Canadian Electrical Wholesaler

May 14, 2020

Frank HurtteBy Frank Hurtte

Failure to recognize changes in the business landscape can result in systemic failure. Since approximately March 15, the business climate has changed dramatically. While the length and permanence of the changes can be argued, for now, and likely through the end of 2020, the shift in the business climate is real and exceedingly different from just a couple months ago. It is time for manufacturers and their distribution partners to look at the operating environment and have some frank discussions about the future.

Some distributor contracts have been in place for years. Many of them are built around the concepts which are, at least for now, obsolete. Let’s review some of these ideas.
Good distributors

• maintain an inventory
• develop year over year growth
• identify new customers in their territory
• assume technical service and post-sale shortfalls tied to the manufacturer
• conduct customer events to promote new products
• participate in and perhaps taking the lead in local tradeshows
• attend factory-based training classes
• employ specialists to further drive customer intimacy
• make a set number of in-person sales calls

Generally, I am fully on board with each of these requirements. In the old environment they just made sense. But for now, and who knows how long, the world has shifted.
Year over year growth-based distributor programs might be obsolete

Year over year growth-based distributor programs might be obsolete

In March 2018, we wrote about the issues tied to year-over-year growth compensation for distributors: http://thedistributorchannel.blogspot.com/2015/02/distributor-supplier-etiquette.html. Based on annual growth projections laid out by most distributors, these aren’t going to work for 2020 and perhaps beyond. Let’s think about the situation for many distributors before Friday, March 13, 2020. Business was cooking. Many distributors felt bullish about the economy and their chances of turning 2020 into a record year. Then, like a kung-fu chop to the midsection, things changed. Today, even the best and brightest distributors can only dream of closing out the year with sales down 70%. The chances of attaining goals and growth objectives laid out in January or February are somewhere between zero and nothing.

Without intervention, distributors automatically end up with a lower margin. Does this make sense?

While it could be reasoned that manufacturers face the same profit pinch as their channel partners and cutting back on distributor margins are justified, the practice is akin to defunding sales efforts in a critical market building period.

Having weathered more than my share of recessions, downturns, and other economic storms, here are my observations:

• Market share is built when times are bad and starting to turn upward. 

• Making the sale is difficult, more costly than normal, and often requires a great deal of hand-holding and risk mitigation activities before and after the sale.

• Customers are more likely to respond to the local efforts of a distributor they trust over a factory guy traveling in from outside the territory.

Because our situation is a health-related crisis and travel may be restricted well into 2020, distributors will be assuming more of the technical support provided by factory people who often play a role in the sales process. Removing a portion of the distributor’s available margin seems counterproductive in a time when we are all pushing towards recovery.

Co-op funds should be redesigned

Most distributor agreements carry funding for joint marketing activities. Over the years, joint marketing activities have morphed and migrated. Activities once viewed as essential to growing the business have all but disappeared. Customer events consume a portion of the money, but they are probably out of the question for the future (or at least near term). Golf outings will probably be nixed as well. Travel and expenses tied to training will be shot. This leaves the ever-popular logoed shirts, hats, and jackets as the remaining expenditure. But do they achieve the needs of today’s business? Candid conversations with a few supply-partners reveal some thoughts of doing away with the whole concept.

I believe now might be a good time to move the co-op program into the modern ages. What do we need today? Here is a shortlist:

• highly focused and qualified leads for new customers
• greater visibility within the management ranks of our customers
• broadened customer contacts at existing customers
• improved online capabilities at the distributor end

All of these can be done digitally. In most instances, the supply-partner has the know-how, and distributors are willing to move forward. They just need some seed money and a few ideas to get them started.

The co-op concept is as important today as ever, it should not be scrapped. I believe it needs to be redefined and brought into the 21st Century.

A final thought

Moving forward and planning for the future requires an assessment of today’s reality. As an industry, we are in an unprecedented situation with uncharted waters ahead. Continuing as though nothing’s changed seems like a recipe for disaster.

If you are a manufacturer presenting a new distributor agreement ask yourself, does the agreement match the times? If you are a distributor facing one of these cookie-cutter plans, now is the time for candid conversations with your manufacturing partners. Meaningful conversations and unvarnished communications are key to our future together.

Which brings us to another article I wrote in 2015 on distributor-supplier etiquette: http://thedistributorchannel.blogspot.com/2015/02/distributor-supplier-etiquette.html. I pointed to a good example of a bad scenario where the manufacturer’s regional manager dropped the neutron bomb distributor-supplier relationships by saying: “We are the ones who decide as to whether you are doing the right things. Don’t forget who’s in charge here. We are the manufacturer; you are the distributor. We’ll tell you if you’ve got it right.”

If you happen to be a manufacturer and hear this statement echoing through your mind, please rethink your strategy.

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

CEW market research 400By John Kerr

The past nine weeks have been to say the least a challenge across the electrical industry. From agents to suppliers, from end users to the electrical channel, all have been affected, all have been forced to think differently and all have begun the journey to retooling the way we operate.

This is the third report in our series quantifying and exploring how electrical wholesalers have had to adapt and how they are looking to find a way forward. For this we have taken a different approach from our previous reports in that we have incorporated the results from our recent survey alongside personal interviews and discussions with electrical distributor teams across Canada

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arkest Before the Dawn, Part 2

CEW 9 JK Figure 1 700By John Kerr

I spoke in my previous article about my father’s quote darkest before the dawn. Well, he had another saying clearly brought forward by his growing up in the depression. He would say, “Money is not everything. It just helps,” and at a time like this when there are so many storylines of effort above and beyond the call, and so many initiatives underway by electrical distributors, there will be a rallying right across the country. The electrical distributors are moving, reacting, and more adaptable than ever before. 

The current situation we find ourselves in is to say the least fluid, dynamic and somewhat disconcerting for many, but underlying it is a focused, disciplined approach to addressing the new norm and new reality. Some branches remain closed, some open with minimal staff, and others rotating staff and working differently than ever before.

Recent public reports by Wesco and Rexel have indicated drops approaching 23% through mid April and clearly ones that demonstrated a slowdown from mid March. Our discussions with both distributors and end users/contractors alike confirm their buying and purchasing activity were curtailed more aggressively in early April.

Over 106 electrical distributors responded to our recent survey with 73% from corporate and branch management. 

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Gurvinder ChopraBy Gurvinder Chopra

This June, Canadians will commemorate Electrical Safety Month; June also marks the fourth month of the COVID-19 pandemic national lockdown. For many Canadians, working from home has become the new normal. As confinement continues, the demand for constant power feed to connect to the world we now live, work, and play in at home has grown substantially. Homes are being equipped with new technologies that offer plenty of benefits, but they also place high demand on electrical systems at home, potentially causing serious safety risks. 

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David GordonBy David Gordon

In talking with distributors and manufacturers it is clear that many are actively in the planning and pivoting mode, moving from survivability to thriveability. They’ve stabilized their business financially, emotionally (from a staff viewpoint) and operationally. Now they are looking at “doing business,” and more financially secure ones are identifying ways to take share.

This doesn’t mean that others are not planning and pivoting. Some didn’t miss a beat; others typically don’t do much planning and live in the moment. 

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Building Permits - MarchThe total value of building permits issued by Canadian municipalities decreased 13.2% to $7.4 billion in March, with declines reported in seven provinces and two territories. The $1.1 billion national decrease was the largest since August 2014. This reflected notable drops in Ontario (-12.9%), Quebec (-18.1%) and British Columbia (-19.4%), which coincided with efforts to slow the spread of COVID-19.

 Value of residential permits down

The total value of residential permits decreased 13.1% to $4.6 billion in March.

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Changing Scene

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EIN evolve 400As we continue to respond to the changing status with the COVID-19 outbreak, EFC is taking preventative measures to protect conference delegates from any further risks associated with this virus. After much consideration and consultation, the EFC Board has decided to cancel EFC’s Industry Conference in Banff which was rescheduled from late May to September 1 - 3, 2020. This decision was difficult but necessary for the safety of our members, employees, and the community.

One of EFC's key mandates, is to deliver a premier national thought-leadership conference for industry members, partners, and affiliates. 

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Sonepar's Gaurav SharmaA new video featuring Sonepar’s Vice President of eCommerce and Digitalization, Gaurav Sharma, answers COVID-19 related questions regarding Sonepar Canada’s digital solutions, his team, and the future of eCommerce in the electrical wholesale industry.

Among new solutions introduced by Sonepar: customers can now create an online account through a simple text message. Traffic on Sonepar’s website has tripled since the pandemic began, and the number of new accounts has doubled. Many Sonepar locations also feature curbside pick-up.

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Schneider ElectricThe Continental Automated Buildings Association (CABA) is pleased to announce the appointment of Hugo Lafontaine, Vice-President Digital Energy at Schneider Electric Canada. CABA is an international nonprofit industry association that provides information, education and networking to help promote advanced technologies for the automation of homes and buildings.

“We are delighted to welcome Hugo Lafontaine to CABA's Board,” said Ron Zimmer, CABA President & CEO “He brings a stellar background in building systems integration and the building automation market, and a wealth of insight into the digital platforms and solutions that will define smart-building innovations now and into the future.”

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Harold HayesHarold Hayes, a stalwart of the electrical industry, passed away peacefully in Scarborough, Ontario at the age of 90 on May 9, 2020.

Harold joined the industry as an apprentice at age 18, working first for his father’s business, Power Cable Installations, and then for Comstock. Among his later accomplishments, he formed Federal Pioneer Electric’s electric heating division, served as president of the Ontario Electric League in 1985, and while in his 80s consulted for Intellimeter Canada Inc.

 

 

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Peers & Profiles

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With over 60-years of experience in the lighting industry, CBC Lighting has established itself as a ...

 

Sarah SilversteinBlake Marchand

Sarah Silverstein is a principal with Liteline along side her two brothers Mark and Daniel. Together, they lead the company founded by their father, Steve Silverstein, who retired in 2018.

Although she initially pursued a career in outdoor education, Sarah was instrumental in the company’s expansion into architectural lighting and the U.S. market. She joined Liteline as a project manager in between stints working in outdoor education. Now she leads Liteline’s U.S. distribution arm and marketing department.

 

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