NAED South Central – Welcome Back

Last week’s NAED South Central, held in Phoenix, brought industry participants from the South and Central part of the country back together after a two year hiatus and was a resumption of the NAED regional schedule. 562 individuals registered for the conference with only 34% being with distributors. 58% were manufacturers with the remainder being service providers or reps. There were 54 distributor companies registered however this includes multiple divisions / operating companies from the same entity as well as some companies that had to cancel at the last minute.

The atmosphere was one of “good to be back and see people ‘face-to-face’. Most, if not all, had a very good 2021 given the recovery and benefiting from price increases so the only “complaint” was supply chain issues … which, according to manufacturers, started every meeting.

Heard at the Conference

• Distributor prospects for the year center around mid to upper single digits, however, in practically all cases this excludes whatever their “benefit” may be from price increases as it is difficult for them to project. Part of the difficult arises from how they develop their sales forecast and the other part is trying to assimilate individual end of year price increases and extrapolate over the entire business is difficult. Manufacturer forecasts, on the other hand, either mirrored distributor forecast or took into account projected price increases as they have some visibility into their supply chain and raw material expectations.
• Everyone expects the supply chain issues to continue. Reasons range from Asian imports and container costs to availability of raw materials and labor. We heard of companies addressing labor issues by utilizing robotics only to get stymied by the lack of a computer chip. It will be another year of navigating product availability issues.
• There is concern for slowing growth rate in the second half of the year, however, it is felt this will impact stock and flow goods and that revenues will be masked with backlogs slowly being filled (and backlogs are currently at an all-time high.)
• The industrial market seems to be moving forward well and heard many distributors discussing EV opportunities … for chargers as well as the Bill of Material opportunities.
• Electric Supply (Tampa) shared that they made an acquisition and local Florida sources expect others to be coming in the near future.
• Some distributors reported that manufacturers referenced that they are adding field personnel to focus on end-users / contractors as a way to drive demand / brand preference. Some of these companies have direct salesforces, others are augmenting their rep agencies. It highlights that manufacturers, and their reps, see a need in the marketplace to control their destiny by creating demand with most distributors supporting the demand.
• Spoke to a few more manufacturers who are endorsing the NEMRA Point of Sale Minimum Standards initiative as they recognize appropriately compensating their reps as distributors supply material from RDCs/CDCs is important and that a standardized format is preferable. This will bring participation to 53 manufacturers and 50 distributor entities.
• Some distributors commented about the recent GE Current / Hubbell Lighting acquisition and wondered what the eventual model will be and how it will impact their reps / lighting agents. All question if the two brand model will survive, or even work.
• And, unfortunately, heard that an industry icon, Jim Strenk, who worked for Allied Tube and Conduit and was a strong NAED supporter, passed away at the end of January. He was a consummate gentleman and a mentor to many, always willing to share insights. May he rest in peace.

Lots of interaction, lots of meeting. Active hotel lobby. Little time to spend in the NAED Connections Hub (which reportedly had limited activity other than during registration.)

NAED

NAED’s involvement, and exposure, in the conferences this year seems to be “conflicted” as if there really wasn’t much of a plan. Or perhaps the plan was to take a page from someone from years ago who said, “call an industry conference, book the hotel and then get out of the way.” Sometimes those can be the best meetings.

As mentioned, the hotel lobby was busy. Late night meetings occurred. Meetings in hotel rooms and suites occurred. The one-on-one area was busy, especially on day one (Mountain and West Coast destinations suffer on day 2 due to the flight schedule).

NAED educational sessions were non-existent. NAED attempted to promote some of its offerings, and perhaps some topics, in an amphitheater set-up in the Connections Hub but didn’t expect much attendance based upon the number of seats set … and the Connections Hub was a distance from where manufacturer meetings were and from the lobby.

About 25-30% of registrants attended the opening session.

The general session speaker was the same as from the Eastern. Many had their phones out. An okay, but not energetic speaker who shared some economic information and key areas to watch out for with the result being expect lower GDP growth and possibly a brief recession to curtail inflation.  To meet this future economic challenge companies must adapt and have leadership. Winners confront reality sooner than their competition and that “creating tomorrow” takes courage.

NAED shared some of the initiatives it is working on. Highlights included:

• Trying to determine what the association can do to add value to distributors for 5-10 years from now. Areas include data, data insights, digitalization, selling services and education. The NAED Board and the NAED Educational Research Foundation (NERF) are aligned on the topics.
• They will be taking the “Connected” report and synopsizing / simplifying it to hopefully make it easier for distributors to embrace.
• Emphasizing, and repositioning, its Market Data program, which has been a 4 year initiative. Now the focus is to understand the product mix of different customer types. The example given was understanding what a contractor who works on data centers should buy. While admirable as an endeavor, the reality will be challenged as trying to get all distributors to categorize contractors by the type of project they work on will be impossibly (there is no NAICS or SIC code for segmenting contractors let alone getting all reporting distributors to share information using the same legend) and getting distributor salespeople to understand and use the information will be more than a challenge … they want to focus on capturing the order.
  • The concept is admirable, but, in the words of one manufacturer “when do you stop throwing good many after bad and looking for problems to solve that don’t need solving.”
• Promoting its Economic Forecast report which aggregates economic information to save distributor management time. This is now being provided to NAED distributors for free courtesy of Hubbell and Schneider Electric.
• Enhancing PAR by adding more operational data, regionalizing information and possibly providing insights at the branch level.
• Discussing if NAED should develop an electrical industry marketplace, similar to Amazon. Wes Smith, NAED’s chair, shared an opportunity his company had where a customer asked them to aggregate information for 17 trades into one website. While in today’s nomenclature it may be referred to as a “marketplace” in eCommerce terms, in the old days this was integrated supply as it is multiple trades to support one customer with an easy ordering platform. (For a sense of what iPower is / was, click here.) For a marketplace to be successful, the sponsoring organization must be adapt at marketing to generate “eyeballs” to the site. Contractors don’t need a marketplace as they already know the local distributors who can service them. MRO customers can use Zoro, Grainger, Amazon, local distributors and there are marketplaces by vertical market that electrical distributors can join (and have … Turtle & Hughes and Graybar are part of Stockd.)

The takeaway from NAED’s participation in the conference was that it is an “attendance gatherer” and the association, rightly or wrongly, is targeting its services to those who are larger, active participants in the association. Although it is an association of 350 distributors in an industry that has about 2000 distributors (of which 850-900 are in AD and IMARK), the focus is more on what could be referred to as the “top 150”. Could be good looking at 5-10 years, could be limiting.

Overall it was good for the industry to get back to having meetings. The South Central followed NEMRA’s successful conference that had over 1300 attendees. Next up is the Supply Force national meeting (limited audience but another opportunity to connect) and then the NAED Annual in mid-May.

And, from a CMG viewpoint, lots of conversation about market size, market share, marketing strategies, the impact of the Infrastructure bill, eCommerce, creating demand, vertical marketing, customer insights and customer satisfaction with distributors and manufacturers as well as some discussions with service providers regarding rebate and SPA administration. If we can help, please give us a call.