Sales-wise, 2023 was a decent business year in the electrical market as long as you could navigate past the higher interest rates, stubbornly high product prices and shortages in some segments of the switchgear market. In this article, Electrical Wholesaling’s editors will focus on the news and trends in the business this year that may have the most impact down the road. We picked out six of them.
More than a billion dollars in revenues changes hands in 2023’s distributor M&As
It was another year loaded with major distributor acquisitions, and EW’s editors reported on more than 20 deals. Six of the distributors ranked among the 150 largest companies on Electrical Wholesaling’s annual ranking were acquired: Shepherd Electric Supply, Baltimore, MD (Graybar); Billows Electric Supply, Philadelphia (Sonepar/Cooper Electric Supply; Electric Supply Inc., Tampa (Sonepar/World Electric Supply); Buckles-Smith, Santa Clara, CA (Rexel USA); Sunrise Electric Supply, Addison, (Sonepar/Viking Electric Supply); and Teche Electric Supply, Lafayette, LA (Rexel USA). Two things stuck out about the companies that were acquired this year – their total combined revenues and the size of the markets where they operate.
Combined revenues for these six companies top $1.2 billion in 2022 sales, and most of them were located in prosperous large markets. With its three acquisitions, Sonepar bolstered its operations in the Chicago, Philadelphia and Tampa markets, and Rexel USA added a widely respected North California distributor with its acquisition of Buckles-Smith. Graybar added the most revenue in a single transaction for the year, with its purchase of Shepherd Electric Supply in the Baltimore-Washington, DC, metro and its $429.3 million in annual sales.
Along with these pure-play acquisitions of full-line electrical distributors were quite a few acquisitions by distributors into adjacent business niches. Graybar bought Valin Corp., San Jose, CA, a large supplier of products for the process control, process heat, filtration, motion control and automation industries. Rexel bought Wasco, a HVAC plumbing distributor based in the Netherlands, and Sonepar purchased Alliantz of Narbonne, France, a distributor of solar products and energy efficiency solutions.
Other acquisitions of interest included two in the lighting market, where Green Mountain Electrical Supply, Colchester, VT, bought lighting specialist Atlantic Electric Supply, Shrewsbury, MA, and Facility Solutions Group, Austin TX, purchased Lighting Maintenance Inc., Valley Cottage, NY.
Eckart Supply, Corydon, IN, made two purchases: Automated Controls & Electrical Supply, Richmond, IN; and Electrical Supplies Unlimited, Buford, GA. Wiseway, Florence, KY, also expanded outside the electrical market with its purchase of Stearns Supply, a plumbing distributor based in North Vernon, IN.
Mega-mergers take center stage in rep world
While rep M&As aren’t anything new, seeing two reps the size of Electrorep Inc., Sausalito, CA, and R/B Sales Corp., Hiawatha, IA, sold in the same year is a big deal. What makes these transactions even more interesting is that the same company bought both of them – Forward Solutions, a provider of centralized growth services for reps in a wide variety of niche markets. Forward Solutions currently operates in the facility maintenance, cleaning, hygiene, foodservice disposables, foodservice equipment, industrial/MRO, safety, construction, electrical, utilities, telecom and packaging supply industries. This acquisition continued to make news for months after it was announced in Sept. 2023 because of speculation of how much further into the electrical space Forward Solutions could expand with other rep acquisitions and the key line changes that came after the transactions. Other rep mergers that made news were the merger of FRM and Bell & McCoy in the South, Southeast and Southwest markets and the acquisition by Flynn & Reynolds of Mills Talbot Co. top expand into upstate New York.
The recession never came, but higher interest rates, product shortages and stubbornly high prices still bedeviled the industry in 2023
Electrical distributors, reps and manufacturers breathed a collective sigh of relief that the U.S. economy didn't tumble into a recession this year. But they still had to navigate through product shortages in the transformer and switchgear markets; high lending rates that forced some customers to postpone or cancel construction projects and electrical prices that aren’t quite back to “normal” for some products, including some types of wire and cable and steel conduit. According to Electrical Marketing’s Electrical Price Index, through October power wire and cable was still up +39.8% on a year-over-year (YOY) basis and steel conduit was also riding high over 2022, with a +15.1% YOY increase.
Industry groups and digital solutions vendors look to link distributors, manufacturectiers and reps with contractors’ business systems
You could write a book about the electrical wholesaling industry’s search for “one source of truth” in electrical product data. IDEA and its merry band of digital enthisiasts and other industry data providers have spent countless hours over the past 25 years developing systems and standards for clean product data that distributors, reps and manufacturers can use in their business transactions. The focus has now expanded to bring this data to electrical contractors, too. At the 2023 IDEA national conference, representatives from the National Electrical Contractors Association (NECA) and National Electrical Manufacturers Representatives Association (NEMRA) joined a panel discussion with executives from the National Association of Electrical Distributors (NAED) ElectroFederation Canada (EFC) and National Electrical Manufacturers Association (NEMA) to discuss the need for a common-sense approach to share electrical product data. Discussions continue to make this dream a reality.
Electric vehicle manufacturers pump the brakes on production of new electric vehicles and pivot toward hybrids as customer demand for EVs slows down
Ford’s announcement in November that it would scale back the capacity of a Michigan-based EV plant now being built and the Dec. 12 news that it would slash the production of its F150 Lightning by 50% are two of the most recent signs that EV sales have hit a rough patch. A post at www.theverge.com said Ford told its dealers that in 2024 it will cut production of F150 Lightning production from its current 3,200 production capacity to 1,600 per week to better match customer demand. Even Tesla, which sells approximately half of all EVs in the United States, is seeing a slowdown in sales, and in October reported that its Q3 2023 deliveries were down -7% year-over-year to 435,000.
The latest news in the EV market is about auto companies investing more in their hybrid-electric models. A post at www.globalvillagespace.com said Ford Motor, Toyota, and Stellantis are planning to build and sell hundreds of thousands of hybrid vehicles in the U.S. over the next five years. In September, Ford announced it plans to double production of a hybrid version of its F150.
Many auto industry analysts say several reasons exist for the downturn in EV sales. They believe most of the early adopters have already bought their EVs, and that many potential customers are currently turned off by EVs because of their high prices and news reports of undependable public charging stations and lithium battery fires. These analysts say EV sales would pick up again if manufacturers can hit the market with lower-priced but still profitable models with sticker prices in the $30,000 to $35,000 range that can compete with gas-powered vehicles for the customers’ wallets and pocketbooks.
Artificial intelligence: ChatGPT has big plans for the electrical wholesaling industry
While machine learning and other forms of artificial intelligence (AI) have been around for some time, AI really hit the public consciousness when ChatGPT was launched in Nov. 2022. Since that time, there’s been plenty of conversation about how “good AI” that can help us do our jobs faster and more efficiently and how “bad AI,” could make decisions to take over the universe.
While thinking about AI applications in our industry, I decided to ask ChatGPT how AI could affect the electrical industry. The cool/scary thing is that when I asked it the question, it spit out 10 pretty realistic ideas in less than 10 seconds. They included optimizing the supply chain by more effectively managing inventory levels; customer relationship management (CRM) to analyze an individual customer’s ordering habits and then identifying upsell or cross-sell opportunities; delivery route optimization to cut down on fuel and travel time; and fraud prevention by detecting unusual online patterns or behaviors. Welcome to the machine!