NAED 2015 South Central Observations

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NAED-featured-3It was always said that the South Central regional should be in a warm weather location. Unfortunately, while warmer than Chicago, it was colder than what Floridians are used to. This must have been the coldest South-Central I’ve attended … maybe ever … but by Thursday afternoon people were able to golf (although there was a 30 minute frost delay!).

Anyways, the South Central had about 620 people register for the meeting but a number were no-shows due to weather (ice / snow in the Southeast).  Overall there were 62 distributorships that were registered and 111 manufacturers. Interestingly, only there were only 54 distributor booths. Some of the distributors that were not represented in the booth area were Crescent, Graybar, Rexel and WESCO … but CED and Gexpro both had booths and Sonepar (corporate) was represented on the booth floor by a few of their operating companies. So maybe the booths are for independently managed companies?

I had over 15 meetings (and countless hallway discussions) which generated much conversation and some insights, albeit not much manufacturer or distributor-specific commentary … so what I’m sharing may be more “trend” related.

General

  • A number of distributors and manufacturers commented that business has been slow YTD (with one saying the beginning of February was horrid). No one seems to know why but suggested reasons included: bad weather, not much planned for this winter based upon concern from last winter hence things are delayed till spring, the effects of the oil slowdown, the strength of the dollar and hence the impact on OEM business, one rep thought it could be the overhang from distributors stocking up at the end of the year to meet rebate incentives (and salespeople loading distributors to make their goals), to the West Coast port strike which inhibits material being shipped in from Asia to possibly the economy isn’t as robust as Wall Street and the media make it out to be.  In other words, no one really knows and no one is asking their customers.
    • The only one that makes any sense would be weather for northern tier distributors and if a significant percentage of a manufacturer’s business was Central US and New England / Mid Atlantic
    • But with all the excuses and the slowness, no one was backing away from a 4-6% increase for the year (with selected distributors and manufacturers / product categories expecting much more for specific reasons.
  • Distributors, and manufacturers who sell counter-oriented products, are seeing a decline in the percentage of distributor business done at the counter. To combat this, some tool suppliers are deploying tool specialists to generate demand.
  • My discussions with distributors revealed increased interest in market research. Marketing departments are seeking research to support strategy development, customer insights, market size / potential (and at the customer level) and we also had conversations where senior management is starting to ask “what else should I be expecting from my marketing department?”
    • And part of these discussions related to “growing the business” and processes for taking market share and creating demand.
  • The General Session was somewhat interesting. This year’s chair, Maureen Barsema, has a theme of Evolve. Her platform of issues involves the distributor as a “bank” in the industry, improving SPA processes and improving and gaining adoption of IDEA.  She asked the question “why make business between partners so difficult and expensive?”  She gave the traditional pitch for NAED training and research tools but also implied / said that NAED needs to evolve and that there are group(s) discussing what NAED needs to be to serve its members in the future … what is its role (or, essence for being – my phraseology). Some distributors are initiating the discussion. Maureen appeared to go a little “off script” as, if you know her, she’s not the type of be “managed”.
    • Next year’s meeting is in Las Vegas.  When announced there was an audible “sigh”!
    • Paul DePosta of the NY Mets and known for Moneyball was the speaker. Entertaining but heard he ended his presentation about 15-20 minutes early and didn’t take questions, which disappointed some attendees.
      • The essence of his message was to ask why so that you can see things differently; you need to change to compete against others who have more financial wherewithal.
    • Many weren’t enthralled with the Tuesday-Thursday pattern as it essentially made the meeting a 4 day mid-week meeting.
  • In talking to distributors and manufacturers about some “specifics”,
    • Schneider Electric is going back to being called Square D.  The experiment, reportedly, is over. New management is seeking a 7.5% national growth objective and wants to fight to take back share that it has lost (recently). The tone, according to some, was more “aggressive” in pursuing business and perhaps more approachable.
    • GE, which has been undergoing a transition to SAP, seems to be getting a little better … day by day
    • Distributors report good growth with Dialight and Lighting Efficient Design … but there are lots of LED companies in the market. As long as someone can source, then can say they are an LED manufacturer.

eCommerce was a topic discussed by many

  • I sat in the Alternate Channels educational session with 18 other people on Tuesday morning. It ended up being the same presentation I saw at NEMRA and the slides had a date of June 2014 on them. They hadn’t been updated which was disappointing since the definition of “alternate channels” was eCommerce and eCommerce has evolved since June 2014. The presentation, in my opinion, was more remedial in nature but there was an interesting insight from the distributors that were interviewed … they feel that almost 70% of their transactions would be defined as “simple” (which is the most vulnerable to eCommerce). The interviews revealed that distributors are focused on providing more “value” but, if 70% of your business is transactional and that goes away to “easier ordering processes”, then you’re left with the high cost, high value business (which is only 30% of customer spend!)
  • Trade Service introduced its Packaged Data Content which could be very effective for companies starting an eCommerce initiative and is affordably priced. This is catalog / eCommerce quality data, with graphics. Distributors could purchase 2500-10,000 SKUs (and TSC could go to 20,000 shortly) which would cover most distributors’ stocked SKUs.  This could be a viable alternative for small to mid-sized distributors.
    • Trade Service is also willing to work with, what I call, “data consortiums”, which are groups of distributors seeking to have common data developed and then shared amongst the group, hence reducing the cost / SKU for the consortium participants.
  • A few distributors, and service providers, mentioned Second Phase to me as an alternative eCommerce engine to Unilog, albeit maybe a little less robust but more than adequate for distributors <$200M (and maybe some above).  IMARK just announced a service provider relationship with them. Combining Second Phase, which has a SaaS model and hence is affordable for many, with TSC’s Packaged Data Content, could help many distributors.
  • Some distributors are soliciting supplier “support” for advertising in their eCommerce engines and seeking funding based upon search algorithms and placement (think of it as “the Google compensation model”)
  • I had a manufacturer ask me, “Why NAED, since it’s a 50% owner of IDEA, can’t get its members to adopt IDEA?”  This correlated with some other discussions I had relating to IDEA and changes going on there such as:
    • Since information (product attributes) are needed for creating a product, before a product is deemed to meet NEMA standards, shouldn’t the product attribute information be made available?
    • Originally IDEA was conceived, and marketed, as a vehicle for data synchronization to reduce channel (read manufacturer and distributor interaction) costs. Nowadays, that same “data” is considered content, especially for catalogs and eCommerce systems. Should responsibility, or at least involvement, now involve more manufacturer marketing personnel, who may be able to move at a faster speed than IT people?
    • In considering “data” for a distributor’s website, how does one compare TSC’s offerings vs IDEA’s offerings vs developing their own / more content (perhaps Unilog and others) or creating their own or partnering with other distributors to share developed information (excuse me, content)?
  • There continues to be lots of discussion regarding LEDs but some distributors are realizing the potential in the industrial market for LEDs and others are trying to determine how to be more effective in the commercial retrofit market.
    • Non-major lighting lines that are focused on LEDs to the retrofit and industrial market, or who are small, are finding more success in working with supply agents (NEMRA agents) than lighting agents.
  • Heard of some smaller acquisitions that have been considered however, when the potential acquirer started investigating, they determined that there wasn’t much to the business – low profitability, poor quality inventory, limited processes, staff on the “older” side, etc and the deals collapsed.  It then begs the question of “whom will be the acquirers of these small companies or will they just shut the door and eventually sell the land?”  If there isn’t much goodwill / value in the business, inevitably an acquirer can buy / rent a facility, purchase their own inventory and hire (or train) salespeople.
  • CMG new services introduced
    • We introduced a couple of manufacturer reps to our new Uncover for Manufacturer Reps service. This is a tool where progressive manufacturer reps can ask their distributors to evaluate them via an e-survey.  We then calculate a DSI (Distributor Satisfaction Index).
    • We also introduced our new eCommerce research tool where we can help distributors who are considering investing in an eCommerce system the ability to solicit customer input … and possibly quantify lost business and identify where an eCommerce strategy could help generate more opportunities!
    • Email or call me at 919-488-8635 for more information

While it was a little chill, these meetings can be as productive as you want to make them. The key is setting up meetings in advance and hallway networking. Unfortunately the educational sessions attract few people (Sean Leahy’s was good, but Sean is now off to Sonepar). I heard of one that had 3 attendees!

And the industry topics of interest appear to be LEDs, marketing, eCommerce and growth (or taking share).

What did you hear?

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