Tom O’Connor, president of Farmington Consulting Group., (FCG) Farmington, CT, has worked with independent reps and the National Electrical Manufacturers Representatives Association (NEMRA), Portsmouth, NH, for several decades, analyzing the impact of the market’s mega-trends on reps and the electrical manufacturers that use them in their go-to-market strategies.
Tom will be retiring at the end of 2017, leaving Farmington Consulting Group in the capable hands of his son, TJ. As one of Electrical Wholesaling’s most popular contributing authors over the last 20-plus years, we wanted to give Tom at least one more chance to grace the magazine’s pages with his observations on the electrical market. He recently posted some interesting observations on his company’s web-site, www.fcgltd.com, about what he sees for reps in the future, and EW’s editors thought they would make a great “Speaking Out” for this issue. Here they are.
The electrical channel is shrinking. Following manufacturer consolidation and distributor consolidation, in the next three years the electrical market will experience accelerated manufacturers’ rep agency consolidation. This can pose either an opportunity or a threat for independent reps.
When you factor in two sea changes — the facts that the Millennial workforce is taking over customer buying decisions and that digital sales technology is the “Millennial choice” of transacting business — FCG believes that by 2020 the Electrical Rep Landscape will look like this:
1. Electrical channel consolidation will result in fewer total NEMRA rep members by 2020. Some weak reps who don’t survive the consolidation will wrongly blame their competing reps for poaching both their lines and their talented people, rather than focusing on performing up to their manufacturers expectations and treating their people well.
Electrical manufacturers want and deserve high-performing rep firms. We believe talented people want the opportunity to grow in responsibilities and be rewarded accordingly.
3. Mid-size rep firms will become obsolete. These mid-size rep firms will be forced to grow, shrink or be acquired/merged into a super-regional rep agency.
4. Mergers/acquisitions of NEMRA reps will accelerate. Many reps are members of one of the seven different networking groups. The networking groups are made up of non-competing reps who get together through semi-annual or annual meetings to share best-practices. Many rep firms in these networking groups are seeking to merge, acquire, or be acquired by fellow networking group members. They want to be part of super-regional rep agencies.
5. Small rep firms will survive to serve small to mid-size manufacturers and many will shift their focus on a specific industry or product area.
6. Platform manufacturers will attempt to acquire mid-size, premium brand, privately owned manufacturers such as Arlington, Bridgeport, ILSCO, Electri-Flex, Leviton and Lutron.
7. Some platform manufacturers will continue to seek opportunities to sell directly to customers — bypassing the traditional electrical distribution channel.
8. Platform manufacturers will execute hybrid sales models with super-regional reps and direct factory salespeople.
9. Alternate channels will continue to threaten the distribution channel.
Tom O’Connor started Farmington Consulting Group, Farmington, Conn., for the distribution channel in 1982. He is nationally recognized in the distribution industry as a strategy consultant. O’Connor is also a contributing writer for Electrical Wholesaling and a best-selling author for the National Association of Wholesaler-Distributors (NAW) with his book, “Strategic Planning for Distributors: Execution Isn’t Everything – It’s the Only Thing!” You can contact Tom at (860) 678-4402 or by e-mail at [email protected].