Canadian Electrical Wholesaler

 

Dec 5, 2018

Frank HurtteBy Frank Hurtte

In setting growth plans for the coming year, one should ask, “What percentage of my customers might go away?” Some will go out of business and they stop buying. Others might be folded into a larger organization. If that organization has a relationship with a competitor, your business could be switched to another supplier. Further, some aggressive competitor could make inroads into your account through hard work and/or better relationships, by way of a valuable new service or through jaw dropping price levels. This is hard to face, but it happens. The question is, how much would any of these affect your business?

To the best of my knowledge, the only industry to truly study this phenomenon is the HVAC/R industry. Three years ago, HARDI (Heating, Air Conditioning, and Refrigeration Distributors International) hired Mike Marks and Steve Deist of Indian River Consulting Group to conduct a study that resulted in meaningful numbers. These results, which shocked the industry, were published in a book entitled Myths & Misperceptions: How markets are really made in HVACR. I recommend the book to everyone in the HVACR business and believe the points made apply to distributors in many other lines of trade. Here are a few highlights from their work:

The average small HVACR contractor switches suppliers at a rate of 4% per year with well over half of the attrition (2.5%) tied to distributor dissatisfaction. Larger and more professional contractors switch at a rate of 11% per year, with 7.8% of that tied to distributor dissatisfaction.

Another group, which lumps commercial, institutional and industrial accounts together, switches business at a rate of 29% per year. I believe this higher attrition rate may well be tied to the point that HVACR distributors tend to be geared to better serve contractors than other types of customers. Further, if the institutional portion of the mix is higher, we might assume some of those institutions are government-run organizations that base purchasing practices on price (low bid orders).

For our discussion, there are two points to consider:

1. Even the best of customers leave the fold at a rate of 4% a year with the average nearing double that number.

2. If you are planning to grow your business by 10% next year, plan on 15% growth. Losing some of your existing customers is probably in the cards.

Retention is the opposite of attrition

Nobody starts off with a plan to lose customers, but things happen. The inside sales team gets stretched a little thin and service wanes. The warehouse gets careless and the customer finds themselves facing a box with the wrong parts. Even salespeople, charged with keeping customers, forget to cover all the bases with their customers. Your top suppliers experience delivery issues and you take the brunt of the blame. The list goes on and on.

Done properly, end of year planning allows for contemplation, reflection and plans for correction. Planning allows for an objective view of the current situation and how retention might be improved going into the next year.

Have you reviewed the (hopefully short) list of customers who have stopped buying from you? 

What happened?  

• Has anybody from management done an exit interview?

• How might the situation have been different?  

What preventive measure could avoid the problem in the future?

• Are there trends? Could it be that dealing with "Danny" is toxic to customer health?

• Are there policies or procedures impacting business?  

How long did it take for you to realize something was wrong?

• Who in your organization monitors customers for significant drops in business?

Not every ex-customer can have facial warts and a bad attitude

• Did you listen to the customer’s comments without tossing out excuses?

Are there existing customers on the cusp of leaving?

• Are there early warning systems that might point to issues?

• How might management assist the team in determining ongoing customer satisfaction?

Two important thoughts for your end of year plan

First, customers are more likely to switch distributors because the incumbent distributor did something wrong than because they were sold on the new distributor. This runs contrary to the common sales think.

Second, distributor sales teams aren’t great about staying in contact with the other guy’s customer. After a short flurry of activity, which produces little or no results, they engage with existing customers and let the potential customers fall out of their mind. Most of us understand this is a mistake, but it is the reality of the situation.

Progressive distributors have established a plan for continuing outreach to their competitors’ customers. Is this in your end-of-year plan?

Frank Hurtte is the Founding Partner of River Heights Consulting. The Distributor Channel is a service of River Heights Consulting. Find out more.

 

SignifyThe electrical and lighting industries were shocked this week with the announcement that Signify purchased the recently renamed Cooper Lighting Solutions from Eaton.

The former Eaton Lighting division was scheduled to be spun off from Eaton via an IPO late this year / early next year.  While rumored earlier this year to be up for sale, rather than being spun off, there were no takers for the business. Although, it was reportedly considered by some.  According to Signify, discussions with Cooper Lighting, and Eaton, began a month ago. The interest could have been provoked by the Q3 slowdown in the lighting market with Signify sensing an opportunity to make an acquisition, perhaps at a discount.

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Rick McCartenBy Rick McCarten

For a long time now, many experts have been pointing out how companies should be expanding their service offerings beyond their product sales. Companies are wrapping services around their product and packaging — everything from special deliveries, warranties, repair and technical assistance to 24-hour service. This “servic-ization” helps differentiate companies from their competitors. How big is this going to get? Some reports have this trend becoming the core of our future economy.

 

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Carol McGloganBy Line Goyette

With Industry 4.0 on our doorstep, we are facing significant technological and resource changes, some of which question our industry’s core values. Artificial intelligence, the Internet of Things, digitization, transport electrification, diversity and inclusion are among the inescapable changes that will affect our industry head on, both in its best practices and its business models. We have several advantages to help us deal with the changes, including an unwavering advocate for our industry: Carol McGlogan. She is the first woman to hold the position of Electro-Federation Canada’s (EFC) President and CEO. 

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CEW IDEAL Nationals 400

The IDEAL Nationals are underway with an 18 member Canadian Team supported by the IDEAL Industries Canada crew. This year over 55,000 electrical contractors and electricians competed worldwide so this is the cream of the crop competing here in Orlando .

The 2019 IDEAL National Championship is a highly charged, no-holds barred competition to determine the best electrician in North America and includes teams from China, Australia and Mexico.

To make it to Orlando, contractors have to qualify first and numerous qualifying events were held throughout Canada.

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GDP Rose 0.1 PercentReal gross domestic product edged up 0.1% in August, following no change in July. Goods-producing industries were up 0.2% after two months of declines, led by a rebound in manufacturing, while services-producing industries edged up 0.1%. Overall, there were gains in 14 out of 20 industrial sectors.

On a three-month rolling average basis, real gross domestic product rose 0.5% in August, compared with a 0.8% increase in July.

 

 

 

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Changing Scene

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ImarkDuring the recently held IMARK Canada 2019 meeting in Niagara Falls, executives from 14 of the leading manufacturers in the Canadian electrical and lighting industry participated in the IMARK Canada Product Stampede on September 13th.

Select manufacturer executives had precisely five minutes to present a key product with superior growth potential to the members of IMARK Canada. Distributor member executives then rated each supplier based on the quality of the presentation and the perceived sales potential of the product being demonstrated.

 

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OmnicableOmniCable would like to thank the electrical distributors and industry partners who attended OmniCable Toronto’s open house on October 23, 2019. OmniCable opened its Toronto branch back in April 2019. Toronto is OmniCable’s first branch outside of the United States. The Toronto facility, which is approximately 50,000 square feet, is OmniCable’s 13th branch and services electrical distributors throughout Canada.

During the open house, attendees toured the facility, met OmniCable Canada and US teams, enjoyed light refreshments, and walked away with giveaways.

 

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Ilsco and Adanac SalesILSCO Canada has announced the appointment of Adanac Sales as agency of representation for the ILSCO brand in the province of British Columbia.

This partnership exemplifies ILSCO’s dedication to collaborate with companies that share ILSCO’s commitment to providing excellent products and service to the electrical industry in British Columbia.

 

 

 

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ABBTotal orders -1%1, order backlog +3%

  • Steady revenues and book-to-bill2
  • Operational EBITA margin2 11.7%, +20 basis points; impacted 70 basis points by stranded costs
  • Income from continuing operations, net of tax $422 million, -1%
  • Net income $515 million, -15%
  • Operational EPS2 $0.33, -7%3
  • Cash flow from operating activities $670 million, +19%, solid cash delivery expected for the full year
  • Björn Rosengren appointed Chief Executive Officer, effective March 1, 2020

 

 

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Peers & Profiles

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Stephanie MedeirosBy Blake Marchand

For Stephanie Medeiros, this is an exciting time for Canada’s electric vehicle industry because it is approaching a tipping point. “One or two percent of vehicles in Canada are electric, but you’re going to see this change rapidly. There are different factors that come with that, but to make it a reality you need to have a charging infrastructure in place. One of the factors involved with that is establishing standards for charging, as well as settling on a uniform method for charging — ultimately, constructing a landscape that closely resembles that of internal combustion.”

 

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City Electric Supply - Jon LlewellynJon Llewellyn is the Branch Manager City Electric Supply’s Nanaimo, BC location. “I've worn many hats within this great organization,” Llewellyn told Canadian Electrical Wholesaler. Beginning as a Van Driver, Jon worked his way through several different positions at City Electric Supply after a 10-year career in the trades as a Drywaller. Starting as a driver, Llewellyn would move into the warehouse, and on into Inside Sales, which would turn into an Account Manager position before he would land in his current role as Branch Manager. The ability to learn on the job is an essential skill in an evolving industry, particularly one that is heavily technical. Something Llewellyn has certainly embraced.

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Looking Back

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