Well Attended NAED Western

This week’s NAED Western was a very active event with surprisingly a good amount of optimism by distributors and manufacturers.  The event was well attended with 775 registrants, which makes the Western conference the largest NAED event.  Interestingly there were 62 manufacturer reps in attendance to support the 381 manufacturer attendees who met with the 290 distributor attendees from over 80 companies / divisions.

Overall the economic tone was upbeat.

• Distributors averaged expecting growth to be 5-7% with all saying “don’t know what impact will be if tariffs are included / removed” as none have a sense of if there would be any impact on consumption.
  • And we heard of a national chain with a few divisions in the West that is projecting 10% growth.
• Manufacturers ranged from 3% to 16%, however, manufacturers do not work on “the market”.  They are focused on their sales and hence revenue goals tie to new product launches / extensions and share goals.
  • Of interest was a dichotomy from manufacturers that could portend a challenge for large manufacturers.  Overall, large manufacturers are projecting in the 3-5 or 3-6% range.  “Medium” sized companies that are less brand-driven at the contractor end and are known for service and price competitiveness (or, in other words, are perceived as more distributor friendly and easier to do business with) all shared they are projecting high single digit or double-digit growth … hence taking share from larger companies.  There is a message here for the large companies relating to service, focus, local relationships, nimbleness and that “size may hinder.”
  • Some lighting manufacturers reported sales being “soft”, however, that may be more from a revenue view versus a unit view and could be the impact of distributors purchasing in advance due to tariffs and/or increased competition.  There is a differentiation challenge for many of these companies.
• Companies did express early concern for 2020 with some saying late 2019 backlog concerns and others echoing comments or predictions that they have heard from ITR Economics as well as Dodge Construction.  Not a severe recession but perhaps mild. The caveat being that 2020 is an election year so, early projections could be wrong as getting re-elected in a down economy is “a real challenge” (to state mildly.)

Other non-NAED related news included:

• NEMRA introduced its expanded POS initiative to a number of manufacturers. This new service will enable distributors to upload a single file with POS information from multiple manufacturers to a secure web platform, the data will be cleansed / normalized against IDEA data and then provided to participating manufacturers via a single feed consisting of data from all of its POS submitting distributors.  Reps will also be able to download transactional POS data for their manufacturers from submitting distributors in their marketplace. The intent is to streamline the data collection process, reduce costs for all parties and ensure that manufacturers and reps have the same data from which to calculate compensation.  Some distributors were also conceptually shared the approach.  Overall, the initiative was well received. NEMRA will be more formally announcing at the NEMRA Annual Meeting and continuing to meet with manufacturers at NAED South Central. For more information contact Ken Hooper or myself (note, CMG is the NAED POS facilitator).
  • Of note, most manufacturers only desired non-customer information to support compensation initiatives although the platform enables manufacturers who desire customer company name information, and their distributors agree, to capture that level of detail.
• It’s expected that this year’s acquisition market will be more active, from an announcement viewpoint, than last year (essentially the culmination of last year negotiations.) The Kendall / Becker deal was noted as an example. Some Western region deals were rumored.
  • Manufacturers are also being active in this space and are looking for “bolt-on” deals
• Heard of a couple of companies that are aggressive in the region … growth-wise / vision-wise … from manufacturers … Main Electric Supply and Lonestar Electric Supply
• Continued talk re digitization / eCommerce with larger manufacturers inquiring about distributor investments and sharing some of their initiatives which range from website enhancements, eCatalogs to product category specific apps to make product selection easier for contractors.
  • There were a number of eCommerce-related technology companies in attendance – EvolutionX /ES Tech Group, XO Logic, Snap36, Distributor Data Solutions, Trade Service, and of course, IDEA – which highlights the interest level that the electrical industry represents to these companies and the opportunity for distributors.
• Distributor Data Solutions shared its new Rep Data Exchange (RDX) with some rep agencies. The RDX is a rep specific eCatalog service reps can deploy on their website to service end-users, distributors and support their staffs.
• Heard positive feedback on a “new” (unheard of) rep CRM system called RepFabric. RepFabric comes from the electronic rep industry and the electronics industry has been more advanced than most industries regarding technology, processes and data sharing.
• Some manufacturers shared that their distributor meeting content is shifting. One said that “50% of their conversations now relate to marketing”. Upon further elaboration, their feedback was that conversations were less about sales numbers, support / service and new products and more about how to penetrate end-user markets, promote products, call on customer segments, create opportunities.
  • This is not to say that service and performance issues are not discussed, especially with distributors having the opportunity to escalate issues, as needed, with senior management.
  • And there are distributors who commented that too frequently discussions with senior management don’t result in timely responses / action, but that’s a different story!
• Some conversations on “what is the role of / should be the role of a regional manager (or whatever title)”?
• A number of manufacturers inquired about WESCO’s acquisition of Sylvania Lighting Solutions and how this could impact WESCO as well as questions about SLS providing contractor services on lighting projects.
  • Given that SLS has been in a focused segment for many years, and had revenues of $100M, they are accepted in the niche they play. Additionally, there are other distributors who either have contractor “arms” or quote turnkey lighting projects and outsource labor to “selected” contractors.
  • The bigger opportunities may lie in
    • WESCO expanding reach into SLS customers to serve other needs.
    • SLS having access to other lighting manufacturers through WESCO.
• The hazardous lighting market is getting more crowded. While Dialight and Holophane are considered “the standard”, companies such as Shat-R-Shield and Nicor now offer hazardous lighting products amongst many others.
• A number of Sonepar’s OpCo’s are focused on digitization and proactively focused on driving more business digitally … through website and/or direct connections. Divisions that are most successful are driving initiatives locally versus corporate initiatives. This is also a case that “size has its privileges” … ability and willingness to invest.
• Heard from some mid-sized manufactures that a recurring topic with distributors was lack of distributor knowledge re breadth of manufacturer line at management level. According to these manufacturers, they have a challenge in getting rep mindshare on mentioning their broader offering to the distributor (and the distributor has the same challenge in getting their salespeople to remember “who has what” as well as focusing on management commitments / interests to mid-sized / smaller manufacturers”.  End result … much talk, little action and that companies need to develop a model that works for them to supplement rep initiatives as rep can’t be all things to everyone.

Regarding NAED

• Didn’t get to the workshops and didn’t hear any conversations about attendance or topics (which were the same as at the Eastern), which isn’t necessarily good.  A couple of comments regarding the Customer Experience “workshop” is that the presentation was very long (scheduled for 3 hours) and there wasn’t much interaction. Additionally, the presentation was more consumer facing vs distribution examples.
• The general session, one Customer Experience, was thematically a good presentation and was well attended. Good refresher / good reminder. Not exactly new ideas but a different “twist”. Could have been shorter. Some key takeaways / reminders:
  • Innovation = thinking outside the box
  • Internet is not generational issue. It is user / customer issue driven by societal expectations (that are often set by other companies.)
  • There are increased expectations of your customers. They expect helpful information … now. And customers want consistency in experience … and periodically being delighted helps.
  • Consider your website as a “touchpoint” in your customer relationship.
  • Rethink customer experience from customer viewpoint, not how you want them to interact with you.

• A couple of people commented that getting meetings with distributors is getting “harder and harder” and some distributors commented that they are getting requests / booked 4-5 months in advance!
• The lobby was very busy during the NAED receptions, which was a little unfortunate to “lose” 100-200, perhaps a little more, from the networking opportunity.
• The one-on-one booth session area was very busy both days with few empty booths except for the very end (as many manufacturers had to catch early afternoon flights to head back east.)

Overall it was a very productive meeting, however, as a distributor / manufacturer, it is all about the one-on-one meetings that are individually set and unfortunately held in suites due to privacy and ease. Saw some hallway meetings but the individual networking is limited and an area for NAED to consider strategies to enhance, if possible.

Palm Springs is a wonderful place, albeit from an inside the hotel view. Someday hope to get outside.

A good event to kick-off the year.