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2007 Market Planning Guide

Nov. 7, 2006
Sales through electrical distributors will grow by $10 billion in 2007. Use this guide to calculate market share, evaluate potential new markets and analyze changes in market segments.

The sale of electrical products through electrical distributors will increase by nearly $10 billion next year. This forecast puts U.S. sales for 2007 at $93.3 billion, a 10.5 percent increase from the current 2006 estimate of $84.4 billion. For 2005, Electrical Wholesaling estimates industry sales at $75.6 billion, an 11.4 percent increase over 2004.

The forecasts are based upon responses to Electrical Wholesaling’s annual Market Planning Guide (MPG) survey. Each year, the magazine asks more than 3,000 electrical wholesale firms for the previous year’s final sales results, sales predictions for the current year and predictions for the following year. It also asks respondents how sales for the first six months of the current year compared with the first six months of the previous year.

This year, Electrical Wholesaling mailed 3,111 surveys on July 13 to all of its subscribers in the United States with the title of chairman, president and vice president. Each survey packet included a postage-paid return envelope. The mailing garnered 194 usable surveys for a response rate of 6.3 percent. Forty-four surveys were returned by the post office, and three were returned incomplete.

Respondents reported an average sales-per-employee number of $478,413 for 2005. Contrast that number with $593,506, the Top 200 average-sales-per employee number for 2005. Regional sales-per-employee numbers are provided in the complete Market Planning Guide.

Using multipliers results in a dollar figure for market size that tells the level of business electrical wholesalers in the area could do if every potential customer there bought a typical amount of product from them. It tends to be a larger number than actual distributor sales.

The complete 2007 Market Planning Guide is availabe for purchased for $99 on Electrical Wholesaling’s Resources Page.

The complete 2007 Market Planning Guide includes sales forecasts at the national, regional and state level for 2007, 2006, 2005, 2004 and 2003; percentages of sales for electrical wholesalers by product, customer and market segments; Electrical Wholesaling’s multipliers, which allow electrical distributors to estimate potential sales and assess market opportunities; and more.

Read on for a more thorough explanation of what’s included in the 2007 Market Planning Guide and ways to use the data.

How to Use the Market Planning Guide

The market-planning data is divided into nine regions of the United States. For each region and state, you’ll find sales forecasts for this year and next year, along with the three prior years’ sales. In addition to the sales forecasts, which are prepared by Electrical Wholesaling’s research department, you’ll also find an economic snapshot of the region and employment statistics for four of electrical wholesalers’ major customer groups: electrical contractors, the commercial market, the industrial market and government.

The employment numbers help develop forecasts for customer buying potential. The basis for employment data comes from the Bureau of Labor Statistics or the Census Bureau.

If you’re looking for sales breakdowns for full-line distributors’ key customer and market segments, you’ll find the Customer Mix and Market Mix. Both were updated this year, and you’ll notice some shifts in the market. For example, according to the new Customer Mix data, electrical contractors now account for 43.7 percent of the average electrical distributors sales. That’s up from 40 percent in 2003 and 37 percent in 1998, the last two previous times the data was updated. As a result, the electrical-contract multiplier also increased.

The Product Mix data gives valuable insight into the product areas that have the most mind share with electrical distributors.

Getting the full picture on a market area isn’t that difficult. When developing any market forecast, gathering some basic data on the size and makeup of the market is the first step.

Let’s take a look at some of the ways you can crunch the numbers we’ve provided to tailor them to your specific business and market.

Sales Estimates. Are you wondering how you can use these sales estimates? One of the most common uses of this resource is for a business plan, whether it be for internal use as your guide for next year or for a presentation to an investor or banker. You will need something that states the size of the local market, and these sales figures are a documented source you can use “as is.”

This data will also be helpful in establishing a sales forecast for your company and your region, comparing nearby or far-flung markets with an eye to opening or closing a branch, and evaluating promising areas of new business.

One question distributors should ask themselves — and suppliers will be asking — is: “Are our sales into the market at the level they should be?” Look at the estimate of the overall sales in your market in comparison with your company’s sales.

Employment in Major Customer Markets. In addition to sales forecasts, employment numbers make up a large part of the regional profiles. The number of people employed by a company or in an industry tends to rise and fall with the volume of business it’s doing. Employment figures, therefore, act as a gauge to business prospects and conditions in end-user markets.

• With the employee counts from each market, you can compare the relative sizes of various end-user groups in your area.

• You can also compare the makeup of one market area to another, and reflect on whether there are new customer markets or ones that you could be serving better.

• If you track the employment figures for each market over time, you’ll see broad economic trends unfolding in your market.

• You can also use these employment figures to make your own multipliers or you can use the national multipliers we’ve already calculated.

Multipliers. Each multiplier is a dollar figure that represents the average amount of electrical products that electrical distributors sell to each particular type of customer, on a per-employee basis or other “economic factor.”

When used with the employment figures in the regional profiles, the multipliers help you establish the amount of business electrical distributors (could) do with major customer groups in your area, and in total.

For instance, you can go into greater detail by using locally available sources of information on employment or other measures in end-user industries. The professionals at the nearest business library should be able to direct you to a source for the numbers you need.

These multipliers are also a good option for determining sales in an area of the country not covered in the list of major metropolitan areas in the regional profiles. The same approach applies if you want to look at one county in an MSA that covers six counties. You would have to obtain employment figures or economic factors from local sources.

For instance, to find the number of electrical contractor employees in a place like Addison, Ill., a city not detailed in the East North Central regional profile, you could contact the local Chamber of Commerce, a nearby union chapter, the state university, the state’s department of commerce or the local library to track it down.

These multipliers come in handy if you want to approximate the amount of sales available from a particular account. For example, if a manufacturer employs 300 people, by applying the national multiplier of $737, you would expect that the facility purchases about $221,100 worth of electrical MRO product.

You can use the multiplier approach to tailor your own multipliers. You might want to do that if you feel your area differs significantly from the national or regional average.

The multipliers are useful if you want to assess the relative size of various customer markets in dollars in the defined area. You can go on from there to do such things as select markets for new or increased sales efforts, advertising and promotion.

These forecasts give you handy ballpark figures for your business plans and general thinking.

Estimating the size of the market with multipliers is a process of building up a sales potential, piece by piece. Electrical contractors in Albuquerque, N.M., employ around 3,208 people, so the potential market for electrical contractor sales there would be 3,208 times the electrical contractor multiplier of $43,054 for a total of $138.1 million potential electrical contractor sales. You would do the same for each of the other customer markets electrical distributors serve to reach a grand total for Albuquerque.

Using multipliers results in a dollar figure for market size that tells the level of business electrical wholesalers in the area could do if every potential customer there bought a typical amount of product from them. It tends to be a larger number than actual distributor sales.

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