Observations from 2024 NAED South Central and New President Address

Last week’s NAED South Central attracted about 610 registrants to Dallas. This was Wes Smith’s inaugural conference as the new President of NAED (after a 40-year career as a distributor.)

As is every conference, it was productive if productive is defined as “achieving your goals.”

And a number of people felt that the conference agenda, topically, was one of the better ones in a while. The key to driving attendance to the “educational / topical” sessions is consistency in relevance and quality to “spread the word.”

Now, to the thoughts about the conference and to marketplace input.

About the NAED South Central

• As mentioned, good attendance, albeit of the 610, about 215 or so were distributors. These distributors were members of about 58 different distributors / operating companies and 22 of them were part of national chains. A good turnout and showing that even the national chains brought their localized business operations to the conference. As much as the industry consolidates, it is still a “local” business where decisions relative to growth and line support are made at the local / regional level.
• The Monday sessions (Futures Group) and one run by Industry Insights that overviewed the PAR report, reportedly, were informative.
  • While I couldn’t attend due to meeting conflicts, Tim Salvadore from GRN Coastal, an electrical industry recruiter attending for the first time, attended the Futures Group session. He shared
    • “The Future’s Group Roundtable Discussion was superb. The discussion was heavily attended with individuals standing in order to listen in after the tables filled up. Topics spanning from Talent & Innovation, Electrification, and Digital Transformation. The Talent & Innovation portion echoed many sentiments our team at GRN Coastal hears on a daily basis. Organizations as a whole want to bring on young bright talent, practices including internship programs, better articulating culture, and heightened focuses on career paths were at the forefront on discussion. It is always great to hear from industry leaders as many face the same issues in building a 21^st century team.
    • The second and third topics, Electrification and Digital Transformation were also lively discussions. With an influx of emphasis and spending in electrical markets specifically (EV charging stations were a hot topic) both manufacturers and distributors were communicating on how they can capture this spending specially from the contractor side of the business. Organizations seem to be taking a more team based sales approach with multiple touch points to be putting customers first. Digitalization has increasingly become a hot topic amongst distributors and manufacturers. With insightful data driven decisions being made daily, organizations are looking for the right solutions surrounding AI to avoid “garbage in, garbage out” data practices.
  • Feedback on the Industry Insights session was informative as it broke down the PAR report and shared distributor financials and identified potential inferences. One person commented “Is it a coincidence that higher performing distributors have slightly higher compensated people?” which was something mentioned at the session. The data presented was from the 2022 PAR report. 2023 data is currently being collected. Many expect that 2023 will continue the decline from 2022, which was down from 2021 when distributors, on average, reported net profit of 6.6% (2022 was 6%). The decline can be attributed to a slower growth rate, less price increases, higher compensation and operating costs, lower rebate income, etc.
• Tuesday started with the general session and the “introduction” of the new NAED president – Wes Smith. Wes shared that he is excited for the new role, that he has “the heart and the ideas” to help drive the association forward. He mentioned that he’ll be doing some traveling to solicit member input as well as seek cross-industry (and association) collaboration. He commented that he is committed to “listening and trying some new things” including “acting a little crazy.” Wes emphasized that he is committed to helping the association for the next five years. In essence, after 40 years, this was an opportunity to give back to the industry … he had the distribution experience the committee (and “membership”) wanted, an understanding / vision of technology utilization in the channel, and “ideas” to drive change while providing an ROI for members on their membership.
• Noted football coach and ESPN commentator was the keynote speaker. As he is on television, he was an energetic speaker. Many football analogies. Focus was on motivation, training, “doing the little things” and “embrace change.” He also shared it is important to remember KYP … “know your personnel.”
• This session was followed by an Electrification Panel featuring key industry leaders. Unfortunately, there were only about 40-45 people in attendance, including a number of service providers. It was a very informative session that highlighted opportunities for distributors from industry leaders who are quoting today and “looking over the horizon” at what is coming. The takeaway was
  • The future is bright (some might say “electric”) as most, if not all, of the major global trends need more power and/or are driven by electronics.
  • The future will require more technical sales knowledge to support residential, commercial, and industrial customers. The products will be more technical, but they will also be “plug and play” so it is easier for systems to “talk” to each other and be installed. AI may / will play a role. This has employee training implications.
  • The booth sessions were “the booth sessions.” Lots of activity. About 50 manned booths

Marketplace Feedback

• General consensus is that 2024 is expected to be a 1-5% year with the second half of the year stronger than the first.
• A number of manufacturers, and distributors, commented about a slow January. Some have seen it run into February. Quotation activity is strong. A few had strong months, albeit not consistent. The pattern, on the distributor side, seems to be companies that have intentional growth strategies and are targeting specific verticals, or they have won a / some large project(s).
• The product backlog issues for distribution equipment and transformers are expected to be with us “for a while.” If anything, they may get exasperated with continued data center and EV industry construction as frequently some of these projects find their way to the “front of the line” as time is more valuable than money.
• Heard of two more independent electrical manufacturer representative mergers / acquisitions that are expected to be announced / closed by the end of the quarter. Neither are tied to one of the three “super-regionals / quasi-nationals”.
  • Lots of conversations about strengths / challenges with super-large agencies. Heard feedback from manufacturers that they are hearing more about reps considering converting to ESOPs as an ownership exit strategy (and more ESOPs are becoming known.)
• Lots of talk about data centers. Seems to be that every manufacturer is talking about it (except maybe lighting companies). Most of the larger distributors are seeing some activity in this area and many of these projects, due to their size, are being awarded to larger distributors who have relationships with the larger contractors.
• Seemingly more manufacturers are deploying business development / sales engineer personnel to call on the engineering and key account contractor community. Much of this is due to long cycle selling and contractors operating across regions.

Take Aways

Overall, in speaking with a number of distributors and manufacturers, the sense was that it was a productive session for many given what currently is a market that is reverting to pre-pandemic performance (historically the industry is a 3-5% organic growth market) and while there are market accelerators, they are either geographical or specific verticals. The common trends were:

• Be intentional to drive growth … in planning, training, talent development, and targeted initiatives while being passionate about driving a service culture.
• Part of the cultural element is focusing your team on growth, demand generation, and marketing. A number of people inferred that sales needs to be a contact sport that involves “listening, following up, and making sales calls.” Manufacturers feel this point is becoming a lost art for many distributors (which also means that manufacturers are selectively investing in more demand generation initiatives.)
• Distributors are focusing on operational performance and supporting existing customers. In general, manufacturers are not viewing them as demand generators. They are viewed as “servicers” … focused on serving existing customers and, in many cases, not driving a specific manufacturer’s initiatives.
• Consolidation, coupled with the need to finance larger orders, favors the larger distributors.

If you attended, what were your takeaways from the NAED South Central?

And if you’re curious about the observations from the other two regionals … click on the applicable conference.

• NAED Eastern, held in November in Marco Island
• NAED Western, held in January in Austin