Electrical Industry Moving Ahead According to Survey

The results of our fourth COVID-19 Market Sentiment study (click to purchase report) are in and the electrical distribution industry is back to work, and sales are improving and the electrical industry is moving ahead.

Based upon feedback from over 450 individuals within the industry, our study found that:

1. Sales – Based upon a weighted average, distributors and manufacturers both report sales essentially flat. Interestingly performance falls into one of three categories … some had continued decline; many were flat and a number reported growth.  A deeper analysis revealed much of the decline is regional with the Southwest impacted (oil and gas) and the Midwest as the lowest performers.

The trend is improving for June’s outlook with nominal increases expected by many while year over year June performance is projected to be down low double digits … much less than feared in April.

The stabilization, and improvement, was expected given that the construction market is open across the country and states reopened their economies in May, albeit at different paces.

• 75% reported branches are open with many reporting some visits by manufacturer representatives.  Many report that their salespeople are available to visit customers, especially if the customer requests. As one distributor advised his salespeople “If you are comfortable, and want to, go ahead, but take precautions and use commonsense.”  The first preference is a virtual meeting.
• Project quotation activity is good. Only 25% described it as “weak”, The question many have is “is it funded?” as there is an undercurrent of concern for late Q3, Q4 and early 2021.  Many report some projects being delayed short-term (expected) but there are some delays over the next 6 months and some cancellations being reported.
• Distributor inventories appear to be in good shape most likely due to the low demand in April. Few expect the need to increase inventory in the short term.
  • Distributors report that they do not have many customers short-paying them or significantly behind, but there is some. This is important as it affects cashflow and profitability, especially given the low net profit of distributors. Something for a distributor to keep a close eye on. Few have put customers on hold.
• Many report acquiring new customers, however, few expect retaining these accounts and converting them into “reasonable”, longer-term opportunities. This may be due to these “opportunities” being transaction-based for safety products, traditional distributor having inventory or delivery issues, DIY projects or one-off projects. This speaks to the need to identify relationship development initiatives to identify and cultivate repetitive selling (and buying) opportunities.
• 32% report that their backlog has decreased with 67% saying it is normal or improving. This could be an early indicator of the future market for some distributors … projects being down? Sales decline?
• One the important issue of manufacturer visits … a good percentage of distributors report that their local manufacturer representatives have visited them, at least once, for specific issues although visits are discouraged with the feeling that Teams / Zoom can address most issues. For those who are having meetings, masks are encouraged / required, meetings must be scheduled, agendas must be approved, and few are allowing manufacturer representatives to “wander” the building. Some distributors shared that they have dedicated a room for manufacturer / rep meetings to physically restrict access to other areas of the building.
• July appears to be a time where more meeting access will be provided, some not till September. A few shared that they prefer the electronic interaction as it has improved their productivity, shortened “meetings” and even improved inventory control for one.

• As it relates to manufacturer personnel and out-of-state visitors, some shared that minimizing / restricting this enables them to not subject people to exposure caused by travel, they minimize COVID transmission risk from those whom they are less familiar with and it reduces meeting time so they can be more productive. Some questioned the value of some of their historical meetings.

• Office dynamics have changed in many companies. Most have revised meeting room capacities, have installed acrylic dividers in offices, are requiring masks in meetings and public areas while some require wearing in work areas and many have identified some people who can work from home.  In many cases the outside salesforce is still working from home.
• When asked about employment practices in June, few expect more layoffs / furloughs. Interestingly, more “hiring for new roles” is expected than bringing back furloughed staff. The furlough terminology may have been used to adhere to PPP in April. Now it seems that companies are either looking for new skill sets, new roles, filling roles they were previously looking for or, in some cases, used COVID-19 as a reason for personnel change.

Survey participants also shared market opportunities that they see and shared examples of some demand generation initiatives (Teams / Zoom but also creative ideas such as an NCAA basketball promotion, online poker tournaments, sampling followed up be a virtual meeting, webinars with gift cards to encourage attendance and continuing attendance, virtual lunch ‘n learns … and even some that are already out conducting counter days and parking lot training.)

Overall survey respondents are seeing improvement, however, there is concern about the dreaded “second wave” and government’s reaction to it (typically more of a fall expectation than what is being experienced now given the timing of the survey), the outlook for projects in late Q3 and Q4 due to access to funding and the safety of their people.

Given the concerns expressed by all in April, the state of the industry is much better today and appears to be brightening as summer arrives.

A complimentary copy of the report was shared with those who took the survey and requested it and was made available to Channel Marketing Group and DISC CORP customers as well as NEMRA and IMARK Group members for those groups’ assistance in disseminating this industry survey.

Click here to purchase the report for $50, of which $25 goes to the Gary Sinese Foundation, or email us.