Learning from History

George Santayana

George Santayana, the Spanish philosopher said, “if we don’t learn from history, we are doomed to repeat it!”  Our economy is certainly changing quickly, as is our industry

Many of us tried fighting the DIY market when they began selling electrical products, accepting credit cards and having long hours for our customers.  Products we sold very profitably across the counter to homeowners changed our counter model and products sold from extension cords, devices, boxes, fixtures and much more were lost from our channel. (And many homeowners are now happy they do not have to travel to industrial parks for these items!)

Today’s environment is also changing given acquisitions, national contractors, general contractors purchasing packages directly from manufacturers and distributors, and even more manufacturers selling additional channels or directly.

Learning from History

Allow me to cite a few examples of the changes we are experiencing:

• Prysmian’s purchase of Encore Wire will surely affect the wire and cable industry. In many areas, there could be as many as 3, maybe more, rep agencies or directs selling in the same markets given Prysmian has multiples due to market served. Granted this can be for different product offerings and perhaps to different channels. How this will play out has many on edge given the importance of these lines to many agencies.
  • Years ago, when Southwire acquired Senator Wire, Southwire found two representatives selling their products was counter-productive to their overall strategy for utilizing their position. They ended up combining the two into one agency. When a manufacturer I had represented some 15 years ago suggested we separate our agency into two: one selling their products and another for other manufacturers, we went to our advisory board at the time with each distributor member stating our strengths as a representative was our relationships and selling our package. There are many quality representatives awaiting a decision that will be critical to their success and immediate futures.
  • How this will play out, I have no idea. Time will tell.
• Another wire manufacturer I was speaking with confirmed they were firing their existing rep force and going to a direct model. The difference in this model is that given their manufacturing capacity, they have determined to sell only through larger homebuilders and their contractors rather than through distribution. Their experience in territories selling their product was that although considered a commodity, it had a unique cost savings advantage that distribution had not helped them promote.  Where reps were actively trying to generate demand, the channel was prohibiting the growth they were anticipating because the cost savings was not going directly to the installer (and more likely they were getting pressure from their incumbent line(s)).
• A newer manufacturer looking for representation told those they were interviewing they needed significant specification effort so they would be accepted into a new market for them. Their commission reflected, at best, one that would be barely acceptable for a commodity line and were surprised more of those representatives they sought are not accepting their representation offer. This is a case of a factory not willing to compensate for the efforts required and manufacturer representatives, who know the market for this product, understanding the sales challenge. It was a disconnect in expectations.
• Representatives, like distributors and manufacturers, are expanding into new geographies and product offerings, many to better serve their distributors and manufacturers as they also expand. Conflicts arise should a rep move into another geography representing competitors to those manufacturers they might sell in their other territories, but not offered in the new ones. Most representatives I know move into newer areas because either manufacturers they represent, or their customers, ask. While some manufacturers express concerns regarding price and strategy conflicts, there are ways to restrict access to information across territories within computer systems, to assign different product managers (or champions) to conflicting lines and good old fashion communications at the principal level. Conflicts are not new but are manageable through communication, common sense, ethics, and integrity.

These are merely a few of the very recent changes occurring causing concerns as I speak to various people.

As we continue our very necessary growth and changes, especially with a slower market putting growth and profitability pressures on everyone, I truly hope that discussions on these areas and others that might trouble us can be  mitigated through discussions together. I always found advisory councils so very critical to learning and being able to activate strategies in a friendly and thought-provoking process. Where are these advisory boards now?  If you have one, please share with us your thoughts about their usefulness.

And I know manufacturers say, “I don’t need an advisory council, I talk to my reps / customers regularly.” While this is true, and helpful, it does not allow for group interaction to drive a consensus or enable multiple viewpoints to be expressed. Inevitably “we” talk to people whom we like, and who agree with us (or are important to us). A broader perspective can help surface potential issues and generate ideas. And 3^rd party facilitation helps ensure no feelings get hurt and all ideas are expressed.

When speaking to many friends who have retired or left our industry  on what they miss most, nearly 100% respond “the people.”  All of us want a better industry regardless of our positions in it; why not use each other to understand better how to accomplish it!

PS

A couple of things …

• Did you notice the resemblance between George Santayana and Gene? Brothers? Cousins? Prior generation?
• If you don’t have an advisory council, or would like to learn more about either setting one up, gathering insights on a regular basis from your distributors, reps, or manufacturers (and we can facilitate anonymous feedback), give us a call

David