On June 4th Trimble announced the purchase of Trade Service Corporation.
To some this announcement will be just another time that TSC has changed hands. But there is more to this purchase than many realize. This is a major business focus for Trade Service.
Product Data drives the electrical market place!
Since the start of the business computer age to date, content (Descriptions, Unit of Measures, prices and some sort numbering schema) have created different issues for electrical manufacturers, distributors and the end users). There has always been mis-matches of data that kept the Electrical Channel from passing data along electronically without human intervention.
ERP Development
Both manufacturers and distributors would buy into the development of ERP software systems as a way to run their businesses. But there were two sets of data that didn’t match. One set of data from the manufacturer and another from Trade Service Corp. From the very beginning of the business computer age Trade Service gathered and ‘standardized’ electrical product data to be sold in a book form and eventually as initial loads to a distributor to fill up the ‘buckets (fields) of data”. Distributors were grateful they they didn’t have to develop the product descriptions and benchmark pricing. But there was an underlying confusion. As manufacturers changed their prices, distributors received monthly and eventually weekly electronic price updates. Many of the specific SKU’s didn’t match along with velocity coding.
Different ways to sell product (The rise of the SPA)
Manufacturers looked for ways enhance their margins by issuing Special Pricing Authorizations (SPA) that required the distributor to claim back the difference between sale price and the cost that the distributor paid for the product. Almost without recognizing that the manufacturer had caused the distributor to ‘loan’ them money in the form of a SPA, many came to understand that some manufacturers were depending on many distributors NOT claiming back their SPA money.
Distributors trusted Trade Services’ data and their format. The basic problem was that manufacturers had different data formats, which meant that each distributor had to claim in different formats. Some with paper others with spreadsheets. Even then the data didn’t match completely.
Trade Service walks on the other side of the street to sell contractor data
During the rise of ERP systems, professional contractors were buying computer estimating systems from companies like McCormick Systems, Accubid, Con-Est and Estimation to name a few. Trade Service sold and/or gave away the data loads in estimating systems to develop subscription purchasing models just as they had in the distribution market place. Some jealousy developed between contractor estimating systems because Trade Service had a subscription business model and the estimating systems didn’t
Data didn’t match…..problems grew to a head
Distributors tried to submit their SPA claims in an electronic format and it didn’t match the manufacturers data. Up to this point most distributors submitted piles of paper that eventually evolved to Excel spread sheets. To this day some distributors still submit paper and or Excel spreadsheets. The time to receive the credit for paper and some Excel SPA submissions took as long as 6-9 months. Many distributors never got their money back.
NEMA + NAED = IDEA…….Maybe
NEMA and NAED created IDEA and set about to do some meaningful research that if the product data matched, electronic processes for SPA claiming could be done by both parties using exception reports management. They exchanged data and found a number of errors. but they also developed a number of possibilities for manufacturers and distributors to seamlessly transact business using their computer systems.
NEMA and NAED started IDEA to replace Trade Service data, mistakenly thinking that all distributors would migrate to IDEA data. That didn’t happen! Trade Service continued to dominate the distributor market place. At one point, NAED (NEMA and IDEA) had an agreement to buy Trade Service but internal politics blew that sale away. The possibility of mass conversions to IDEA were blown away and ineffiencies remain even today.
IDEA continued to be plagued with what became known as “distributors don’t trust manufacturers” and kept asking what did IDEA do for them as distributors. Recently IDEA has developed a data schema and has began to encourage manufacturers to load their data into the IDW.
INTERNET evolves
Some distributors looked to their brick and mortar locations the only place to perform business. Other distributors recognized that the Internet would be a low cost store front, but they needed searchable data and pictures of the product.
Most distributors could see the need and the market. Many turned to Trade Service or IDEA for their attributed data needs, while others built their own data. Grainger and Automation Direct addressed the data problems and grew their Internet markets.
MOVING FORWARD
Trade Service has been sold to a company that will push their data through their estimating software systems and now compete against other contractor software companies.
With the sale of Trade Service to Trimble, distributors have to question the support and accuracy of Trade Service data as well as the motivations of Trimble due to its ownership of a contractor estimating system. And other estimating systems will decide if they want to financially support a competitor.
There has always been a lot of money to be made by distributors by the way they handle their SPA’s and sales to their existing customers. but that could change if wrong business decisions are made.
How will the sale of Trade Service to contractor estimating software company affect you business as distributor? Do you think that Trade Service will pay less attention to the distributor end of their business?
Will you have to build your own data?
Or will you get your from IDEA?
Or will you use some data from IDEA and some from other scources?
9 Comments
wonder how much of a dent IDEA and consolidation has made into their business? These people from Trimble, don’t know them at all. Other than supporting contractors, are they involved in distribution. If not, as an industry we need to control our own destiny and not make Tony and Todd any richer. This will make me push my IT group to learn more about IDEA
Never heard of Trimble before you mentioned it.
I think TSC made a desperate move, as they probably saw a continued decay in their Distributor business. TSC’s data was so poor in the industrial space that we have used mostly manufacturer data.
In their day TSC, was the a different company.Hope they made plenty of money.
If I remember correctly NAED stopped the purchase of TSC? Do you guys a have a link back to that post?
To the questions you ask: We want to have the same type of sales model that Grainger has. They are blowing the doors. Between their Internet site, trucks and radio ads, they are taking some serious market share.Your indication is that good searchable data is what is helping? Right?
Over the years we’ve had 32 postings, or postings where individuals left comments, regarding Trade Service. To access these, there is a search box on the lower right side of the page. Please type “Trade Service” in the box and you can access prior postings.
Does Allen have a feel for the amount of business loss that Trade might have had?
We used Trade exclusively for as many years as I’ve been here. Two years ago we started using a blend of data.
Just curious.
I have absolutely no clue as to the growth or loss of business that Trade Service might have enjoyed.
Certainly the roll ups that all have seen, might have caused a loss of business. But there have been some other companies that have opened up recently.
IDEA continues their efforts and are a viable opportunity for some distributors.
In our business data has risen from an afterthought to #1 on our list for Internet purposes.
It’s a pain. but we think it is worth it.
It may be a pain and as you noted it is well worth it.
For those that are late to understanding what really good clean data can do for your company, Think about this:
1. Matching data helps drive quicker electronic collection of SPA’s.
2. Full robust databases help inside sales find and use the correct data for a NON-STOCK purchase. Why is this important…it gives you a more robust purchase history and when you want to grow top line revenue by figuring out what your customer didn’t purchase, then you have an accurate purchase history. From an inventory stand point, it helps with your cycle count and moving obsolete products out of your warehouse.
3. Those companies that excel in growth on the Internet, understand that without good clean data, searches and pictures will cause potential customers to go else where.
4. The biggest reason why good clean/robust data helps distribution to be more productive: It allows your company to become super productive and competitive. Trying running your system with junk data, and watch your profit drop in half and your payroll go thru the roof.
Over the last year in just the electrical channel there have been hired some 16 data and pricing specialists. It works in todays market place.
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