Canadian Electrical Wholesaler

 Best PracticesBy Frank Hurtte


The distribution business has a beast looming in the back of the closet. It lurks in your inside sales group, thrives in your sales department, and sucks the life blood from your bottom line. What is this savage? It’s the practice of cost-plus pricing. Every industry has one. For the electrical wholesaler, it’s cost plus 20. For others, it’s cost plus 10, 20, 25 or 30%.
As an industry we have talked about cost-plus pricing for decades, yet it manages to survive. If your organization doesn’t have a clear-cut process for pricing, it’s still hiding in the deep recesses of your company. And, it needs to be killed before it kills you.


Here’s how it works. A customer calls in and asks one of your employees for price and availability on a product. Somehow, someway they believe the “system price” shown on the computer is too high, inaccurate, not supported, or non-stock. The employee quickly looks up your cost and then the monster appears. Instead of measuring the cost of ordering, freight, logistics and all the other value we provide as distributors, the employee just goes cost plus 20.


In our own research, many of these cost plus 20 orders actually turn into cost plus nothing. This is especially true when we think about non-stock items where freight or special handling is required. In our work, we see literally hundreds of occurrences of profit potential being given away. And, worse yet, often negative revenue is produced. We’ll cover this phenomenon some other time, but for now let’s just look at profit potential.


Candid conversations with our manufacturing partners indicate there’s a problem with giving distributors “really hot” into stock pricing. Why? Because some untrained inside sales guy can screw up a whole market by using their favourite cost-up number. The option for really meaningful margin gains flies out the door, because the distributor’s own people allow the monster to dominate their thinking. Still not convinced? What if I told you last week we spoke to a company president who “bribes” her IT person to add 15% to the cost of a line where she had negotiated a really great price level. It’s been nearly two years and not a single salesperson has complained — and her business is growing.


I know what many of you are thinking: it doesn’t happen here. Put your own organization to the test. Sort the last week’s customer invoices and look for common gross margin percentages. I would be willing to bet a shiny new “loonie” that you will discover a whole string of orders with margins of 10, 15 or 20%. In many instances it will be the same guy in the quotes department or inside sales group who has gotten in the habit of assigning 20% to far too many orders. The question you need to begin asking is, why?


We already said, sometimes this type of pricing is applied because the computer price isn’t accurate. Other times the product is a non-stock and your people are too busy to find the right price. Regardless of why, the real question is how much money are you willing to toss because it happens? We recommend a process. Measuring the process gives you an opportunity to review and re-educate your people. Ask, why 20% instead of 21.3, 23.25 or 24.75%. Customers don’t think about cost-plus for products. The market didn’t somehow form around this cost-plus monster. We created it. The only people with access to our costs work inside our own business.


Build a process


A process gives an opportunity to uncover some of the issues lying a below the surface. When employees know management cares, they go a little further to determine the right price. The right price equates to more bottom line profits.


Here are some steps to driving a wooden stake squarely into the monster that devours profits:


1)    Inspect your current situation. Look for instances of even digit cost-plus pricing. Sort them by customer, by salesperson, by customer service rep, by product line. Nothing beats data for understanding your real situation


2)    Reeducate your staff. Cost-plus pricing is a decades old practice. Talk about the importance of understanding value with your whole team. Coach individuals when you see even digit cost-plus margin percentages


3)    Fix computer issues. Has your computer pricing gone to purgatory? Identify lines with issues and fix them


4)    Tighten up pricing authority. If everyone has the ability to reset price levels, evaluate their skill sets. I believe one person per branch should be the “go-to” for all pricing authority


5)    Establish a procedure for price adjustment. The term czar seems to be in vogue. Why not jump on the bandwagon and name your own “pricing czar”? Establish a plan for everyone to bring their pricing issues to a single person


Tools for building pricing strategies have blossomed in the past few years. For instance, Strategic Pricing Associates of Cleveland, OH has developed tools for pulling data from your system and scientifically evaluating your pricing direction. Their product “bolts” onto your business system and provides real live direction to your process.
Is all of this worth the effort?


David Bauders, who leads the Strategic Pricing organization, has gone on record stating the process developed by his organization can add 2-4 margin points to your business in 90 days, and he has a number of distributors who back up his claims. Let’s calculate the payback. If you are a $100 million organization and you get just a 2-point improvement, this works out to a cool couple of million bucks.
If you have questions about how any of this works, get in touch. We have seen the monster. We can help.


Frank Hurtte, Founding Partner of River Heights Consulting, packs straight talk and 28 years of experience in the electrical wholesaling industry into his work. He speaks, writes and consults with distributors and their supply partners. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it.

Statistics CanadaThere were slightly fewer active businesses (-0.1%; -1,208) in May compared with a month earlier, marking the first time since May 2020 that the number of closures outpaced openings.

The number of business openings decreased by 11.5%, the largest percentage decrease since December 2018 and the second consecutive month with negative growth (Chart 1). The number of business closures declined by 2.9%, following a 2.5% increase in April. The decline in the number of business openings in May was largely driven by fewer entrants (-16.4%). The number of entrants in May was below the 2015-to-2019 average for the first time since August 2020. 

Read More


 

 

 

488 Days of COVIDBy John Kerr

Looking back to early 2020, the industry entered the first quarter with a sense of a solid year ahead, one that would easily eclipse 2019, and then in mid-March the brakes went on and relatively quickly.

On both the supplier and distribution sides, many took a reactionary stance and then quietly planned their next moves. Thinking differently, adding stock and doubling down on inventory, looking at alternative shipping methods and figuring out how to stay close to the customer are among the attributes of those that pivoted well and have come out of the dark in great shape.

Read More


 

Non-Mortgage Borrowing from Chartered Banks in March 2020The outstanding credit debt of private non-financial corporations doubled from the height of the financial crisis in 2008 to early 2020. At the onset of the pandemic in March 2020, businesses added a record $52.1 billion in credit debt to their balance sheets. However, according to a new study, as other sources of financing became available and businesses adapted to the pandemic, outstanding loan balances with banks declined for eight consecutive months.

The study Trends in Canadian business debt financing: Before and during COVID-19 looks at the types of credit debt private non-financial corporations incurred prior to and during the COVID-19 pandemic, and examines how they used that liquidity to weather the economic turbulence during this period.

Read More


 

Investment in Building Construction - May 2021Investment in building construction cooled slightly in May, decreasing 1.9% to $19.4 billion. This was the first drop in seven months. Residential construction investment (-2.7%) was down for the first time since April 2020, while non-residential construction increased slightly.

On a constant dollar basis (2012=100), investment in building construction declined 2.7% to $14.8 billion in May.

 

 

 

Read More


 

 

David GordonBy David Gordon

As we transition from the pandemic many wonder about the future of sales, meaning, “What will the sales process (sales model) look like in the future,” and, essentially, “What is the role of / for outside salespeople?”

In reality, this question was asked pre-pandemic as management lamented that Sales wasn’t being as productive as they desired. Companies are always seeking to improve their processes, whether it is having salespeople better penetrate accounts, identify and call on new customers, use a different (new?) sales method...
 

Read More


 

Changing Scene

  • Prev
Beginning October 1st, 2021, we are pleased to announce CSA Enterprises Limited will be become the ...
 Canada’s National Electrical Trade Council (NETCO) is pleased to announce that IDEAL ...
IMARK Canada announces 2021 Award Winners-Oscan and Kidde take top honors.     ...
More ultraviolet (UV) radiation-emitting and ozone-generating devices such as lights and wands have ...
 Leviton Lighting Canada has announced David Janowski as the new Eastern Regional Sales ...
EdisonReport has announced their 5th Annual Lifetime Achievement Awards.  These Awards will be ...
The Executive of Gerrie Electric Wholesale Limited has announced that Jason Krehl joined the team ...
 The Executive of Gerrie Electric Wholesale Limited has announced that Scott Currier joined ...
The 2021 Sapphire Awards, one of the lighting industry’s top honors, announced ...
 David Gordon, President of Channel Marketing Group, will provide insights from the Rep ...
 

 

Signify“In the second quarter we saw an acceleration of the pace of recovery in comparison to the first three months of the year,” says CEO Eric Rondolat. “We successfully executed our strategy as demand for our connected lighting offers and our growth platforms remained strong.”

The consumer segment held its momentum and demand for conventional products proved resilient. The professional lighting segment showed sequential improvements, while still impacted by both extended lockdowns and supply constraints. Overall, we managed to improve the operating margin by 190 basis points and generated a solid free cash flow. 

 

Read More


 

Adrian ThomasSchneider Electric Canada, together with the France Canada Chamber of Commerce Ontario (FCCCO) is proud to announce Adrian Thomas as the newly elected President of the European Union Chamber of Commerce in Canada (EUCCAN). Thomas, who currently serves as the country president of Schneider Electric Canada is entrusted with continuing the growth of EUCCAN by reinforcing transatlantic cooperation between the European and Canadian business communities.  “I am deeply honoured for the opportunity to join EUCCAN as their new President and build on the growth they’ve experienced in recent years,” says Adrian Thomas, Country President of Schneider Electric Canada. 

Read More


 

 

Agents of ChangeAgents of Change is an event for stakeholders from Canada's electricity and beyond to build capacities in diversity, equity and inclusion.

Agents of Change is a one-day event focused on equipping attendees with the tools they need to address the challenges under-represented groups face in the workplace. Women, Indigenous people, racialized people, persons with disabilities, LGBQ+, gender diverse people and newcomers to Canada are under-represented in electricity and often face systemic barriers. We have the power to change this disparity and transform our sector into a paragon of equity.

 

Read More


 

Flemming Jensen, Jason Samuelian, and John ClancyLED lighting solutions manufacturer Espen Technology has announced three changes to its sales management team.


Flemming Jensen (left), previously was Vice President of the Central and South Regions, has been promoted to Senior Vice President, Sales and Marketing. Flemming brings over 40 years of industry experience in the distribution, ESCO, and agent markets. He will focus on continuing Espen’s top line growth, in the coming years.

 


Read More


 


Edison ReportEdisonReport has announced their 5th Annual Lifetime Achievement Awards.  These Awards will be presented the Tuesday evening, 26 OCT before LightFair begins on Wednesday, 27 OCT.

Judges for 2021 were Paul Pompeo, Nancy Clanton, and Donny Wall.  Clanton stated, “Selecting individuals for this award was extremely rewarding especially in identifying the leaders and innovators, including world class lighting designers and researchers, that truly have made a tremendous positive impact in our lighting industry.”

 

 

Read More


 

Peers & Profiles

  • Prev
Illumisoft Lighting is an innovative company headquartered in Ottawa that focuses on suspended ...
Electrimat is an independent Quebec-owned company that has specialized for 40 years in the ...
In July, Eaton announced that Vice President, Channel – Electrical Sector, Matt Cleary would be ...
Mission Technical Solutions is a recently established sales agency founded by industry veteran ...
Omid Nadi, Trade Marketing Manager with Ledvance, is a Ryerson University grad coming out of their ...

 

 

Brett NicholdsBy Blake Marchand

Illumisoft Lighting is an innovative company headquartered in Ottawa that focuses on suspended ceiling troffer LED fixtures that utilize optical film technology to achieve a high level of performance and efficiency.

Their flagship product is the EcoWing, which is available for new construction and fixture in fixture retrofits. Their primary application target is office buildings, hospitals, and dealerships. Recent projects include the Department of National Defense building in Ottawa, AMPED Sports Lab, Queensway Carleton Hospital, and Surgenor Automotive Group.

 

Read More


 

Jeffrey MoyleBy Line Goyette

“The ongoing integration of Rexel Utility into our Canadian business platforms has underscored our responsibility as an organization to find creative solutions for today’s challenges, as well as to prepare for tomorrow’s opportunities.”

This quote from Jeffrey caught my attention. Vice President, Supplier & Digital Strategy at Rexel Canada Electrical Inc., Jeffrey has extensive experience in the industry and is a graduate of the University of Western Ontario with a Master’s in Business Administration, focusing on internarial leadership.

Read More


 

Copper $US Dollar price per pound

Kerrwil Publications Great Place to Work. Certified December 2019 - December 2020

538 Elizabeth Street, Midland,Ontario, Canada L4R2A3 +1 705 527 7666
©2021 All rights reserved

Use of this Site constitutes acceptance of our Privacy Policy (effective 1.1.2016)
The material on this site may not be reproduced, distributed, transmitted, cached or otherwise used, except with the prior written permission of Kerrwil