The End of an Era, The Birth of IESD

Last week IMARK Electrical and AD finalized their merger and the Independent Electrical Supply Division (IESD) of AD was born.

Both organizations shared a press release, and letters to suppliers and service providers authored by Bill Weisberg, where they shared the new organizational structure which integrated members from both organizations into a new board and highlighted key IMARK personnel who became staff and advisors within the AD organization.

John Gunderson, a 25-year electrical industry veteran who is collaborating with Channel Marketing Group, shared some thoughts in this article:

IMARK Electrical Make the Merger Official: opinion on how the new AD IESD impacts the channel

“The news release called this a merger of equals to create AD Independent Electrical Supply Division (IESD) that represents 700+ independent electrical distributors with annual sales of over $43 Billion.

As the saying goes, the best predictor of the future is history, so I thought a look back at the recent history of AD and IMARK as being a great place to start.

When I first started in electrical distribution 25 years ago with Crescent Electric Supply Company (today one of IESD’s largest electrical distributors) the idea of being in a buying group was not even on the radar. Of course we kept tabs on what the buying groups were doing, but we were not members of Affiliated Distributors (AD) or IMARK.

I was the new guy at the headquarters, and we just went about our business dealing with suppliers directly, negotiating our own rebates, and writing our Strategic Business Agreements. We were certainly aware of AD but as a non-Rockwell (back then Allen Bradley) distributor we were on the outside looking in as AD was founded and was dominated by Allen Bradley distributors.

There was a common joke I heard often at the time that went as follows.

1. What’s the only difference between AD and AB?
2. The only difference is a line in the second consonant. (for those who don’t understand, AD’s abbreviation used to be A-D.)

As jokes go it certainly was in the bad dad joke category, but it did illustrate the common belief that AD and AB were such close partners that they were somewhat synonymous.

Both IMARK and AD were formed to increase the strength of independent distributors by working together towards the common goal of enhancing the profitability of their member-owners. They started, of course, with helping manage and negotiate the always important purchase rebates.

Both groups have evolved to where the vast majority of the large independent electrical distributors have, over time, become either AD or IMARK members. The Crescent Electric Supply team I was on, if I recall properly, joined IMARK in 2010 or 2011 (DG note – when I was with IMARK, from 1995-2000, we met and recruited IMARK to the point that they almost joined in 1998 or 1999.)  Sometime, about the same time or a few years after, most of the independent electrical distributors were in either the AD or IMARK camp. To use a Game of Thrones analogy, by the mid 2010’s the majority of the independent electrical distributors were either declared for team red or team green.

These two competing groups also expanded the race for more members into other channels like HVACR, Plumbing, Industrial, Waterworks, PVF, MRO, Safety and more.

As they have grown so have the services they offer their members. For example- IESD now provides support for ecommerce, insurance, HR, SaaS Companies, consulting, and an ever-expanding list of support services.

The new AD IESD has evolved to a point where they are, in my opinion, doing many functions that were years ago mainly provided by an association like the National Electrical Distributors Association (NAED). The meetings they hold internally for members have become very important industry events.

Both IMARK and AD grew services, and their offerings to their members, because of the competition. Well, today that “cold war” has ended, and they have combined their resources to compete in the new electrical world order.

That new world order will likely include an increased level of services for IESD members to consider using in the competitive fight for growth against the national electrical distributors (Wesco, Graybar, etc.). It will be interesting to watch to see how IESD continues to evolve.

Could it be an Iron sharpens Iron situation where the IESD versus Nationals competition improves the entire channel for end customers? Or will it make the market so equal that the value of the distributors is so close that “price” is used more frequently as a weapon? How will manufacturers adjust to more buying power and potential pressure for better backsides and support?

I am not sure what the final outcome will be … and time will tell. I and the channel will be watching closely. I wish all the competitors “good luck in the wars to come.”

Thoughts

• IESD, which represents about 720 electrical distributors and, according to the press release, $43 billion in distributor sales, represents 30% of projected 2024 electrical distribution sales. While significant, unfortunately, due to consolidation, this is an eroding percentage. However, it is still more than any national chain and, as we consulting with manufacturers, the advice is “treat this as a channel.” In other words, each national chain is a channel, so is IESD.
  • And earlier, when the merger was first announced, I shared thoughts.
  • A recent podcast that TEDmag had with John Thompson (First Electric) and Paul Kennedy (DSG) shared that the first F2F meeting between the parties was last December.
• IMARK Electrical is going to operate separately till the end of the year for the purpose of “program management.” This also gives manufacturers time to update their customer databases and refine “child / parent” relationships where “parent” equals “group / national chain / ownership.”
• There are some former IMARK Electrical members who will not be transitioning to the new company as they were deemed to be part of national chains and “asked” not to participate.
• The manufacturer landscape is still unknown as there are some who were in one group but not the other. Steve Guidry, Jerry Knight, and the supplier committee will need to work this out. Retaining Jerry also provides Steve with a resource that has “institutional knowledge” of how / why some IMARK programs were negotiated the way they were. Together they will seek to optimize programs (hopefully manufacturers budgeted accordingly!)
• John mentions the group’s potential competition with NAED based upon services and meeting content. It will be interesting to see how this plays out as IED has 2.5x the number of distributors as NAED yet NAED’s board and competitors is primarily independent distributors. Further, Wes Smith, when he was president of Mayer Electric, was a long-time AD member before Mayer left AD and he / the company joined AD. From a membership viewpoint, hopefully Wes / NAED and the IESD leadership will reconcile and work well together. Aside from Schneider, Eaton, and a number of smaller / mid-sized manufacturers, much depends upon it.
• While IMARK Electrical is the only IMARK Group division joining AD, presumably those members who also were in IMARK Plumbing, Luxury Products Group (decorative lighting), or Blue Hawk (HVAC), will need to select which segment is more important as it is doubtful that a company can be a member of IESD and a member of one of the other IMARK Group divisions given that AD has other divisions in each of those industries. Manufacturers who sell to companies that have multiple divisions may need to check with those companies to see what they have decided (especially if electrical was not their primary offering.)

Congratulations to all parties. It is the end of an era that started as purchasing cooperatives back in the late 1960s, and, surprisingly, in the South (and if you’d like a copy of the history, send me a note as I have an article in the first issue of IMARK Market Focus, from 2000, that has the group’s history.