13 Predictions for 2013

Welcome back from the holidays. We hope everyone was able to spend time with family and we wish all of our readers a happy, healthy and prosperous New Year.

And with a new year we thought we’d share some crystal ball predictions for 2013.  A caveat, however.

From speaking with many contractors and end-users, distributors, manufacturers, some reps, some private equity firms and others, the general feeling is minimal growth in 2013 (especially since it appears we’ll avoid the fiscal cliff and instead slide down the side of the mountain be elongating the process).  With this type of industry environment, key to increasing sales is focusing on customer engagement to optimize penetration within existing accounts and then expanding your sphere of influence to other like-minded customers and customer segments.  You need to protect your base and focus on share. Relationships are critical in this environment.

And now for our 13 predictions for 2013 (in no particular order):

1. Look for ABB to look to broaden its electrical footprint to compete better with Eaton and Siemens … could GE, Leviton or Legrand (Pass and Seymour and Wiremold being the prime components) be targets? Either the gear package needs to be built out or they need to expand their breadth.
2. Electrical manufacturers with industrially-oriented products, now aware of Kaman due to its new relationship with Schneider Electric, will flock to their door and authorize them for the line.  Be wary of Motion Industries and Applied.  Industrially-oriented electrical distributors will have new competition from PT distributors.
3. NAED, looking for members, will diversify into non-traditional channels to attract companies looking to expand in the electrical distribution marketplace. It’s all about revenue.
4. Distributor acquisitions will continue, albeit not at some of the multiples from last year, as distributors either seek to cash out for retirement purposes, lack of succession or recognition that the market will continue to be slow growth for those unwilling to make investments in people and diversification.
5. With all distributors offering comparable customer service, marketing and idea generation become more important.
6. Strategic management of SPAs, as well as the general area of price optimization, will enable distributors to maintain, and grow, their net profit.  Those who don’t will see net profit continue to erode (or ride with the tides of industry growth).
7. Graybar (or perhaps WESCO) decides to purchase a top 15 industrial automation distributor to advance further into the industrial sector.
8. A very large industrial distributor purchases an electrical distributor that is very active in the energy efficiency market
9. The industry reacts to new healthcare law (Obamacare) by hiring more part time industry veterans to gain quick expertise, hence generating a fast ROI, to avoid paying the additional cost of medical insurance. NAED, NEMA and possibly NECA and IEC join forces to create an electrical channel health exchange to lower costs for the channel. Someone suggests making this part of IDEA or NAED.
10. LED lighting will take another step forward and become the “Product Group of the Year” as the commercial/institutional and industrial markets invest into energy efficiency. While many distributors commoditize the product category, those with exceptional technical understanding are viewed  differently and capture higher market share. New business technologies enable improved customer service, enabling them to cost-effectively compete
11. A large national chain introduces a new service program which targets the 1-7 man contractor customers that will provide very high fill rates and actively markets the new offering, taking business from small distributors and big boxes.
12. Manufacturers, seeing continued consolidation, overhaul their rebate programs and “preferred” distributor programs and move more to a differentiated model that drives support to those who they feel have staying power and will be loyal.
13. and hopefully, more manufacturer and distributor senior management will better understand the difference between marketing and marketing communications.

And, because we’re consultants and couldn’t stop generating ideas, here are three more:

1. Branding will increase in importance as communicating breadth of product / service offering to current and future customers becomes more central to distributors’ growth.  Manufacturers will redirect channel brand development funds to end-user initiatives and eventually partner with selected distributors in a marketplace to drive business to them.
2. Discretionary and reallocated funds will be directed to 3 areas … marketing, technology and people
3. Progressive distributors will fund marketing 50-100% higher than the industry average of .217%.  The benefit?  They’ll drive higher, more profitable, growth.