Recent Layoffs and a Changing Market

Last week Prudence Thompson shared / confirmed, and we’ve reconfirmed a few other ways, that a prominent distributor had a significant layoff … 200 people. And reportedly they are closing some branches. Unfortunately, they are not the only company parting with staff.

Over the past few months, I’ve seen this most prevalently with manufacturers, seemingly “slowly” releasing people as more and more “Open to Work” are posted on LinkedIn.

In some cases, it is driven by lack of company performance. In others it may be personal performance, but it is more frequent.

The industry’s growth rate continues to decline to where DISC reported recently it was at 2.6%. And the outlook for next year is comparable with the “net” growth (excluding pricing) lower. (This “industry growth” projection may turn out wrong due to tariffs, but it is based upon “today’s state.”)

The challenge is that the growth is very uneven.

Observationally, and from data I’ve seen,

• The office construction market is flat.
• Residential is hurting
• Data center, as everyone knows, is great, although that is spread geographically, and selected distributors are benefiting disproportionately.
• Major cities, especially below the Mason-Dixon border, are benefiting. Distributors that primarily serve secondary, tertiary, and smaller cities are challenged.
• This distributor sales over the past 5 years have grown about 40%, that’s only 8% a year and a significant percentage of this is driven by the increase in copper prices (from $2.85 to $4.25), tariffs (still on, and it is probably affects at least 50% of lighting sales, and more in some product categories), growth comes from data centers and some very large projects (semi-conductors).
• And similar.

When companies compare their performance based upon unit sales … it does not show growth.

The challenge is that, as the top line grew, many companies added people hoping “the good times” would continue. They haven’t and unfortunately, they need to evaluate the business.

Branches get reviewed. The role of CDCs / RDCs and the ability to service a market may make a branch obsolete. Salespeople get reviewed. Support roles are evaluated. Sometimes individuals get caught in a numbers game. And sometimes people are “exposed.”

The industry’s net profit, based upon a review of PAR, continued to drop in 2023 and will so again unless companies are “focused”.

The “focus” needs to be in the forms of disciplined sales management as well as identifying ways to drive productivity.

More of the manufacturer changes I’ve seen are in the lighting space, which continues to struggle as identified in our Q3 Pulse of Lighting report. Lighting manufacturers struggle with creating demand. If the construction market is not growing, where is the opportunity for lighting? It is difficult to convince companies to replace / upgrade their lighting for the sake of improved efficiency or aesthetics … and the sales efforts are not necessarily focused on this due to the long sales cycle. Plus, companies are investing their monies in areas other than fixed costs … unless utility rebates are available and/or there is an ROI.

It is possible that the “return to work” efforts can turn this around as companies redesign office space.

While companies may have layoffs, at the same time they may be hiring. It can be for a different skill set. It can be for a different geographic market. And seemingly tenure doesn’t insulate someone as it comes down to dollars, role, and location. Talent can get lost.

Industry consolidation is, and will, also drive this, and create opportunities for other companies.

Some thoughts

From a company viewpoint, it’s a reminder to focus initiatives, refocus on disciplined sales management, and seek to improve productivity to drive profitability. Make sure you are measuring “the right things”.

Given that there is much conversation about tariffs, be cautious that they drive top line, can drive bottom line dollars, but can be changed and, perhaps more importantly, are not changing the fundamentals of your business … you are not selling more units, just selling the same units for a higher price (and maybe only temporarily.) There will be wage pressure as consumer goods will also increase. Consider variable compensation models that are performance-based. Discretionary compensation to reward “performers” may also be warranted.

Technology that enhances productivity / processes will be more important. We’ve all heard the promises of AI. Some companies are launching tools that can help. A word of caution … focus on projects / products that can be implemented in a reasonable time, can be readily adopted, and utilized. Long projects take longer than expected and the technology tools will evolve … plus asking people to “do more” by investing the incremental time in meetings is tough for many companies … there isn’t the capacity.

A word about “work from home” … while many would like it, we’re seeing less of it. There are pros and cons and the “smart” companies can consider one-offs for selected roles, but it can create employee conflict (consider, no one in the warehouse gets the option?) Hybrid is feasible but, in the “old days”, we called this “good management” and being compassionate for specific issues. In the best scenarios these are earned benefits, not “rights”. The market has changed. Covid is yesteryear.

If you are one of the people impacted by a layoff, some industry recruiters you can consider are Electrical Career Specialists, GRN Coastal Recruiters, Pompeo Group, Egret Consulting, and Wholesale Recruiting Solutions, to name a few. All focus on the electrical and lighting industries (and sometimes other complementary industries. If you know of other companies that should be added, please note in the comments or email me and I’ll add them.

Good luck to those looking. If I can help, reach out.