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Wednesday, November 18, 2009

Has the Sun Shone on Solar for Electrical Distributors?

Electrical distributors have been hearing about solar, and other renewable energies, for a couple of years. Most have avoided the market and at the same time, many solar manufacturers have shied away from distributors, preferring instead to sell direct or via dealers.

NAED has tried to stimulate interest by having some solar manufacturers attend last year’s Annual meeting and this year’s Eastern Regional and a number of distributors have mentioned that they have sold some solar, either purchasing directly from manufacturers or partnering, and purchasing, from solar integrators. We’ve also done research on the solar market to identify marketplace opportunities for some clients.

And now comes an article in today’s WSJ entitled “Solar Panel Makers Seek Local Ties.” The gist of the article is that large solar companies are developing dealer networks, similar to the HVAC industry, preferring to work directly with dealers for marketing and training and letting these companies purchase directly from them. They are bypassing distribution (never-mind that the HVAC industry does go through distribution).

Reasons include promotion of their brand, that there are not “solar distributors” for these companies to purchase from, the engineering support that manufacturers and dealers have (and most distributors do not). And, and this is a major issue, direct pricing enables solar manufacturers, and dealers, to be more price competitive. According to the article “some (manufacturers) are betting that by cutting out distributors and working directly with small local installers, they can increase the loyalty of installers to one brand while raising profits.”
The payback on a solar installation is measured in years, even with federal and state incentives and utility rate savings. Adding 20-25% for a distributor’s margin is not feasible in most instances.

Some distributors are having success. This market is analogous to the datacom market. Keys are finding the right manufacturers who need distribution to “compete” against the big guys, understanding inventory needs, having the right people and understanding if your customers are involved in this market.

Are you in, or considering, the solar market? Why / why not? What have you found as the keys to success?

(also, did you know that a electrical materials represent 10-15% of the typical commercial solar application?)

1 comment:

  1. No and it is fair to say that most of my other ED buddies don't really understand how we can make money out it.

    ReplyDelete

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