Can you spell … Disintermediated?

Light Fair was just last month and featured over 600 manufactures showing their products. How many lighting manufactures does the average distributor deal with? How many can they even name? My experience has been that the average distributor typically works with some of the major 7 or 8 players and then is willing to take an order from anyone else if the manufacture or rep does all of the work. As a tier two lighting manufacture, we sometimes find ourselves asking the question…..”what does distribution bring to the table”? I think the distribution community needs to be a little more open minded in the companies they work with instead of the same old players.

What comes around goes around. Manufacturers have been testing different market strategies for years, most (try to) come back to distribution after their direct strategy fails. Orion is the latest example, there are many.

I’ve received a few calls today from distributors who didn’t want to post directly but said I could share sound bits regarding their thoughts:

1. If a customer needs 10,000 of something and the manufacturer wants to sell direct, they can understand it.
2. Gear companies are known for doing this but usually they put the business through us and we get a few percentage points for either handling the receivable or possibly handling follow-up issues or providing some technical support. In these cases the manufacturer has been specified.
3. I know at least 1 lighting manufacturer who has at least two different comp models for reps. One is for business through a distributor, on e is for business taken direct. Guess which one has higher commissions?
4. Manufacturers should ask end-users “what service(s) do you need or will need?” Manufacturers can be good with bulk sales but if the customer needs maintenance support or has questions or needs 1 lamp / fixture replaced, then the customer suffers and the manufacturer will get frustrated.
5. Fool me once and take business from me, shame on me. You won’t fool me twice as I won’t be doing business with you.
6. I look at it as a ‘trust’ issue with a manufacturer. Tell me directly what you are going to do so that we can decide how we want to work with you.

Hope these feedbacks help and contribute to the dialogue. If I hear from more, I’ll share the overviews as all conversations are confidential (these callers said I could contribute an overview on their behalf).

We took two distributor phone calls today about this post mainly because they are upset with the lower prices that have entered the space which are below their into stock prices.
Distributor#1 South East
From the sound of one distributor, they have ‘been around the block’ with one manufacturer more than once.In one particular case, the lighting line will be removed as they don’t trust what the manufacturer says any more. There is a significant difference price which probably should have been given to the distributor….”But that is not how it turned out”

Distributor #2 California
The other distributor expects that he will have line turn over more frequently with younger and different managers being hired.’It’s a sign of the times…I guess.’ Sometimes I feel like I am dealing with my kids and it is my problem according to my wife.

Why is this discussion limited to Lighting? Eaton, Schneider, ABB and more have their own ‘energy’ sales organizations that are specifically crafted for direct to end-user presentations and direct to end-user sales.
disintermediation assumes there is some sort of a partnership model in the industry.. really? How many brands of lighting, or conduit or wire do each distributor ‘partner’ with? Isn’t that disintermediating their manufacturers?
This is is a non-issue in my book… manufacturers are in business to sell their products; if the distributor channel can’t serve unique or different models… the products are still viable to be sold. “Partnership” is overblown.This is business… sell a product to ensure you stay in business and add jobs and profits.

Ted, I agree that the issue is beyond lighting … and that some of the traditional “gear” companies have ESCOs to take business direct, or at times take gear / control business direct. And it does occur in other product categories (and we did a project in the power transmission industry that revealed about 30-35% of the overall market was direct to OEMs, with the % changing by product category.

A little bit of the difference is 1) the plethora of LED companies that are selling direct and, in some cases, also going through distribution so that a distributor may find that the person who quoted them material is also quoting direct (they distributor expects to compete against another distributor or similar entity) and 2) for a number of other product categories either the customer requests, the supplier has told the distributor or the distributor never knew about the opportunity / couldn’t handle it.

And I agree with you re “partnerships” and selected territories. The term “partner” is too casually used.

The distributor needs to show value to justify earning the business.

Cree got caught in the crosshairs through its visibility and direct promotional / sales efforts.

David,
Once more you have shined the big yellow flashlight of attention onto a darkly lit subject. Here’s the situation as I see it. LED technology is changing the industry. The typical distributor used to have light bulbs/lamps 6-7% representing of their business. These lamps lasted a couple of years, died and were then repurchased. LEDs are sold and are purported to last 20 years (Make a mental note to send your grandkids around to sell the replacements). Things are going to change.

Some of the technology companies selling LED lighting don’t know distributors and don’t care. They will attack this market and some will have success. Innovation does that. Others will slowly learn about slow pay contractors and rigged lighting bids.

Distributors need to understand the game has changed. They can’t provide all the services they currently provide today, and succeed in the new game. If distributors allow manufacturers to have it both ways, and not change the way they compensate distributors for their work (warranty, last minute deliveries, local support), the wholesale industry will take it on the chin.

Let the new game begin… I am betting on the distributors.