NAED 2024 National Meeting Observations … Improving Market, Aspirational Goals

Last week’s NAED National Meeting was the first under its new president, Wes Smith. While it wasn’t a “party”, it did celebrate a number of people at the Chairman’s Awards dinner, recognized many manufacturer and service provider sponsors, hosted about 500 industry participants and shared information in formal event and hundreds, perhaps thousands, of one-on-one meetings.

Attendance

Overall, the conference had 555 registrants (excluding NAED personnel) and there may have been some no-shows or last-minute registrants. There were

• 190 distributor attendees expected from 54 companies representing 44 parent organizations including companies such as Zoro, RS, and Fulltrades LLC (so, untraditional electrical / lighting distributors.)
• 290 manufacturer attendees were expected from 74 companies (who represented more divisions / brands)
• 63 service provider attendees inclusive of, I believe, four M&A companies

And then the marketing groups and miscellaneous people.

About the NAED Conference

• Given that this was Wes Smith’s first NAED, attendance at the General Session was strong in anticipation of learning NAED’s “new” direction and Wes’ vision for the association. Some highlights of what he shared:
  • He’s done extensive research to solicit stakeholder input with staff input, spoke to a number of members and manufacturers and conducted some surveys.
  • The goal is to “power the industry to new heights” and “value all members.”
  • They hired a Director of Industry Transformation, Scott Wagner, who worked for Wes at Mayer.
  • Wes talked about the need to train the association staff on the industry, the need for a new org structure, job descriptions and, what I’ll term, the basics of the business.
  • He wants to “run fast, innovate and iterate” and to that point he has already stopped involvement in some initiatives that are multi-year and have gained no traction.
  • Talked about industry driving forces and trends. In 2012 27% of the industry channel revenues were influenced by 7 $1 billion distributors. Today, 12 distributors are over $1 billion and represent 51% of industry sales (note, definition of “industry sales” may be NAED revenue, this was undefined.)
  • The effects of consolidation will, according to Wes, require a review of the dues structure to ensure “fairness” and, in reality, retention of revenues. Everyone took this to “dues are going up” which then created hallway conversation of value and ROI and what am I getting today other than meetings, maybe PAR. EPEC is viewed favorably but is too expensive and the content needs to be updated (and manufacturer training, which is free, is frequently better.)
  • NAED’s strategic initiatives are to be:
    • Workforce Development
    • Digital (and they’ve raised $9.26 million for their Next Level Now campaign and now need to develop a plan for deploying the funding to benefit a dwindling membership.) First two initiatives are to be a Digital Center of Excellence and AI for Inside Salespeople.
    • Electrification
    • Advocacy (will be adding a lobbyist in DC.)
  • The general session was followed by what was billed as a Cross Industry Collaboration Panel with 4 association leaders. They announced what is called “Project Spotlight”, and then signed an MOU, to collaborate on
    • Lobbying
    • People Development (recruiting)
    • Data – quality and sharing

All with a goal of helping the country achieve its electrification goals, which Rich Stinson from Southwire eloquently shared is a “challenge” given projections that consumption is planned to outstrip generation.

The goal of Project Spotlight is to “advance growth and implementation of the electrical infrastructure by reducing project cycle times; attracting, developing and retaining people to the industry, and to support grid expansion.

Feedback afterwards from attendees was that it was great to see the four associations finally talking and agreeing on something, the goals are admirable and aspirational, and all are awaiting more concrete steps (other than hiring a lobbyist for NAED, which was questionable) to see how NAED can coalesce its members into 1) a direction and 2) action.

• Day 2’s General Session was on AI. Decent attendance for four panelists. Two were service providers (Kojo and Canals.AI) and then Aleisha Eckard from Siemens and Ryan Evans from Border States.
  • The goal of digital / AI is to drive scalability, automate repetitive tasks, facilitate data mining to deliver answers faster, accelerate research, and be more consistent. Speed is key.
  • Bringing data together is the key to developing / deploying AI.
  • According to Kojo it costs a contractor $68 to process a PO.
  • The only reason for technology is “to address a problem.”

It was a good generalist session to the AI topic; however, audience feedback is that they expected more depth about where / how AI is being used or could be used and what is being done / experimented as well as how it can be used in different aspects of a distributorship or manufacturer.

• NAED had some educational sessions. I heard positive about the economist session. The Executive Forum had about 20 people attend of which one-third were service providers, a few manufacturers attended and only one person from senior management from a distributor.
• The booth session was lightly populated. There were only 20 one-on-one booths indicating many more preferred to have meeting rooms, suites or hallway / lobby meetings. Some service providers took booths.

Marketplace Feeback

• Q1 was challenging for most. Pretty much flat / up a little for most distributors, and hence manufacturers. Those in the Southeast and Southwest are faring better. Others doing well are winning some large projects or have very intentional / focused strategies. Lighting overall is down and, on average, seemingly down 5-10% however, when unpacked, architectural / spec lines (and conglomerates) are down more than value-engineer oriented lines (who are mostly flat to up about 5%, some more.) Q2 appears to be on an upswing for many, however, commodities could be coloring this.
• The words of the day appear to be “data center” and Capex. Every manufacturer wants to talk data centers (news flash … there are not many in every market or state!) Capex is for the pursuit of large projects (second news flash, these are favoring the larger distributors due to financing and logistics issues as well as the projects being handled by larger / traveling contractors.) Industrial seems to be doing decent. Utilities are strong, but this is a niche market with selected distributors and manufacturers serving this market are not looking to authorize more distributors … as they don’t need to.
• Rep consolidation was a topic in a number of discussions with me as well as between manufacturers with larger distributors. The jury is out whether people think good / bad, however, all are learning to adjust. A common phrase was “I never expected this to occur, and I’d have to think about a national / super regional sales network.)
• Questions about the Encore / Prysmian deal and what will happen with the rep network, Encore’s culture, and Encore’s core value proposition – service. The sense is much change could be detrimental to overall Prysmian value as Encore, and its reps, understand the resi / commercial construction contractor market, and may be the best wire line in that segment. Some manufacturers are thinking about the impact of if their rep carries Encore and loses the Encore line, what does that do to the viability of the agency.
• Distributor consolidation, as expected, was another topic. Where is it going? The impact on channel strategies? Role of CDCs / RDCs? Rebates? Marketing group survival and value, etc. but few are tailoring their strategy to align with specific nationals … but they will customize initiatives for “a” national.
• Many asked “what are you hearing about AI? For many it’s talk and low-level execution. Some with interest are realizing data quality issues and internal system challenges.
• Don’t ask distributors about the switchgear companies, especially Schneider. The sense is not much will change with Schneider and Eaton “for a while.” Schneider has greater challenges. While both companies have made investments, it takes time to bring the factories online, hire staff and train them. Reportedly Schneider has had staffing issues. One distributor commented that they heard that Schneider senior / executive management seems to be more “involved” in the issue (or gave him that sense) so he thought that was a positive … but don’t take it to the bank. ABB and Siemens are reported to be in better shape and taking some share. Some distributors quietly are asking “what is the value of being Schneider Premier if I can’t deliver for my customers?” Essentially, what they are asking is “what business am I losing, switchgear and more importantly, other material, by not focusing on the customer in lieu of prestige and a nominal rebate?”
• Some discussion regarding imports vs domestic, especially relating to commodities (especially conduit). Some say, “customer rules and frequently the customer buys on price”. I had one discussion where the distributor stated that they are pro-domestic and will only promote and quote domestic to their customers and will work to get the right price for a project.
• The service provider booths were slow with limited those taking advantages of demo slots minimal. Not enough distributors to be of value to service providers and the wrong attendees. Service providers were mostly ops / tech related.

NAED National Meeting Takeaways

• From a personal side, had many meetings with distributors and manufacturers … scheduled and hallway.
• From an NAED viewpoint, the sessions had attendance somewhat due to wanting to hear Wes’ direction, a little due to topics.
• Where are the distributors? While there is consolidation, attendance as a percentage of NAED distributor membership is only about 20%, hence this is why many manufacturers do not attend.
• The industry is “plugging along.” Lots of opportunities in the market today and on the horizon, however, growth rates are returning to pre-pandemic performance.

Congrats Wes on your first meeting.

Side Note, due to brevity (and the article is long), I know I couldn’t get everything that Wes shared into the overview, so I’ll be reaching out and offering him the opportunity to share more.