The Story Within the Story

June 1, 2007
You can learn a lot about the electrical market when you read between the lines of Electrical Wholesaling's Top 200 listing.

The Top 200 is more than just a listing of the largest electrical distributors. It's also an accurate reflection of the trends shaping this industry. It provides insight into the fastest-growing distributors and the strategies behind their growth. In the comments they provide along with their sales data, one can get a sampling of what's on the minds of the captains of the industry.

EW can provide our readers with dozens of articles about the need to attract new talent to the electrical business, but when the CEO of a $40 million distributor says the most difficult puzzle he is trying to solve in 2007 is expanding his business with “the limited number of qualified managers” he has on staff, that challenge really hits home. Following are a few other interesting tidbits that surfaced in this year's Top 200 listing. Enjoy!

City Electric Supply and its 400+ locations

With its innovative growth strategy of encircling a market with small locations and only letting them grow to a few million in annual sales before adding another branch, City Electric Supply, Orlando, has quickly expanded from its base in Florida and the Southeast into the Mid-Atlantic states, New England, St. Louis, Kansas City, Austin, Texas, and several other key markets.

Some distributors are rethinking their branch expansion strategies because of City Electric Supply's success. It's interesting to note that while the company's branches seldom top $3 million in sales, the average sales-per -branch for Top 200 distributors averaged $14 million.

The power of Rexel and Sonepar

I must sound like an old geezer in saying this, but I remember Rexel and Sonepar before they got really, really big in the United States. Contributing Editor Dale Funk did a 1986 EW cover story on Sonepar, and 21 years ago the company was already planning its push into the United States. Five years later, I wrote a cover story on the growth aspirations of Rexel, then called Compaigne de Distribution de Material Electricique (CDME). At that time, the company was known best in the United States for its ownership of Southern Electric Supply Co., Meridian, Miss., a big player in the Southeast. Today, the company competes with Sonepar for global leadership and is now the largest electrical distributor in the United States. Together, Rexel and Sonepar now operate at least 650 locations in the United States, did more than $8 billion in combined U.S. 2006 sales and employ more than 10,000 people here.

Say hello to hybrids and specialists

There's a big difference in the terms “electrical distributor,” and “distributor of electrical supplies.” People think first of traditional full-line electrical distributors, and it's true that they account for the great majority of sales in this market. But other distributors of electrical supplies often don't fit the conventional definition, yet are effective channels to market, too.

Take W.W. Grainger Inc., Lake Forest, Ill. The company sells an estimated $1 billion in core electrical products, and that sales figure doesn't even take into account the power tools, hand tools and job-site supplies that the company markets effectively in its recently renovated counter areas. The product specialists on this year's Top 200 sell many millions worth of electrical supplies, and much of it is in the same products sitting on the shelves of full-liners.

This listing doesn't include the 2,037-location Fastenal Inc., Winona, Minn., the diversified industrial distributor. The billion-dollar company doesn't break out its sales figures by product type, but the company carries 24,000 stock-keeping units (SKUs) in electrical products.

Fastenal has plenty of new branches from which to sell these electrical goods. The 7,637-employee company opened 73 new branches in the first quarter of 2007, and believes the North American market can support at least 3,500 of its branches. As a point of comparison, the five largest full-line electrical distributors operate approximately 1,700 locations in North America.

The names of the companies in the rankings that EW has published since 1970 have certainly changed. Less than 20 companies on that first listing of the 100 largest companies are still operating under the same; the other companies were acquired or went out of business. But the story within the story in these rankings has always reflected the trends reshaping the electrical wholesaling industry.