NAED South Central … Productive

Feedback from this week’s NAED South Central conference was positive with many reporting productive meetings between their suppliers / customers, which is the key, and in many instances, sole reason for attending the conference. Surprisingly, there was also decent chatter in the one-on-one area at 11:30 am on the final morning (perhaps also contributing is the ability of a good afternoon flight schedule for many to return home at a reasonable hour.)

Overall, the economic mood, especially among manufacturers, remains positive, even with the weather around the country the first two months of the year.  Many reported a slightly slower month than January, but overall, they are ahead of projections. Southwest has had some issues due to rain which has slowed construction, but it will come back, and the upper central has had snow and cold.

Mid-sized manufacturers, who appear to be more nimble, easier to do business with and are more focused, are growing at a significantly faster rate than large, multi-line manufacturers.  In speaking with distributors, the issue is ease of doing business, product availability and speed of decision-making.

Heard many things at this meeting in-between our meetings, during receptions and in the hallways.

Company specific dynamics

• Heard from a number of people about a significant layoff at Southwire which include the release of some high level sales management that were well regarded by distributors. Many wondered “why”, and especially “why” regarding four specific individuals.
• Distributors shared that at least a few lighting conglomerates are having delivery issues.
• Jim Johnson has been announced as the NEMRA president-elect.  He is currently finishing his duties with Atkore and officially joins NEMRA May 1^st as Ken Hooper retires in June. Click here to congratulate Jim.
• Gary Norris of ILSCO announced his retirement after 20+ years with ILSCO. Click here to congratulate Gary.
• Consolidation was discussed as a becoming a larger driver of strategy decision-making.  More deals, on the manufacturer and distributor side, where mentioned with some companies commonly discussed.  Many Rockwell distributors are “in play” as well as mid-sized companies. A well-known manufacturer was discussed by many and could be announced shortly.
• Those manufacturers offering products that support pre-fab / or who offer pre-fab services are seeing growth, although this is benefit is better understood by medium and large contractors who have larger projects with repetitive installations.
• AD reportedly will be announcing another merger / acquisition in a segment outside of the electrical space. A number of manufacturers have noticed this phenom and questioned “who does this benefit / how does this benefit a distributor?”, “why are these groups doing this, lack of succession planning for themselves”, and “is this an outcome of consolidation in all industries?”
• Discussion regarding lighting pricing and round 2 of the tariffs being delayed.  Few expect the tariff to be increased. All hope that pricing can remain at current levels, with or without the 10% tariff, however, many expect that small companies / import-only companies of white goods will again “race to the bottom” and compete solely on price and that there will be an eventual continued erosion of price, which is not good for distributors and manufacturers as more units sold at lower ASP results in lower profitability while needing to provide a high level of service to support the business.  This may be one aspect of the business (and it can be 30-40% of distributor sales) that needs “thought leadership” and re-engineering to provide adequate profitability.  Someone mentioned that there are over 700 companies affiliated with DLC.  Perhaps the definition of “quality” needs to be re-examined … as it relates to lighting, companies, etc.
• Trimble, the parent of Trade Service, is doing some interesting things in the contractor / general contractor / architect space. Don’t know yet if it has any interaction with Trade Service or these are standalone offerings for manufacturers and distributors.) Hope to report back in the next month or so.)
• NEMRA continued to meet with manufacturers and distributors regarding its POS initiative with more distributors committing to support the Minimum Reporting Standards. A few manufacturers committed to joining the 41 that already support the standards and there were more commitments to the proposed process that will enable distributors to upload one file for multiple manufacturers with manufacturers eventually receiving one file on behalf of their distributors (typically only at the zip code level) and local reps gaining reporting access (SKU level, zip code level) so that they have the same data as their manufacturers to audit commissions.
• Interestingly, eCommerce wasn’t heard much, perhaps because there appeared to be no eCommerce companies in attendance.  Did speak with a number of companies about eMarketing and digital / eCommerce adoption as companies are putting monies into these areas.  Food for thought … perhaps ordering online will barely register longer-term with orders being more system to system (punchouts from procurement systems and integration to estimating systems as well as via text and more). Online catalogs will always be needed to provide customers content. Integration with ERP systems, or some connectivity, is needed for sharing pricing and availability.  But what percent of orders will / should be “hunt and peck / click to order?”
  • As a thought … Distributor Data Solutions just launched their DCX (Distributor Catalog Exchange) offering which is an online catalog only solution for distributors.  While targeted at smaller distributors, the concept could apply to anyone not ready, or who doesn’t want, an eCommerce integrated solution for customers.  And perhaps the content can be used for customer procurement systems and support punchouts?

About the conference

• NAED spent much money in signage promoting EPEC, it’s well acclaimed training program, and its Market Data program which is designed to eventually provide market size / share information to distributors at the micro product category level.  And in addition to spending much money promoting this initiative, NAED again appeared to be recruiting / pleading for member sign-ups to get the program launched (sorry, no role or benefit for manufacturers at this stage.)
• NAED again sold a number of manufacturers and other service providers into taking tables outside the registration area. About the same number as the other conferences, however, the South Central’s grouping was significantly different that the Eastern and Western. Interesting that others “drop out”, which may be indicative of their lack of fortitude / focus on the industry and distribution and/or the inability to drive enough interest to these companies to encourage them to return to the conference, even as an attendee.
  • WebPresented, a CRM company, was in attendance as was a company called ProKeep which is a centralized text messaging system designed for distributors to enable another communication channel for customers.
• Heard comments that companies have access to too much information and that the information / data overload is leading to paralysis and lack of decision-making / action.  Key is “what information is needed to drive the business”
  • Our experience is that there are typically 3-5 key metrics per department that are the core issues.  Other metrics support them and are either derivatives of these KPIs or nominally predictive.
• Customer experience (CX) is the topic du jour this year.  NAED has a speaker doing a three-hour workshop on the subject as well as it was the topic of the key note.  Topically the concept is correct, however, both presenters focused on retail / consumer experiences with no effort to industry understanding.
  • Your’s truly sat in on the workshop for an hour and then left as the presenter was exceedingly slow, from my viewpoint, in getting into the topic.
  • Tiffani Bovi from Salesforce.com spoke on customer experience. She is the author of Growth IQ (and a free copy was offered to all attendees. Feedback was “fine” to “good” to “better than NAED’s typical speaker.” All examples, unfortunately were consumer in nature. There were a few takeaways, however, due to the length of this post I’ll share separately the beginning of next week.
  • Overall it was better, but, given that the book was offered and expectations were built, and she’s a good presenter, it didn’t meet the heightened expectations.

A couple of distributors commented that “the key is staying close to my suppliers and my customers to understand their needs and to respond.”

There is much to gain in learning more about how your company is treating its customers and understanding if you are meeting their expectations as well as identifying ways to interact better with them so that they will want to more frequently interact, and place orders, with you.  The issue is first meeting their expectations, identifying ways to be of further assistance to them (via research and developing vision), potentially being predictive in nature (anticipating needs) and using performance to strengthen relationships.  However, delivering a quality, best-in-class customer experience is investing further in customer retention. It does not impact customer acquisition as customers cannot obviously have an experience until you reach out to them. They either need to have a need and seek you or you need to seek them and build a compelling reason … develop a relationship … on why they should try you. Neither speaker spoke to the issue of tying customer experience to revenue except for pointing to extensive research regarding the value of account retention and account penetration … both worthy areas, however, a number of distributors spoke to us about account acquisition … how to increase the number of accounts they actively do business with (what are they missing).  The distributors who mentioned this also have high market share in their territories.

• Change.  Heard privately from a number of manufacturers about their desire for “change” and the ability to influence the industry.
  • First, there is no commercial forum for manufacturers to network, share ideas or gain insights into the market. NAED, at the general session, even said that the association focused on the manufacturer-distributor relationship for 108 years and is now focused on the distributor-customer relationship (and it announced two studies where it is journey-mapping industrial and contractor customer sales processes and needs.)
  • Meeting fatigue is also mentioned. Somewhat tired with “speed-dating” at marketing groups and continuously meeting with “same companies repeatedly” and the battle / time investment to get meetings each cycle.
  • Need to identify ways to accelerate growth above market averages.  What generates demand at end-user in addition to gaining distributor support given the acceleration in the number of companies now importing products and continuously driving pricing down with “value” being diminished.
  • And more … issue is more about “voice” and then action. However, in most cases these are individuals speaking about “the industry” while, in reality, change will be company specific and affect individual company ecosystems.  For example, does the industry need to digitize or is it companies and their ecosystems? Will the industry invest in CX or specific companies?  There are few initiatives that can, and should, be adopted at the industry level, to change the industry (and when these opportunities are identified, like the NEMRA POS initiative designed to more efficiently transfer data), speed of adoption should be accelerated.

In the end, companies and people do what is in their best interest, not “the industry’s best interest.”

Heard many comments about “speed” and that this is affecting businesses. Companies that can adapt, can analyze quickly and decide, can implement and, if necessary, refine, are starting to win the game.

Overall a very productive conference.