Times & Trends: Exclusively Your Line

Oct. 11, 2013
Are exclusive distribution agreements still special in today’s changing channels?

This month’s cover story delves deep into a topic that you don’t hear as much about these days — exclusive distribution agreements.

At Tri-State Utility Products Inc., Marietta, Ga., the subject of this month’s cover story (“The Power of Exclusivity,” p. 20), Wade Patterson uses exclusive distribution agreements as a tool to maintain decades-long relationships with 18 key utility product manufacturers, including Hubbell Power Systems, Howard Industries, Landis & Gyr, Nordic Fiberglass, Southwire and 3M. Wade goes with a single line in key product lines, and devotes all of his employees’ selling, service and delivery time to that line.

In return he expects the same kind of devotion — particularly when a hurricane, tornado or blizzard tears up a utility grid and his customers need products pumped into the market to get the power flowing again. Every minute counts in a disaster-recovery situation, and service takes on a new meaning. For Tri-State’s customers, it’s more than a word on a glossy brochure or in a punchy headline in an email blast — it’s their lifeline to restoring  power to folks in disaster areas.

You can see how exclusive distribution agreements work in Wade Patterson’s world because of the comparatively smaller range of product lines he handles compared to full-line electrical distributors that concentrate on the commercial and industrial market. But I don’t hear as much about exclusive distribution agreements these days, and I can’t figure out if it’s because fewer distributors want them, or if manufacturers aren’t as interested in them.

In the 1980s, the pages of Electrical Wholesaling were full of articles about exclusive distribution agreements, sole sourcing and distributor policy. Back then, there was a lot of talk in the industry about how manufacturers in the industrial automation business would  use them to market what were then exciting new products like programmable logic controllers (PLCs), variable-speed drives and industrial sensors. At that time, the distribution policy that Allen-Bradley used to partner with a network of 400 or so industrially-oriented distributors was the blue-chip industry standard for exclusive distribution. To carry that line, have an APR (area of primary responsibility) for it in their market, and have the famed A-B “meatball” logo on their sign was an honor for a distributor. It came at a steep price — the companies had to invest in electrical engineers to help customers program the control equipment, build on-site training facilities, and make a significant inventory investment. Back in those days it wasn’t unusual for an Allen-Bradley distributor to have  up to half of their annual revenues in A-B products. The Allen-Bradley/Rockwell Automation line is still definitely a prestigious line to carry, but the distribution policy Rockwell uses to work with its distributors isn’t in the industry spotlight as much as it once was.

With so many new products and technologies moving into the electrical wholesaling industry, how common will it be for manufacturers to use an exclusive distribution agreement to market them?  I don’t see manufacturers of some of the newer technology products like LEDs, electric-vehicle chargers or solar equipment only selling their products through one full-line electrical distributor per geographic area. While electrical distributors probably still sell 70% or more of all the electrical products in the United States, these manufacturers have many more channels of distribution available these days, including product specialists, direct sales, distributors from other trades that sell some electrical products, hybrid distributors like Grainger or Fastenal, the big-box home centers and even Amazon Supply or Google.

With all the changes in the channels of distribution these days, it’s time for an update on this important topic. I would like to learn what you think about exclusive distribution agreements, so please give me a call at 913-967-1743 or drop me a line at [email protected] to discuss.  In our quest to produce editorial content that helps you sell more electrical products and run your business more profitably, EW’s editors have always found our best editorial content comes from discussions with readers.