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Contractor Colossus

Sept. 1, 2003
Contractor consolidation hasn't wiped out the electrical industry's business basics.One of the most popular discussion topics around the industry these

Contractor consolidation hasn't wiped out the electrical industry's business basics.

One of the most popular discussion topics around the industry these days is the consolidation of the electrical contracting business. With electrical contractors accounting for 37% of the average electrical distributor's business, it's easy to see why.

That's why the electrical contracting world's most active consolidators--Integrated Electrical Services, Inc. (IES), Houston, Texas; Building One Services, Washington, D.C.; and GroupMAC, Houston--have become huge factors in the electrical market. In less than two years, these three companies have purchased close to 100 electrical contractors.

Distributors want to know what happens to their business relationships with the contractors purchased by one of these firms, and manufacturers are trying to make sure they are included in any of their volume-purchasing arrangements.

In the early going, each of these companies is handling its purchasing policies with a different twist. The nuances of these strategies will provide very interesting reading for you in the coming months as part of a new EW series of articles on the buying practices of the contractor consolidators.

First up is Integrated Electrical Services (See "Living Large," p. 24), the subject of this month's cover story. With its 100% focus on this industry and 1999 sales forecast of $1.2 billion, it's the largest of the consolidators in the electrical market. In comparison, along with electrical contracting services, Building One and GroupMAC offer heating, ventilating and air conditioning (HVAC), mechanical and even janitorial services.

Some distributors get jittery whenever the subject of contractor consolidation comes up because of their fear of large electrical contractors buying direct. But Russ Crawford, IES's V.P. of vendor relations, says as long as a distributor truly builds his business around understanding an electrical contractor's needs and always keeps that contractor's best business interests in mind, he will continue to get that customer's business.

The company's purchasing policies are no doubt shaped in part by Crawford's background as an electrical distributor. He built Crawford Electric Supply into a solid source of supply in the Dallas market before selling it in 1990 to Craig Levering, now that company's chief executive officer. Crawford believes in the value that a good electrical distributor can bring to a contractor.

Working with IES will become even more important to distributors and manufacturers. Crawford figures the 129-location company will purchase $400 million in electrical supplies this year, and he believes the company will boost its purchases of electrical products to over $1 billion by 2003.

While IES's purchasing numbers are indeed mind-boggling, they are also a ringing endorsement of the electrical distributor, since the company buys almost entirely through distributors. From what we have heard, the companies that these 60-plus electrical contractors buy from are the distributors who meet some strict IES guidelines on providing point-of-sale data on the products these contractors purchase and who have offered the best package of services over the years, not the lowball-price artists.

Customers and competitors get bigger. New sources of supply appear out of nowhere, and the electrical business gets more digital every day. But when it comes down to becoming a first-call electrical distributor, some things never change, whether it's 1999 or 1899. It still comes down to getting the right product to the customer, in the right quantities, when and where he or she needs it, at a mutually agreed-upon price.

About the Author

Jim Lucy | Editor-in-Chief of Electrical Wholesaling and Electrical Marketing

Jim Lucy has been wandering through the electrical market for more than 40 years, most of the time as an editor for Electrical Wholesaling and Electrical Marketing newsletter, and as a contributing writer for EC&M magazine During that time he and the editorial team for the publications have won numerous national awards for their coverage of the electrical business. He showed an early interest in electricity, when as a youth he had an idea for a hot dog cooker. Unfortunately, the first crude prototype malfunctioned and the arc nearly blew him out of his parents' basement.

Before becoming an editor for Electrical Wholesaling  and Electrical Marketing, he earned a BA degree in journalism and a MA in communications from Glassboro State College, Glassboro, NJ., which is formerly best known as the site of the 1967 summit meeting between President Lyndon Johnson and Russian Premier Aleksei Nikolayevich Kosygin, and now best known as the New Jersey state college that changed its name in 1992 to Rowan University because of a generous $100 million donation by N.J. zillionaire industrialist Henry Rowan. Jim is a Brooklyn-born Jersey Guy happily transplanted with his wife and three sons in the fertile plains of Kansas for the past 30 years. 

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