Oct 22, 2019
Rexel shared its Q3 performance, providing a peek into how the electrical distribution market may have performed last quarter.
Rexel North America Performance
North America was up 2.8%, driven by Canada.
Overall, sales were up 7.7% on a reported basis (with US currency appreciation) but 2.8% on a constant and same-day basis.
US was up 1.8% for Q3, up 6.1% YTD.
The industrial slowdown impact was due to trade war with China, business selectivity (not pursuing low margin business?), and more challenging base.
- Residential up mid-single digits due to investments in branches / sales reps
- Canada was up 6.3% for the quarter, up 5.4% YTD
- Canada was up due to commercial projects and cable
- Copper, globally, had a -.3% impact on sales.
- Justified lower growth than Q2 due to lower industrial demand “especially in the US …”
- Rexel used an exchange rate of 1 euro = $1.12 USD. In Q3, US was 1.0457 billion euros, or $1.1712 billion USD
Additional insights from their investor presentation:
- North America grew faster than other regions as Asia was up 2.7% and Europe was -0.7%, highlighting the global slowdown with Germany and the UK both down double digits due to industrial slowdown in both countries and branch closures.
- In the PPT presentation, Rexel stated that US industrial was down low single digits due to low OEM activity, which was offset by its MRO business (so OEM was down a reasonable number and MRO may have had a slight increase or there was a business mix shift.)
- Rexel percent of sales by geographic region and business tendency
- Florida 11% of sales trending up
- Southeast 10% of sales trending up
- Northeast 12% of sales trending down
- Gulf Coast 14% of sales trending down
- Midwest 9% of sales trending down
- Mountain Plains 8% of sales trending down
- Southern CA 10% of sales trending up
- NorCal / Northwest 26% of sales trending up
Interestingly the “ups” are historically better performing regions for Rexel.
On October 18th Rexel had a “Digital Event” and shared some information on its digital performance and strategy. It should be noted that these are their goals and vision and it is suspected that 1) it will be a continuum and 2) implementation will occur in different regions at different paces.
- Goal is to become a “data-driven service company” exemplified by
- Personalized, seamless customer experience
- New services and positions in the value chain
- Data-rich supplier relationship
- Machine-augmented operations and employees
- Rexel sees new types of players entering the market … companies that will be “fixed price merchants”, “asset-light specialists” and pure online players.
- Rexel’s North America web sales are up 22% vs LY (but lags Europe where digital represents 25% of sales). Expect to be 18% of overall company sales in 2019, up from 13% in 2016.
- 10% of North America sales are digital with the US being <10% and Canada between 10-30%.
- Globally, 22% of sales are to the residential market, 46% to the commercial market and 32% are to the industrial segment
- 60% of the business is “proximity” (web / branches), 25% is project-driven and another 15% is “specialty” business.
- For suppliers planning to offer “analytics as a service” and “demand forecasting / steering” (will be interesting to see what level of insights that they provide)
- Elements currently planned include:
- Product data quality (online content)
- Market segment … share of wallet by market segment
- % sales online vs offline by product and market
- Online customer journey analytics (perhaps what is being viewed by digital asset)
- Elements currently planned include:
- Some functionality that is planned:
- Track & trace for deliveries
- Lead times for non-stocked items (interesting challenge as requires integration with factories. While could be nirvana for customers, could be a nightmare for manufacturers given the number of systems will need to integrate with (as many distributors will want) but, more importantly, could result in manufacturers being held accountable for non-stock / project performance. Scorecards could be developed and customers may decide which line / products to purchase based upon manufacturer performance (similar to airlines having to share their on-time flight performance!)
- Offline and online account openings
- Product returns
- Development of a “churn alert” process to integrate with sales … efforts to be proactive based upon purchasing indicators of customers not ordering.
- Converting email to EDI to reduce manual data entry
Rexel emphasized that digital is much more than sales. Achieving digital transformation is a mind shift. This mind shift is needed to cultural transform, to revise processes, to be easier to do business, to be more transparent to customers and suppliers and to position the company for the future.
While Q3 performance weakened, North America outperformed the rest of Rexel and the US market was essentially flat. With 4 regions representing 57% of sales reporting some growth, the growth rate, in aggregate, wasn’t significant enough to offset the regions that represent 43% of sales that were down … which means they were down pretty significant … and the down regions are regions that are historically down.
Rexel’s digital vision is impressive, however, the North American market, and specifically the US, is lagging.
You can find the full press release HERE