AD Ascends

Ascend was the theme of last week’s AD North American Meeting which brought together over 1000 distributors and manufacturers from the U.S., Canada and Mexico.  While the theme of “ascend” was defined by Bill Weisberg in various ways as “clarity of purpose” and “collaboration” with the intent of making better, two of the group’s 2017 initiatives highlight how AD has ascended over its 35 years.

The organization has evolved from:

• A rebate negotiation / buying group to
• A marketing group with the development of its SSP (Sales Stimulator Program) and JMA (Joint Marketing Agreement) to
• Development of networking groups, and
• Business development / large account retention tools such as national accounts (now SupplyForce) and its energy initiative (EnergyForce) to
• A business solutions entity encompassing all of the above activities plus expanding into its newest areas … HR Services and eContent / eCommerce solutions.

The organization is investing more than ever to collaboratively provide services to its membership, if the member desires, while continuing to return more than 100% of the rebate income earned from its manufacturers.

Given that this was the first industry meeting of independent distributors (some national chains have already conducted major meetings with suppliers), here are some of the things we heard about the meeting as well as industry “trends”:

AD

• For the first time there were Marketing Network Meetings which were meetings for marketing personnel to discuss in groups of non-competing members. Reports from some distributors were that this was very beneficial.
• AD US member “remits” were up 4%.  Given that commodity pricing has declined so dramatically, this indicates that member sales increased probably in the 5-7% range, which is above any similarly diversified national chain.  This group of distributors appears to have taken share vs nationals.  Canada was reportedly up over 8% while the Canadian market is flat.
• Many members are excited about Acuity joining AD’s US group effective January 1, 2017.  This should be a significant boost for Acuity and will help AD increase its penetration rate within its distributors.
• AD’s eContent initiative was heavily promoted and Ed Crawford shared with suppliers the differences between IDEA’s IDW data, which is the foundation for AD’s eContent and the enriched deliverable of marketing content that AD will be making available shortly to members.  Almost 50% of AD’s electrical members are involved in the program which will be making content available, reportedly, by the beginning of the year. The AD investment into this initiative is “into the millions” and the example shown to suppliers is comparable to what one would expect to see on Grainger or Amazon’s websites.
• In addition to eContent, another major initiative is HR Services as AD now has an array of HR services to support distributor needs that can supplement a distributor’s HR department.  HR is also developing a networking event for this audience.
• AD announced that they have recruited 5 new members so far this year of which one has not been announced yet and is currently in another group.
• AD’s growth goal is to be a minimum of 2x GDP (this would make growth 4-5% in 2017 given the Fed’s projection.)
• AD polled some distributors and manufacturers who feel 2017 will be between .7-3% for industry growth in 2017
• AD awards:
  • US Member Performance (<$10M through group) – I.D. Booth
    • Honorable mention to B&S Supply and Baynes Electric
  • US Member Performance ($10M+ through group) – City Electric
    • Honorable mention to Swift Electric and Turtle & Hughes
  • Canadian Member Performance (<$10M through group) – Source Atlantic
    • Honorable mention to Gimpel and Western Equipment
  • Canadian Member Performance ($10M+ through group) – Bird Stairs
    • Honorable mention to Eddy Group and Deschenes
  • US Supplier of the Year for Performance (<$10M) – American Polywater
    • Honorable mention to Metallics and BRK
  • US Supplier of the Year for Performance ($10M+) – WattStopper
    • Honorable mention to Rab and Satco
  • Canadian Supplier of the Year for Performance (<$5M) – First Alert
    • Honorable mention to Panasonic and Louisville Ladder
  • Canadian Supplier of the Year for Performance ($5M+) – Liteline
    • Honorable mention to Royal Pipe and Northern Cables
  • Best Annual Planning Process Award – Kirby Risk
    • Honorable mention to Leff and Butler Supply
  • Supplier of the Year for Marketing Excellence – Philips Canada
    • Honorable mention to Universal Lighting Technologies and Omni Cable
  • Best Conversion to an AD Supplier – Stanion and Thomas & Betts
    • Honorable mention to Marshall E. Campbell / Atlas Lighting and Bell Electric / Leviton
  • Member of the Year for Leadership – Greg Chun from McNaughton-McKay
  • Supplier of the Year for Leadership – Pat Murphy – Acuity (under the Juno banner)
  • AD MVP – Lauren Shovein from Van Meter
  • AD Giving Back Award – Border States
    • Honorable mention to Intermatic and Standard Products

Industry “Trends”

• Distributors and LED manufacturers are discussing issues relating to inventory.  Manufacturers want distributors to stock. Distributors are reluctant due to the pace of product innovation. Reportedly some retailers are desiring lamps with less longevity.  The bottom-line is that, while everyone recognizes that these electronic products will continue to innovate, the goal of “never changing a lamp (or fixture) cannibalizes future business opportunities at an ever declining price point.
• The Internet of Things / Industrial Internet of Things was discussed by some distributors who are wondering “how can I better participate / enhance my business model so that I can participate in the revenue stream, and add value, other than just selling the hardware?”
• Some manufacturers had pricing discussions with distributors … some price increases; some discussing changing pricing models.
• There were some manufacturers, who will go nameless, whom we heard have “challenges”.
  • A couple of people asked about Cape Electric, a former AD member who was purchased by Graybar, joining IMARK. Commentary ranged from operating as a separate business and hence meeting IMARK regulations (see below) to seeking more acquisitions and hence developing relations to possibly benchmarking IMARK rebates vs Graybar rebates. Only time will tell on why joined, but was disconcerting for some manufacturers.
    • Note:  I’ve heard some feedback regarding the above point, which was based purely from an editorial viewpoint based upon comments made to me.  Personally I do now know why Graybar / Cape joined, however, back in the late 1990’s, when I was at IMARK, the BOD made a decision (I can’t recall if it was a by-law amendment) that companies that were IMARK members (and this may have been refined to accommodate any distributor) and were acquired by a national chain could remain in the group as long as their was separate management and separate financials … essentially no sharing of confidential information.  At the time this was informally referred to as the “Moskowitz Rule” as the owners of Avon Electrical, which was purchased by WESCO in late 2002 / early 2003, wanted to stay in the group to retain relationships, remain “independent” in action and for the financial benefits.  There were some other companies that subsequently remained in the group under this scenario.  Presumably this is why / how USESI and Walters are in the group.  Cape may be in IMARK under this provision or there could be other “rules / by-law” amendments.  I hope this clarifies my understanding.  Feel free to call with any questions.
• NEMRA introduced the finalized standards for POS / POT reporting.  To date over 22 manufacturers have endorsed. To receive a copy email NEMRA
• Industrial market is “soft”; construction market is “good” but stronger in metropolitan areas.
• Looking toward 2017 … manufacturer feedback re next year went from flat to up 3%.  No one, other than lighting companies, is optimistic about anything “robust” from a national basis.  Some distributors are optimistic but it is geographic specific and company-specific (and tied to their initiatives).  Copper expected to remain stable throughout 2017, hence no price benefits.  A couple of manufacturers trying to push through minimal price increases.  A couple trying to reduce / eliminate SPAs and go to nets. Some industrials hope oil at $50 will help in selected markets albeit more for MRO than exploration.  They have been told by their customers that they need $60 per barrel to make investments.

If you attended the meeting, what were your observations (and feel free to comment anonymously if you want or email me your thoughts and I’ll post them confidentially for you.) Or what trends did you observe from conversations with distributors / manufacturers?

As a coincidental bonus, Dodge Data & Analytics held their Construction Outlook Conference at the same hotel at essentially the same time.  Input from this meeting will be shared later this week.