question becomes, does, or should this, become a trend where smaller manufacturers, or those without a significant footprint in the electrical distribution industry, have their branded products sold through 3rd parties (master distributors)?
- The Houston relationship with AD enhances distributor rebate income. While many may have had their own deal with AD, AD is known for negotiating deals that are beneficial for its affiliates. So this results in revenue / profit enhancement for distributors.
- The SupplyForce / VNA deal makes sense, especially since there was a significant overlap in membership. It could provide independent distribution with better resources to compete for these types of accounts. For some distributors it could reduce location specific opportunities due to more distributors covering locations. No word if the increased volume may be able to reduce the overall transaction costs charged to distributors. It should allow for increased resources to be allocated for personnel, IT / systems and perhaps account development / marketing of the independent message. Rockwell’s addition will also help SupplyForce more effectively compete for MRO business where Rockwell is the preferred automation line (and help independents better compete against WESCO versus having the Rockwell business segmented from the MRO business.)
2 Comments
We use WireXpress for a number of non-core purchases. They’ve helped us with some datacom, fiber and security requests from customers. These types of suppliers also help me reduce the size of the inventory I hold as can’t have something for everyone but customers can usually wait a few days for oddball items. The challenge is getting my salespeople to remember we have these type of resources available to us.
I’m an AD distributor and was disappointed that we brought Houston back into the group. I understand why from a financial perspective but Houston isn’t good for my business. I stopped doing business with them awhile ago when they took a couple of pieces of business direct. Moved my Houston business to Omni.
Houston has tried to start doing business with us again and has offered essentially a commission on business they can “direct” our way. The offer was an insult and also violated my integrity. I hope they realize they shouldn’t darken my door again. Others should beware of manufacturers that go direct. We independents need to stick together.
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