Last week IMARK announced that Crescent Electric had joined IMARK, which blurs the definition of “independent”. While Crescent is technically an independent distributor (it’s not publicly owned), within the industry they’ve been considered a quasi-national chain as they have operations in 27 states and over 100 locations. Additionally, revenues approach $1 billion. A little different than the typical single state / regional distributor.
In talking with some IMARK distributors, they could understand the desire to increase the group’s volume but were puzzled by bringing in such a large company. Additionally, they wondered if IMARK’s deals were so much better than Crescent’s.
A couple of observations / questions:
- Are IMARK’s deals better than Crescent’s or is this an opportunity for Crescent to utilize IMARK’s deals and “double dip”? Over 10 years ago IMARK and Crescent did talk about Crescent joining (with the IMARK Board of Directors approval). A dividend estimate showed a slight improvement for Crescent with the benefit coming from IMARK having deals with suppliers that Crescent did little with. Perhaps Crescent will renounce double dipping and commit to suppliers that it will only take the IMARK rebate?
- Is Crescent joining so that it can get to know IMARK distributors better to facilitate acquisition opportunities?
- What is the benefit of being in a group when all of your competitors are in the same group? While the rebate helps ensure profitability, the original premise of the groups was to put small / mid-sized independents on a more level playing field with the larger, national distributors?
- Who’s next? HD Supply’s Utility / Electric division? HD Supply’s Facility Maintenance division? – both are technically independent? Perhaps Sonepar (who may be in less states than Crescent)?
- From a manufacturer viewpoint, if such a high percentage of their business is rebatable, and with the same rebate, should they consider the new JC Penny pricing model and reduce their pricing by the rebate amount and offer “everyday” pricing (aside from projects) and let distributors be responsible for their own margins? Is the value of the group(s) being devalued?
While I can see the benefit for IMARK – more volume, potential acquirer to retain volume in the group –
- What is the benefit for Crescent (aside from introductions)?
- Will most IMARK distributors do best practice sharing with Crescent (unless the information comes from Crescent!)
- What is the benefit for IMARK distributors (doubtful that suppliers increased their rebates)
- What is the benefit for manufacturers?
And does anyone really care and just view this as business as usual?
Lot’s of questions, no answers.
9 Comments
We think IMARK is selling it’s soul in search of volume. First they bring in all these little people whom we compete with, now they bring in a chain. What’s the value for us original members? We haven’t seen our rate of return increase, so where’s the money
Good hunting grounds for Crescent to pick-up acquisition targets.
It is a win for both. IMARK adds profitability to the independenant distributor.
Before buying groups, chains leveraged their size to attain lower commodity pricing and used it to their advantage in the marketplace.
Buying groups have evened the playing field.
This should be a target rich environment for Crescent if they are looking to purchase other companies..
Crescent is a very well run company and a good competitor.
Other original members still have the same problem of carrying small distributors. If Crescent was used to leverage better rebates for original members, then this makes all the business sense in the world.
But is that giving a marketing group management too much credit?
Who knows at this point.
we don’t care. we focus on doing our thing and frankly kick them around wehn we see them
Who’s next? CED, Sonepar, maybe Graybar. None of them are publicly held companies, so doesn’t that make them independents? After all, CED’s USESI division is in IMARK.
Seems like AD is the group that is focused on independents
Where market leaders grow!
As a matter of fact, IMARK member returns did go up as a result of the Equity/EDN merger (fairly significantly) and IMARK has reported so at several member meetings and in reports to members. Whetehr the Crescent merger produces any additional improvements in returns remains to be seen – but at the very least, additional volume means operating costs are spread more broadly and the net operating costs paid by each IMARK member will be reduced as a precentage of their rebate volume.
Remember, IMARK is a member owned cooperative so all gains flow to the members – no lavish personal lifestyles of buying group operators are being supported.
Regarding growth, as a matter of fact, IMARM members have given IMARK suppliers superior growth over chains or AD(D for a number of years.
Would have been nice to know before it was done !
Fact is the members used to have a input , now the decisions are made by the board and the consutlants.Suffice to say I am sure Crescent will be involved in the decision making process going forward. Which means less inpute from us.
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