2016 NAED National Observations … Change

Last week’s NAED National, held in Washington DC, was well attended with approximately 700 registered attendees.  The seminar sessions, for the most part, were well attended with 125-150 or so attending each of them and, perhaps unplanned, there was a recurring message of “change”.

The tone of “change” came through in terms of personnel succession planning and recruiting millennials, changing the physical work space to be more accommodating to “younger” hires, the need to sell value in order to optimize pricing (or engage in strategic pricing initiatives), the role of product data, Amazon as the new definition for innovation, customers expecting more due to eCommerce and consumer players, Sandy Culter mentioning the need for the industry to continue to adapt and change and Alan Beaulieu (the economist) espousing that the market is preparing for major change (up and then down).

Distributors and manufacturers who attended sessions had to walk away thinking “all this change!”

So, let’s cover some details (and some of the sessions may need a separate posting to keep the length reasonable)

• There were 98 distributor companies in attendance, however, this included 9 foreign (South American) companies as well as operating companies of Sonepar, divisions of WESCO and some others.  At most 89 US members, probably a little less, so about 22.5% of the NAED distributor membership.
• Business continues to be mixed.  Industrial is still “hurting” with some stabilization.  Commercial construction still growing.  Major metropolitan areas growing at a faster rate.  Smaller companies essentially flat.
• Heard of 2 distributor acquisitions.  Revere announced on “today”; the other hasn’t been announced so we’ll withhold announcing.  Don’t know if NSi’s sale to a different private equity firm was announced at the meeting but saw a press release dated 5/18 today.
• Met with a number of distributors who are interested in soliciting customer feedback on their service.  Shared with them our Uncover program.
• A number of distributors mentioned investigating strategic pricing initiatives to improve profitability.  On a couple of panels the panelists mentioned that distributors should undertake this initiative if they are seeking to sell in the near future as it can provide a significant boost to valuation.  Jigsaw Systems (which reportedly can also support SPAs, contracts, commodities and stock business) and Zilliant were at the meeting sharing their solutions.
• eCommerce and product content were repeatedly mentioned.  Spoke with a number of distributors that have eCommerce solutions.  As eStores (hunting and pecking to place orders), most distributors are generating <1% of sales.  One was doing a little less than 2%.  Biggest benefits from eCommerce for distributors is generating cost efficiencies / customer service benefits and, especially for industrial distributors, the utilization / implementation of punch-outs. A few are looking at their sites as vehicles to generate greater customer engagement and are less concerned about how the order is placed.
  • A session on the need for continued improvement in product data was held on Friday with essentially an appeal for manufacturers to continue to “step up” and invest.
    • From a manufacturer viewpoint, it is a challenge to continue to invest given that 1) there are still many distributors not obtaining their data from IDEA (and many are not NAED members) and 2) distributors continue to purchase from suppliers who are not members / contributing content to the IDW. The “IDW march” continues on.
    • And a thought from this morning … I wonder why some manufacturers are either not more supportive or are not populating it.  Perhaps smaller ones don’t know about IDEA/IDW?, Are challenged with generating the content?, Don’t want to pay to provide the data to IDEA? Perhaps it’s a chicken and the egg issue … need sales to justify the expense but distributors can’t support the line without product content? Would be interesting for these manufacturers to speak out (or send us your thoughts and we can post anonymously, or perhap NAED / IDEA should foster the discussion to improve for all?)
  • One of the challenges with developing an eSales venue is that deployment can take 8-12 months depending upon if a number of issues are addressed prior to site development.  The distributors involved in the IMARK initiative are now pending their 12th month to gain content and a functional site.
    • If launching a site for 2017 is a potential strategy, it is important to develop your plan and commit to a resource now. The shortest time frame we’re aware of is 4-6 months, but this was for a small distributor.
    • Spoke to a couple of distributors who have been attending other conferences to gain insights re eCommerce.  One that was mentioned was BtoBOnline.  This also gives you a sense that 1) these companies are serious about playing in this space and 2) have high enough level management to attend these meetings who are looking for insights.
• With the advent of eCommerce we’re hearing more distributors investing in marketing / marketing personnel.  We know of 4-5 distributors that are seeking marketing management personnel (which is highly unusual.)
• Some large manufacturers are undergoing some senior management changes.  New management for most were at the meeting. The challenge is that in many cases the new people, while accomplished managers, are new to the electrical distribution industry.
• NAED recognized individuals, and companies, at the Award Breakfast.  A word that was continually used was “passion” for their business and the industry.  Award winners were:
  • Dick Waterman, ex Rexel and Westburne – Arthur W Hooper Achievement Award
  • John Spoor, State Electric  – Distributor Distinguished Service Award
  • Denise Keating, Datagility – Associate Service Award (for her efforts re IDEA and product data)
  • Sandy Cutler, Eaton – Honorary Life Award
  • Omni Cable – Industry Award of Merit
  • Van Meter – Excellence in Training
  • Littelfuse – Excellence in Training
• Reportedly a first draft of a long-term NAED strategic plan was shared with the NAED Board at this meeting.  This was one of Glenn Goedecke’s goal for his chairmanship.

The key breakout sessions that had some interesting points were:

• Michael Marks’ panel that had Sonepar, Rexel, Anixter and Graybar on the panel.  Observations will be shared in a separate post.  When Michael was asked “why not others who could be perceived as ‘visible by their absence’, he responded “only so many seats for a panel to be effective.” (good for him vs trying to be politically correct).  There were some insights from this session and it was attending by 125-150 people … standing room only.
• Alan Beaulieu from ITR Research gave a presentation sharing his observations about the economy and projections for the electrical industry.  In his words, “good times are ahead” (and click here for his presentation) and he projected a 13.3% electrical industry increase for 2017 (of those we spoke to afterwards, 100% didn’t believe him regarding the number but felt that there would be improvement due to commodity price appreciation and stabilization / increases in the price of oil … but we’ll share more separately.)  A few said that they’ve seen the same presentation multiple times in other industries … just change the industry specific slides.
• Reportedly Sandy Cutler’s keynote presentation was well-received.
• Michael Marks’ M&A presentation didn’t reveal anything that hasn’t been said before. Some felt it was a Sonepar pitch (with David Gabriel) and then an M&A person.  Limited breadth and insights.
• The political commentator was, as you’d expect, a commentator.  In DC and during an election year, pretty much what you’d expect and didn’t hear anything about it afterwards … hence not memorable.
• And there was a presenter from the beauty industry talking about competing against disruptors. Feeback was that is wasn’t too enlightening.  It’s interesting to note that when NAED brings in speakers from outside the industry they end up picking people with a retail focus who don’t connect with the audience … perhaps better vetting and guidance is necessary or stick to distribution speakers.

Feedback from many was that it was a “good conference to reconnect with people” but for manufacturers “it’s ‘top to top'” and having, in many instances, to “herd executive management” with “little specifics to show for it”.  Few small to mid-sized manufacturers were at the meeting and, if they attended, it was with few staff.  To give a sense of the manufacturer involvement, there were only 38 strategic one-on-one booths (with manufacturers in them) and another 6 service provider booths.  Other manufacturers were in their suites.

Insights from the panel and the economist come tomorrow.

If you attended … thoughts?  If not, why not?