Venturing Out to New Markets

Had an interesting conversation with a distributor today. We were talking about arc flash and the ability of his sales organization to initiate arc flash discussions, and solutions, with his customers. While he felt that some of them could, his overriding sentiment was “it’s the manufacturers role to create demand / specifications and generate the pull-through. Our guys focus on supporting the customer and essentially our core expertise is distribution of equipment and providing credit.” The challenge, unfortunately, is that there are not enough end-user sales focus by manufacturers (can’t afford all of the salespeople who would be required) and, even if there were, there is the joint selling challenge (who’s customer is it?)

Which led to the thought of “will distributors lose out on niche growth markets due to their reluctance in investing in salespeople (possibly sales engineers) to create demand in their marketplaces?

Consider this:

• According to a gear manufacturer, national chains have been more aggressive in benefiting from arc flash. (and, based upon research we’re currently doing for an upcoming article, this appears to be a major growth opportunity, with reasonable margins and significant manufacturer support for distributors who are willing to partner … everyone can prosper!)
• Arrow Electronics has launched a division focused on LED lighting applications.
• As energy generation sources change, and eventually their replacement markets, which distributors are distributing solar and wind products?

Essentially the opportunity becomes … “how can I (distributor) capture first-mover advantage in growth markets?” While the payoff may take some time, progressive distributors who have a longer-term viewpoint can be very successful in some of these markets. The key is having vision, being willing to invest in research and then resources.

As food for thought in a couple of markets, check out this info:

• LEDs – Cree is in the process of relamping itself. According to an article in LED Magazine, They are currently projecting a 48% energy cost reduction. Visit their website, http://www.ledworkplace.org/, to learn more about some successes (plus they’ve had success with a number of cities with outdoor lighting.)
• Solar – Few distributors have probably done much research in this area, but we continue to read stories in major publications about corporate investments in this technology as an energy source. According to a September 3, 2007 Forbes article, an economic case for solar is building. Take a look at the chart below.

While solar is getting viable in California and Nevada, in the near future it could be cost-efficient in Boston, Florida, Phoenix and Denver. The keys determinents are kilowatt hours/square meter and cents/kilowatt hour.

In fast grow market segments, taking appropriate risk is critical, and investing in the people who can help generate demand will be more profitable. In fact, research we are currently doing suggests some distributors are taking the leap of faith and are marketing to ultimate end-users and influencers!

Without an investment to affect customer needs, distributors will be left with existing customers purchasing existing products from them at ever decreasing margins. Few are currently investing at the end-user level. Could this be an opportunity for you? Should you consider venturing out?