Q3 2020 Recovery & Looking Forward to 2021

2020 has been a rollercoaster of a year …

• Q1, if you can remember that far back, started strong for most distributors.
• Q2 was the rollercoaster plunge, which we documented in three of our COVID surveys (first, second and third surveys)
• Our fourth survey, in early June, identified that the market was rebounding for all, albeit at varying rates of improvement.

But a recovery appears to now be here.

Now, our recent survey affirms what many have experienced, Q3 represented significant improvement for most.

Our recent survey asked distributors, manufacturers, and sales agencies (supply and lighting agents) for their Q3 performance as well as their outlook for Q4 and forecast for 2021.

The result is that business has improved, however, looking forward, nominal improvement is expected … essentially, we’re in a glide path.

Some insights into the survey results

Sales outcome and projection:

• Q3, compared to 2019, was down a little with the reps reporting most pessimistically, but still only down, on average, low single digits. Manufacturers reported flat and distributors were consistent with reps.
• Q4 is projected to have a slight improvement and approximate 2019.
• 2021 is currently coming in at a nominal increase (which many will accept consistency as a recovery.)
• 60% of distributors have had some projects delayed or cancelled. This may be the biggest indicator of the impact of COVID on the industry. Without these cancellations / delays, industry sales would be up.
• Almost 50% of distributors have reduced their inventory. Whether this has been a conscious decision or the outcome of ordering less due to sales trends is unknown. Many manufacturers, anecdotally, have shared that their stock / reorder business has declined.
• 40% of those who have a commerce-enabled website report increased online-generated sales and a higher percent report increased website activity.

Getting Back to “Normal”

The definition of normal is questionable, but “normal” is referencing “work from home” as well as visitation.

• 70% of electrical distributors report that their staff, with the possible exception of outside sales, is back in the office
• Almost 90% report that their sales organization is available to visit customers, with the customer’s approval
• Over 70% are open to visiting with manufacturer reps / local salespeople and 60% are accepting of manufacturer regional / corporate management visiting (people from outside the local area.)

From a manufacturer perspective,

• Less than 25% of manufacturers are allowing direct salespeople or regional managers to visit distributors
• 33% are not allowing any visitation and 42% are allowing visits only if the individual resides in a the territory. So, for the most part, corporate people are not traveling (and according to many distributors, this is fine. Teams / Zoom has made up for transactional conversations and will make up a hybrid communications model in the future.)
• These visitation percentages are comparable when manufacturers were asked about visiting end-users.
• Further, 55% of manufacturers state that they will travel “upon request” and almost 20% will not travel until a vaccine is widely available.

2021

Given that many are in the 2021 planning mode, survey respondents were asked about data sources that they use in their planning process and initiatives that are being considered for 2021.

Data Sources

While much is talked about data analytics, the industry looks inward in thinking about planning.  The top three data sources for distributors are:

1. Field sales reports / customer input (which typically means talking to top salespeople and top customers … comment – think you’ll get pretty much what you’d expect?)
2. Supplier provided information (i.e. free information)
3. Reviewing historical trends.

Only 33-50% of distributors utilize third party sources such as DISC or trade publications and less than 25% consider local or regional business indicators.

Manufacturers, on the other hand, use field and customer reports (especially from regional and national companies as they seek a wider perspective with 60% reporting that they also subscribe to DISC as well as use their sales reports.

Reps use distributor input, supplier input, trade publications, local employment data and DISC.

2021 Initiatives

Each audience was also asked about their 2021 initiatives to accelerate growth and were given a selection of about 10 activities.

Overall, the industry appears to have survived COVID, Q3 improved to being comparable to 2019 and a recovery is moving forward. While there is some concern for Q4 due to the unknown impact of COVID on the project business, the outlook looks brighter although it will be a tight, extremely competitive, market.

A complimentary copy was shared with Channel Marketing Group and DISC clients and survey respondents. Members of IMARK Electrical and NEMRA were also provided complimentary copies through their organizations in appreciation for their support in sharing the survey with their members. If you are a member of these organizations and want a free copy, please contact them.

Electrical Wholesaling also supported this industry research effort through mention of the survey in its publications.

The Q3, Q4 forecast and 2021 outlook report highlighting what lies ahead is available for $25 by clicking here or email to purchase.