Taking a Deep Dive into Wesco

Within the electrical industry, distributors like to learn from each other. Modern Distribution Management (MDM) launched a series of distributor case studies last fall with a case study on Fastenal. Recently they ran a three-part series on Wesco, culminating in a report. As a follow-up to my review of Wesco’s Q2 report, this MDM report is a good follow-up, sharing additional insights.

Channel Marketing Group’s newest contributor, John Gunderson, is writing these reports for MDM.

Many may know John from his time at Crescent Electric and HD Supply. He’s also been with a number of other leading distributors in the datacom and MRO space. He is very familiar with analytics, having worked with MDM Analytics and knows the consulting business, having focused on category management for Dorn Group.

John and I have known each other for many years, connecting at industry conferences. We’ve collaborated on www.hvacrtrends.com, a service of Channel Marketing Group.

John is now contributing his expertise to Channel Marketing Group and working with me on www.hvacrtrends.com, www.uslightingtrends.com and will occasionally share thoughts on ElectricalTrends.

His Wesco series for MDM has been popular and we wanted to share the highlights. As expected, with their overall revenues exceeding $22 billion worldwide, they ranked #1 in North America in MDM’s latest Top 30 Electrical Distributor Report, many have interest in the company. So, John took a deep dive into learning more about what makes Wesco “tick”.

A Deep Dive into Wesco

“Recently our good friends and partners at Modern Distribution Management (MDM) asked me to write a series on public distributors and create a special report. The MDM series and special report on Wesco has just been released and we wanted to share some insights in this column on the MDM series.

One of the great things about being in the business for many years is the opportunity to share your thoughts and opinions on a leading distributors strategy.

I have been fortunate to work as a marketing, sales, category management, and pricing leader for five of the largest distributors in North America. One thing I have learned from some great distributor mentors is there are many ways to be successful as a distributor and not one playbook to success.

Wesco has their own culture and success path that obviously works for them. As the largest Electrical Distributor in North America, they know how to run a strong business. In the MDM Series, I focused on looking at their three enterprise strategies. What I consider their foundation for success or pillars.

Wesco is clear that the company continues to focus on three key enterprise strategies.

1. “Extend our industry-leading scale and value proposition.” Wesco Analysis, Pt. 1: Scale and Value Proposition (Free) – Modern Distribution Management (mdm.com)
2. “Further develop our team and our culture of excellence.” Wesco Analysis, Pt. 2: Enterprise Strategies (Free) – Modern Distribution Management (mdm.com)
3. “Digitalize and transform our B2B business.” Wesco Analysis, Pt. 3: Digitize the Business (Free) – Modern Distribution Management (mdm.com)

I would encourage you to check out the full series on MDM and the Wesco full special report (MDM premium readers have full free access to the detailed analysis and the special report).

There are a couple of things that stand out in the MDM final Wesco report that we wanted to share at a high level. I call these the “key pillars of strength” that every distributor can focus on or should consider focusing on.

First, Wesco has a Smart Silo approach. By that I mean they segment their business into appropriate business units or silos. Each of these business units have distinct go to market strategies and customers. Electrical and Electronic Solutions (EES), Communication and Security Solutions (CSS), and Utility and Broadband Services (UBS) all have distinct customer bases and go to market strategies and Wesco excels as the 1 or 1A market share leader in each business unit. In the series with MDM, we covered Wesco’s smart silo focus in depth.

Focus on their team and how to retain and recruit top talent to their business. Wesco sells highly technical products to end users that require excellent support. If you have ever sat down and done a lighting or gear takeoff, built a complex data system, or worked with dangerous high voltage utility products you know you cannot just hire from a temp agency to find talent.

To become a real technical expert for their customers it requires an investment in your people. It requires a real investment in training. The mantra of “our people make the difference” must be more than just lip service. Wesco understands that “their people really do make the difference” and has a clear focus on their employees.

The final key strategy is digital. For the markets they serve to be successful requires more than a top “amazon” type website, because most of their business is not going to go through a complete self-service digital platform. Their customers for the bulk of their purchases require some level of traditional distribution full-service support.

Wesco’s digital approach makes it clear they understand that great digital support helps them improve their full-service distribution business.

So, what can you learn from Wesco to apply to your electrical business as a manufacturer or distributor? Is it having Smart Silos? Is it really investing in your people and backing up that claim with top training and communication plans to help them grow? Do you really have a smart digital approach that serves your full-service business and a plan to get better digitally every day?

I truly believe that there are many ways to win, but the above three strategies are clearly ways to win that apply to everyone in the channel.”

John Gunderson is a senior executive with more than 25+ years’ experience leading category management, sales, marketing, pricing, analytics, and ebusiness with companies such as Crescent Electric Supply Company, HD Supply Power Solutions, White Cap Construction Supply, Anixter/WESCO, Modern Distribution Management, Dorn Group, and EIS-INC. He can reach John at jgunderson@channelmkt.com

Takeaways

While others may comment about Wesco, the reality is the company is doing much right as evidenced of a growing business, generating over $22 billion in revenue, and generating above industry margins. Hence an opportunity to review and identify takeaways.

When John Engel, CEO of Wesco, shared the rationale behind the Anixter acquisition, he referenced that the new business would be able to take advantage of secular trends relating to industrial, data, communications, power generation (utilities). Wesco’s focus on large construction, industrial, data communications (and data centers), renewables (especially solar) and the utility market provides the company with strong market drivers. This is the “silos” referenced in the case study.

Further, access to lines that are critical in the data center world, such as Belden, as mentioned in this LinkedIn post, helps capture data center business. Their comprehensive data center offering enables them to have a Data Center Solutions group.

While some comment that Wesco’s digital “lacks”, what they are really saying is that Wesco’s buy.wesco.com website does not meet their expectations. Wesco has invested millions into their data and digital initiatives; however, it is important to recognize that their audience is 1) investors, have www.wesco.com, and 2) their customers – large contractors and industrial accounts. Hence the focus is direct connectivity, eProcurement, storeroom management and more. Consider their recent acquisitions – Storeroom Logix, which Wesco acquired in June and was mentioned in their 10-K, helps with storeroom management, and entroCIM, a data center and building intelligence software, for a minimum of $30 million. They are focused on their, and their customers’ needs.

And to the point of people, Wesco employes about 20,000 people. Obviously, they are retaining and recruiting people. They have a robust intern program, recruit from college campuses, pay “competitive” wages (and only reasons for quotes are that they can be competitive for the industry, for their geographic market, and for the functional skill set commensurate with a Fortune 500 company). The company is thriving, and that’s due to its people and its focus on its customer base.

If there was an overarching takeaway … have a vision of the markets you want to serve, focus on those markets and the core customer base you want and then structure your resources (inclusive of people) in pursuit of your vision. This focus will reward your shareholders.

Thoughts on Wesco? On the keys to driving a successful distribution business?