Canadian Electrical Wholesaler

 

Transportation BusinessRick McCarten

Ford just recently announced that they are setting up a research facility in San Jose, CA to look at new forms of transportation and all of the software connected to new vehicles. They also announced that they see themselves not only in the car business, but in the grand scheme of things, they are in the “transportation” business. 

Right now, cars might be the best form of transportation. However, by taking a bigger picture view, the way we travel now, may not be the best method. Ford is not going to be tied to old legacy viewpoints that force them to defend themselves against new technology — which could end up hurting their business. 

I remember reading an article by Theodore Levitt in a 1960s issue of the Harvard Business Review which set up the basic premise that the railroad business at the time was seeing major decline. His point was similar to Ford's; if the railroads saw themselves in the transportation business and not just in the railroad business, they would have reacted differently. Perhaps they would have embraced highways and other forms of delivering goods, rather than seeing these other modes of transportation as competitors that need to be fought off. If only they had seen their job as helping customers get products from factory to consumer, they would have seen opportunity when new methods of transportation arose. Unfortunately, they only saw competition. The results? This mentality hampered their opportunity to grow and to capitalize on change. 

Another similar case is the city of Detroit. At one point in time, it was recognized as the world capital of the auto industry. Instead of embracing foreign car manufacturers — Honda, Toyota and Hyundai — it supported the three American automotive companies and forced others to locate away from the centre. The result? Instead of hurting auto manufacturers, it ended up hurting itself. 

So what is the big picture for electrical distributors? 

The unique thing about wholesalers, is their ability to turn items. Six to eight turns a year make it possible for a company to be in the wholesale business. Without these average turns, your mark-up would need to be higher and it would be difficult to maintain "wholesale pricing."

Here is a chart to show how it works:

• 2 turns X 60% margin = 120%

• 3 turns X 40% margin = 120%

• 6 turns X 20 % margin = 120%

• 12 turns X 10 % margin = 120 

As the figures above illustrate, three turns a year with a 40% mark-up provides 120% return on your investment at the end of the year. (You need 20% to pay staff, buildings, loans, etc.). Similarly, six turns a year with a 20% mark-up, provides a 120% return. This puts you in the wholesale ballpark. Other companies like Walmart try to maintain similar average turns.

The specialty retail market would have larger margins, possibly 60% or more, because the store just can't turn over inventory fast enough. 

On the other hand, if you double the number of turns to 12 — or Amazon's goal of 24 — and you get mark-ups of 5% to 10%, this scenario could diminish returns and change the dynamics of actually buying and selling products. Amazon’s method for example is to get payment prior to purchasing the item, so credit becomes a source of revenue — not an expense — further reducing overhead costs.

What makes electrical distributors unique is that the product and customer mix allows the market to have turns. The product and customer mix empowers electrical distributors to remain a combined force — one of the biggest wholesale groups in North America. It is this mix that allows yearly turns to take place, that allows the margins. Any change in "the mix" will change the dynamics of the wholesale business overnight. 

I recall sitting next to a small regional pharmaceutical distributor from Arkansas who told me that his industry had consolidated in the U.S. in less than 10 years. I asked him what caused the change and he said the customer base changed. 

And so, understanding what makes your business and services unique will allow you to look at opportunities for expansion. This understanding may allow you to move into existing product markets where you can improve service and pricing through high turnover rates. It might also allow you to build new customer connections that can take advantage of larger volumes. 

The next time you see a competitive situation, think about the big picture, like Ford, and you just might see it as an opportunity and not as a threat. 


 Rick McCarten is VP, Operations, Electro-Federation Canada.

Read more in Canadian Electrical Wholesaler by Rick McCarten
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Adapting to the Future with Young Talent
If Your Customers Can See More, You Might Want to Help Them See Even Further
Health and Sciences Could take a Lesson from the Electrical Industry
Change is About to Hit Our Industry
Challenges of the Digital Age
Agility: The Customer Landscape
Agility is the New Lean: Alexander Defeats the Persians
Agility is the New Lean
The Gap Between “Us” and “Them”
Our Industry Needs to Help Canada Skate to Where the Puck is

 

 

 

 

Carol McGloganBy Carol McGlogan

EFC kicked off 2021 with an outstanding webinar featuring Janice Gross Stein, renowned Canadian political scientist, founder of the Munk School of Global Affairs and recipient of the Order of Canada. Ms. Stein has spoken at previous EFC conferences, earning many accolades, and this session was no different as we learned what to look for as the Biden Administration takes hold of the White House.

Our close economic ties to the U.S. means that Canadians must “keep up with the Administrations” to survive. Janice focused her discussions on industrial policy and climate change within an active intervening government.

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Daniela De MarcoBy Daniela De Marco

When it comes to EFC’s membership, there is no shortage of talent and expertise. The electrical community is innovative and at the forefront of powering our changing world. In 2020, EFC released a call to members for a chance to participate in the recently launched electro|POD — EFC’s Electrical Community Podcast.

Together with Gurvinder Chopra, VP Standards and Regulations, EFC, Rob McIntrye, recently retired Business Sections Manager, expert member Vladimir Gagachev, Manager Codes & Standards, Eaton Industries (Canada), and myself, Daniela De Marco...

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Digital IntensityAdoption of digital technologies by Canadian industries is associated with higher labour productivity growth and greater resilience to the economic impacts of the COVID-19 pandemic. From 2002 to 2019, labour productivity grew 22.1% in digitally intensive sectors — more than three times higher than in non-digitally intensive sectors. 

Over the past two decades, Canada has embraced digital technologies at an unprecedented pace and breadth as businesses and individuals have relied increasingly on digital products and services. 

 

 

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Canadian Business Counts - December 2020The COVID-19 pandemic continues to alter the business landscape. Some businesses have closed permanently, some have grown and others have been temporarily closing or reopening. In October, for example, the number of business openings (41,910) exceeded the number of business closures (32,420) for the fourth consecutive month.

As a result, the number of active businesses in October edged up 0.6%. Despite the slight increase, the number of active businesses was down 6.7% from February 2020.*

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David GordonBy David Gordon

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While Gene is well known by many manufacturers, we thought it would be interesting to ask him to consider changes he has seen over the years.

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Darci SpiteriBy Darci Spiteri 

This past month marked one year since stepping onto a job site and starting my electrical apprenticeship. Little did I know 2020 would throw in some curveballs, but it was a pretty fantastic year for self-development when I sit back and reflect. 

Enter Pandemic, worldwide lockdowns, and my Jobsite shutting down for a month. Losing hours was a downside and with my apprenticeship being based on the number of hours worked, moving onto my second year will take a little extra time. 

 

 

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Changing Scene

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Guillevin International, has announced the acquisition of Dubo Électrique Ltd., one of the largest ...
Acuity Brands, Inc. has announced Trevor S. Palmer was appointed President of the ...
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Guillevin International Acquires Wesco's Canadian Datacom BusinessGuillevin International has announced the creation of a new division, Guillevin Datacom, which will be dedicated exclusively to various network infrastructure products. To support this new division and ensure its success, Guillevin acquires the Canadian Datacom business of WESCO International, whose team will join Guillevin's Canadian operations.

"We have targeted the WESCO business to launch our Datacom division because of the team's agility, expertise and in-depth knowledge of products from the industry's leading suppliers", said Luc Rodier, Guillevin's President and CEO. 

 

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Peers & Profiles

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An engineer by trade, Smith spent the majority of her career with Ontario Power Generation (OPG). She was the first woman to be certified by the Canadian Nuclear Safety Commission at the Pickering Nuclear Generating Station where she served as Plant Manager and was recently named the first President and CEO of CANDU Owners Group. Smith is also a passionate advocate for diversity and inclusion.

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