NAED 2018 South-Central Observations

The tone of last week’s NAED South Central, held in San Diego, was interesting and may be best described as “subdued”, business-like”, “expected”. Some used the word “quiet” and many were challenged when asked about trends that they observed or key takeaways (which may mean many different things were discussed).  Essentially, there didn’t appear to be a “takeaway theme”.

While registered attendance was 606 which probably was close to 550-575 with no shows and 54 distributors had 62 one-on-one booths, as usual many manufacturers and distributors  were secluded in suites or meeting rooms.  Additionally the hotel lobby at the Hilton is on the second floor and NAED activities were on the fourth floor with additional manufacturer meeting rooms on the 3rd floor … so  the group is diffused (some suggested that NAED should go away from resort properties,  use airport / downtown and smaller hotels that have less suites and meeting rooms for manufacturers to get them back to an environment that creates engagement.)

But, NAED will tell us they are booked for “awhile” and that the membership wants resort-oriented properties so … the ship has sailed.

Some things that went on / “heard in the hallways” (in no particular order):

• The South Central Region committee worked, as its project, on value-added services and Walt Morrison, the region chair, emphasized that distributors need to continue to focus on these as revenue generators, cost savers and business differentiators, especially in light of increased competition from online sources, outside market competitors and distributors in other channels expanding into the electrical space.  Click here to see the committee’s work and download key value-addeds by area. (NAED members should login to the site to get the report for free.)
• Herbert E. Meyer, who served during the Reagan administration as special assistant to the director of Central Intelligence, and vice chairman of the CIA’s National Intelligence Council, was the keynote speaker.  Very interesting presentation aggregating insights into how the world is more “similar” in many respects, especially in people’s interests and economic improvement and growing globalization.  Thought provoking presentation according to many.  Some questioned the business applicability but much of that relates to business focus (local vs international / global).
• I sat in the “Digital Disruption Roundtable” for a bit.  Some good conversation. Only challenge is that there were only 18 attendees of which over 50% were software companies. The few distributors present seemed to get some “takeaway” value from the interaction with their peers.
• Had many conversations about eCommerce …. the potential affect of it, Amazon, data sources (no one seems to be happy with any of the mainstream sources – IDEA, Unilog, Trade Service – as all seem to be “challenged” in some way be it perceived lack of ability to differentiate a manufacturer or a distributor website; in some cases perception of their data, or their website, being commoditized; quality of content / graphics; cost to generate the information.  Some specifics:
  • Manufacturers commented on more distributors requesting data directly from them, which has them confused in some instances given that they think the distributors should be receiving from IDEA (and many times the distributor is an NAED / IDEA member, hence they are looking for something else.)
  • Manufacturers commented on understanding IDEA vs Unilog generated data (and why in some cases they are paying to support Unilog generated data and asked “what is my ROI? How do I explain it to my management when I don’t have the cost from any other organization?)) vs Trade Service.
    • They recognize that Unilog is aligned with AD and Trade Service appears aligned with IMARK (however, Trade Service shared that they are working with some AD Rockwell distributors.)
  • Manufacturer understanding on how to differentiate their non-transactional content within IDEA with marketing application and marketing content. While manufacturers recognize that they need to include the “basics” to ensure the features are covered, they want to add more “demand creation” and “differentiation” content … or unleash their marketing elements to integrate with their product elements.
  • Continued concerns about maintenance of the data (timeliness)
  • The need for non-NAED and non-IDEA manufacturer data to be available (companies that are not members of these organizations.)
  • The concept that there was supposed to be one source and now there are many.
    • In talking with distributors, distributors must be employing 500 people strictly relating to content development to “get it right for them” and to “decommoditize” the data they receive and/or to “fix it”.

The reality is that there will be no “perfect” system but distributors, while confused about the definition of “good data”, have shown to prefer options and at times “mix and match” and then still adjust content (especially if they are adding local slang).

And had good discussions with distributors and manufacturers on our recently released State of eCommerce, the Voice of Electrical Contractors and Buyers (Industrial / Institutional), which highlights their current activity, what they want in a site, and their eCommerce outlook.

• From a sales perspective, some manufacturers shared that they had a record January, for others it was slow / choppy.  February for many was “poor / slow” but some pulled it out at the end of the month, possibly due to March 1 price increases.  Overall sales growth is 5-6% when averaged and it is felt that 2018 will be in the 5-6% range.  No one is making any predictions on the 2018 construction / industrial material benefits of the tax cut or prospects for an infrastructure plan.  All feel there will be some benefits from the tax plan but can’t quantify what that may mean in sales … or when.
• The hurricanes don’t seem to have impacted the business yet.  Winter weather, as usual, impacted the business but some commented that the impact was a little more than normal as key areas of the South were closed for 1-3 business days, so winter wasn’t confined to the Northeast and Midwest.
• The issue of POS continues, especially as it relates to capturing rep support.  Discussed the NEMRA POS initiative with a few distributors who expressed interest in endorsing as they want to proactively solicit rep support and ensure that reps are appropriately compensated.  Email Ken Hooper or myself for more information.
• NAED Market Data initiative is coming along. More details were shared, except for distributor cost to participate, than from the NAED Eastern when I last sat in on their presentation. The mock-ups look good to capture distributor sales information by product category by customer segment and geographic.  And they want the information monthly.  Initially information (share) will be historical; reportedly they are going to use some algorithms / econometrics to add forecasting.  The information, and eventual projections, will be based solely from NAED members … which has some value limitations, adn there is currently no role / access for manufacturers or reps to market level information.  The key will be NAED selling the program (smiling and dialing rather than some articles, ads and conference presentations.)
• Heard of some companies (Atkore, B-Line, Wheatland Tube) that discussed freight increases in the 20-30% range. Big reasons for the increases relate to trucker regulations, freight charge increases and hence needing to pass them on, and lack of truckers … which is becoming a bigger issue for long-term.
• Sat in on Dirk Beveridge’s session titled “Reimagining Manufacturer-Distributor Partnerships”.  About 40 in the room.  Downloading the information could add some nuggets to distributor planning thought processes.  A key element is involvement of the rep due to need to execute, knowledge of the market and, in some cases, manufacturer personnel turnover.  In Dirk’s model, determining “whom” to partner with is critical.
  • As an aside, the word “partner” was used a number of times throughout the conference. The question becomes, can you truly be a strategic partner when 1) as a distributor you represent competitive lines and 2) as a manufacturer you sell to multiple distributors in the same customer segment in the same geographic area?
• A number of distributors commented that they are expanding their supplier lists to involve more “tier 2 / tier 3”, albeit good product quality, suppliers to their linecards so that they can be price competitive to earn business.
• Heard from a number of small to mid-sized manufacturers (about $100M) about increased challenges in getting meetings at the South Central.  Some questioned the number of people they should bring in the future; many said won’t attend National and a couple commented that NAED staff suggested smaller companies shouldn’t attend the National.  Some suggested using the scheduling systems from AD and IMARK or that distributors recognize the issue.  The reduced number of meeting days also facilitates the challenge as there is less available time. (and some commented that distributors are booked 3-4 months in advance with one saying they overheard a distributor/manufacturer say “same time next year” … booking 12 months in advance!
• Lots of continued talk about 3M’s moves this fall / early winter. Many think 3M will go direct salesforce over time, and possibly sell direct, which many feel would be a mistake. (And others are pursing the tape business more than ever before and it can be assumed that 3M’s 97% electrical tape through distribution share will diminish, solely because of some distributors desiring “change”.

So …

• 5-6% growth
• eCommerce remains a key topic … content, site platforms, investments (money and people), differentiation
• Freight costs
• Continued move to lower cost “commodity-oriented” product lines where there is limited end-user value proposition

Were key issues.  LED costs continue to decline although the dollar impact shouldn’t be as much given that costs have declined annually. Lighting continues to be a unit growth issue for many distributors with larger manufacturers seeking to recapture share in the smaller retrofit / renovation market and capture some inventory share.  And markets are regional in nature (New England slow, Southwest and West Coast strong).

If you attended, what did you hear? What are your thoughts on eCommerce and data? On price increases / freight increases?