NAED National Session: Predator or Prey?

The first session of the NAED National was a session titled “Predator or Prey”.  The challenge is that session attendees walked away asking “why was it titled that?”  Perhaps the answer is in this quote.  The “predators” were the panelists … all national chains (Sonepar, Graybar, Anixter and Rexel) and the primary audience, their competitors … other distributors, are their prey and it is the distributors’ fault that they are being preyed upon (for business or for acquisitions?

Needless to say, no one could figure it out and, regardless, the session did provide some food for thought.  It should also be remembered that these four companies represent about $18-20 billion of industry sales and competitors are on the stage / in the room, plus their suppliers are in the room, so there isn’t much that they would say that would be provocative or overly insightful regarding their company.

A commonality is that they all have size and size (revenues and profits) can enable one to invest in much more than their competitors … especially when it comes to technology, product content, training and hiring to name a few areas.

Some comments / panel input (and some is from Mike Marks).  Comments are in italics.

• Personnel bench building is needed and moving “next generation” into management is important to mentor them into the roles.
• Some companies are redesigning offices to be more attractive as a recruiting tool
• Need to embrace cultural change
• Companies will survive based upon innovation,  Innovation can be negated or accelerated based upon size and nimbleness of culture.  Distributors need to find solutions “locally” and the successful ones will be able to scale these solutions “company-wide”.  National chain advantage is being able to financially experiment and support these solutions (but this is variable by company)
• Sonepar is working on initiatives to accept orders till midnight and deliver at 5:00AM.  Graybar has late night customer service hours.
• Sonepar at times will hire multiple “new” recruits to the industry rather than 1 seasoned “know the market”, “expensive” person.  They are looking for future top performers.
• Anixter uses a metric that calculates the percentage of business influenced as (through) a value-added service. They seek to grow this annually.  The benefit is the potential for margin but, and perhaps more importantly, the value-added becomes a customer benefit / retention tool.
• A major impact of Amazon and eCommerce is that customer expectations for better, faster and sometimes self-sufficient service has accelerated. This is due to the Internet and consumer behavior and interactions. This is carrying over to the B2B market.
• These distributors look at “product enhancement” as “service enhancement” and are investing in resources to identify services / perspectives in other industries that could be migrated to this industry.  The message … don’t limit yourself to your electrical frame of reference and don’t accept “no one else in our industry / our market is doing it.”
• Mike Marks had an interesting comment … distributors, and their salespeople, are great story-tellers (naysayers?) and always have a story (one off experience) of why something doesn’t work / isn’t try.  The best way to rebut this? Bring data into the business.  Tomorrow’s companies will use analytics to drive decisions and will use this data, converted into information, for better managing their business.
• The term “customer intimacy” was used repeatedly.  Much of this gets to the issue of knowing the customer, their challenges, many people in their organization and measuring “your” performance.  This is not about solely your outside salesperson having a relationship with the owner and going on an annual golfing trip.  Relationships are important but, like one panelist said, “I can have a relationship with Amazon because the system is easy to use, I’m familiar with it, they have what I need and, since I’m Prime, I get it in two days or less.”  It all comes down to what type of relationship one wants to have.
• Much talk about eCommerce as a customer-selected option.  These 4 companies all have the scale to invest in technology (and are).
• There was discussion regarding channel conflict and channel convergence.  The issue came up as it related to eCommerce (and manufacturers giving product content and selling to e-distributors / Amazon), PoE and other LED products being sold through non-electrical distributors (and direct) and more.  It was recognized that manufacturers have obligations to their shareholders and needed to respond based upon “where” the customer wanted to buy.  The issue of manufacturers initiating this was not addressed.
• Tech investment is expected to be a driver of future M&A.  Distributor scale, however, hasn’t been much of an advantage given the local market pricing nature of the industry (a little surprising that national chains admitted to this.)
• All mentioned about undertaking some type of strategic pricing initiative.  They also talked about having their salespeople sell, and hence price, based upon value. (but every distributor we spoke with afterwards said “we don’t see that in the field.” Which makes one wonder how they are training their salespeople to sell / price based upon value and what their sales management is doing if this isn’t being driven down or, is this the reality of local market pricing and no one being willing to hold salespeople accountable?)

In closing, the panelists said:

• “Do something” (change is happening)” – Halsey Cook, Sonepar
• “Ask yourself, what do you bring to the customer? This is your product.” (why does customer buy from you) – Bill Mansfield, Graybar
• “Disruption is not an event but a way of life.  You need agility.” – Chris Fitzmaurice, Anixter
• “Get data, measure, determine if it is threat or noise and have a plan – Brian McNally

Takeaways

• Need to integrate creative, critical thinking into the culture of your organization
• Need to expect, anticipate and at times drive change
• Invest in people … next generation, training, environment (and yes, this is easier for large companies as they have larger bottom lines, in dollars, and can invest in some excess staffing for internship programs.  More distributors could consider this if they considered reallocating their buying group rebates into investment resources rather than core profitability. Perhaps improved pricing and operational efficiency could improve organic profitability so that a percentage of rebate dollars could essentially be used as a venture capital / investment fund (if can’t budget regularly for it.)
• Every department needs to develop its own IT budget. investments in technology facilitate training, information gathering, analytics, operational enhancement, customer engagement, customer intimacy, marketing, communication and more.  Here again, size does matter but alternatives are available at different budgetary levels.
• Amazon, Google, Uber and others are changing the game.  While the electrical industry can’t out-Amazon Amazon, most are not into a transactional environment or sell the breadth of product offering.  Look at this companies as models that are changing and driving customer expectations. As distributors (and manufacturers) the key is focusing on customer expectations.

So, are you a predator in YOUR market or they prey? Are you the share taker / maker or the one who is running?