NAED 2023 South Central Observations

Last week’s NAED South Central brought an end to the trilogy of NAED regional conferences this year (here’s feedback from the NAED Eastern and the NAED Western.)

While there was much information gathered from one-on-one meetings with manufacturers, distributors and service providers as well as hallway and “after hour” discussions, the formal agenda left many “lacking.”

Overall attendance was good, about 600 attendees, however, a number of manufacturers commented that they counted 118 manufacturer entities and only 47 distributor entities. Of the 47 distributor entities, there was about 30-35 companies (i.e. Sonepar gets counted multiple times.) Small and mid-sized manufacturers lamented that they had too much free time, hence were either networking with each other, answering emails or some spent time in their rooms on Teams / Zoom … just another workday.

The hotel was “different” for a change in the sense that it was something other than a Marriott (so many manufacturers didn’t get their points or benefits!) but being attached to a convention center was a detriment for some manufacturers who seemingly were “banished” as they were a significant distance from the central area (and hence a significant walk for those who had meetings with them.) And a central lobby was missing; hotel / conference signage was poor.

 “Content” Events

Unfortunately, I didn’t get to the keynote speaker’s session due to a previously scheduled meeting and a post-keynote meeting, both in the aforementioned convention area. The keynote speaker, and topic (it was billed as “AI Disruption in Distribution” and here is a link to a blog on the presenter’s site on the topic, were not posted on the conference website until the week before the conference. According to many, I didn’t miss much (but I had wanted to attended given the visibility of AI recently). The speaker talked about data, the need for “clean data”, that every company needed a Chief Data Officer who reported to the CEO and the industry “needed to do better.” Many commented that the presenter also seemed to focus on selling their services.

The feedback I heard was:

• “Marginally better than the Western region speaker.”
• The audience is tired of hearing about “clean data” as 1) there is no definition of it, 2) NAED presents the topic regularly and 3) it is presented to the same audience … many whom have already invested much in improving data.
  • As an aside, in speaking to people from other industries, the electrical industry is ahead of many other industries.
  • Will the quest for “more data” ever end? No, especially since new data is constantly desired, identified and delivered … and no on purposely provides “bad” data.
• When is NAED going to have speakers talking about growth opportunities, customer insights and other “business development” topics that help drive the business for all.
• Some commented “it would be better to go back to motivational speakers” or “save the money.”

(As an aside, yes, I know that others probably share recognizing I may share the general consensus, in many cases because they do not feel that they can share directly with NAED … voice not heard. When the same insights are shared repeatedly from people who I, and many others, respect, there is validity in the feedback. One of the missions of ElectricalTrends is to share observations, so … “don’t shoot the messenger, please!”)

And NAED’s focus on technology and data, and speaker missteps, appears to be hindering its fundraising requests to support its technology aspirations to support distribution. Manufacturers are getting turned-off. The money may have to come from larger NAED distributor members … to support “the industry” (their competitors).

There was also a session where four service providers shared how they can help distributors on their Connected Business (NAED 2023 theme) journey – Enable, Avalon CSC, PROS and Infor. Unfortunately, it appeared that there were few distributors in the room – more manufacturers and service providers (about 30-40 people). The speakers shared an overview of their offering but, essentially it was NAED profiling selected service providers. Informative for some, but the desired audience wasn’t there.

Heard in the hallways and in meetings

Industry insights I heard were:

• Slowing growth. Mid-high single digit revenues in January and February but unit sales are flat to low single digit growth.
• Manufacturers sense distributors reducing inventory. Some could be consciously reducing inventory, some reverting to primary suppliers and reducing ordering from secondary suppliers whom they brought on due to supply chain issues, some may be the result of inventory min/max systems calculating lower need based upon downward trending sales.
• Backlogs still exist, and will exist for a while in the switchgear and transformer sectors. This impacts other product categories, most notably lighting. There is some concern about lighting projects, in the future, being cancelled and rebid once distribution equipment is installed due to price changes as well as product availability (no longer in production.) Distributors are also starting to fill some of their backlog in other product categories. But few projects are being cancelled.
• Pricing isn’t falling much, if any. Competitive market. While freight costs (shipping) may have declined, labor costs continue to rise. Don’t expect price declines. Heard steel is rising for manufacturers but in most cases hasn’t been passed on … yet.
• Heard of two “acquisitions”. A few manufacturers and distributors shared that CED acquired the Stanion Rockwell APRs, however CED did not acquire Stanion or any Stanion branches. With this deal there are now only 21 unique Rockwell distributor owners. The other was a Midwest distributor that was “sold” to a private equity firm (but probably retained some ownership). The name was shared; however, the information isn’t in the public domain yet (am seeking to confirm). Also heard of 2-3 others, at least, in discussions. The acquisition march goes on.
• eCommerce
  • Spoke to a number of distributors who are now working with some of their key contractors electronically. These contractors have approached them with various eProcurement solutions that the contractors are using. More on this in an upcoming survey and white paper.
  • Also spoke to some distributors regarding their customers’ eCommerce utilization. The feedback is online ordering is slow / nominal but can be more profitable than standard orders. In the contractor realm, more of the orders are small to medium contractors placing after hour / weekend orders. Otherwise activity is content and information driven – spec sheets, pricing, availability.
• With the emergence of ChatGPT, some discussion about what this could mean for distribution … and many different services.
• Had an interesting conversation with Infor where Steve Levy showcased some AI driven initiatives he’s “playing” with. Could be very powerful for distributors. Watch for an upcoming post on AI as well as soliciting “customer” feedback before embarking on “new” technology initiatives.
• Manufacturers
  • focusing on demand generation and vertical marketing to pursue growth opportunities.
  • starting to have more success with selected distribution strategies rather than saturation distribution approaches.
• Spoke to a few distributors regarding conducting customer satisfaction and some manufacturers regarding “customer” insights and identifying their product offerings market size (and hence their market share.)

And with the NAED National occurring the third week in May, some distributors and manufacturers shared that they are already booked … and no speaker (or even topics) are listed yet!

The regional meetings, and perhaps NAED meetings (regional + national), are now gathering places for manufacturers and distributors to connect. Not a bad approach if that is NAED’s intent. Perhaps NAED’s niche meetings will be their content sessions?

The question becomes, where do distributors turn for market / economic / “customer” insights? Large companies can allocate the resources. Is this an opportunity for marketing groups? For leading manufacturers to support their distributors or does this contribute to the channel segmentation that is coming where companies of a certain size have “resources” and can invest whereas others focus on serving / fulfilling their local market? Perhaps it will be filled by consultants and publications running webinars … free and fee-based?

So, the South Central takeaway … slowing growth but the market, so far, is better than expected. Technology becoming more prominent, and strategic. Companies focusing on vertical markets and targeted applications. The acquisition market will continue.

With change, there is opportunity.