The Silent Majority

Don’t underestimate the power of the thousands of small distributors that don’t always get picked up on the electrical industry’s radar screen.

I recently visited a Florida branch of City Electric Supply and came away impressed with its back-to-basics business philosophy, and how it proves smaller distributors can survive and thrive against the titans of the electrical industry.

The branches of City Electric Supply's U.S. operating companies tend to be quite small, usually with less than 10 employees per branch. Once a branch hits a predetermined sales volume, City Electric adds another location in the market rather than expanding the existing facility.

The philosophy is working. City Electric has more than 200 locations in the United States, and is expanding into Chicago, Detroit, Houston, Phoenix and New Orleans.

With one or two locations at the most, perhaps 10 employees, and sales that don't always top $10 million, small electrical distributors must work harder to get attention. But they have more power than they may realize. Distributors that make EW's annual Top 200 ranking and the 460-plus distributor members of the National Association of Electrical Distributors (NAED), St. Louis, are the best-known companies in the business, but several thousand small full-line and specialty distributors sell electrical supplies, too.

Let's look at some numbers. The U.S. “electrical universe” has approximately 10,000 locations, with 4,000 main house locations and 6,000 branches run by full-line electrical distributors or specialty distributors, according to EW's recently updated EWHotSpots database. More than 3,000 of the 4,000 distributors of electrical supplies in the EWHotSpots database are full-line distributors; several hundred other specialty distributors in that database focus on products such as wire and cable, industrial automation products, lamps, fuses and surplus supplies. As you may have seen in EW's popular “Electrical Pyramid,” some formidable hybrid distributors sell electrical products, too.

Some industry sales statistics support the premise that small distributors continue to play a huge role in the electrical marketplace. Electrical distributors ranked on EW's 2005 Top 200 listing accounted for 46.9 percent of the industry sales. That's a huge percentage for just 200 companies. But it still points to industry fragmentation: Smaller distributors with annual sales of less than $28 million account for 53 percent of the sales. Consider also that the combined sales volume of the four national electrical distributors — Graybar Electric Co., St. Louis; WESCO Distribution Inc., Pittsburgh; GE Supply, Shelton, Conn.; and Consolidated Electrical Distributors Inc. (CED), Westlake Village, Calif. — is just 13.6 percent.

Another measure of the defragmented nature of the industry is the percent of sales accounted for by NAED's 460-plus members and their 4,100 locations. NAED distributors account for more than $30 billion in combined sales, but that's less than 40 percent of the $80 billion in total sales of electrical products expected to be sold through electrical distributors in 2006.

Many NAED members are among the leaders in their geographic markets, and the association's membership list reads like a who's who of the electrical business. But industry consolidation is slowly but surely nibbling away at NAED's membership numbers. The association recently announced that it was embarking on a major effort to recruit smaller distributors — which may help give a louder voice to the industry's silent majority.

Don't ever forget that even the biggest of the big were once small companies. Crawford Electric Supply Co. (CESCO), Dallas, is just one example of a small distributor that grew into one of the largest distributors in the nation. In just 16 years, CESCO has grown from six employees and $2 million in sales in 1990 to $175 million in sales and 190 employees. It ranked No. 45 on EW's most recent Top 200.

The industry's largest electrical distributors will always be a channel of choice in the electrical wholesaling industry. But don't forget the quiet but important role that smaller distributors play in the market.

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