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Over the Next Hill

Oct. 1, 2009
You can already see how the market will be different once the good times start rolling again.

Ispent alot of time while hiking in my youth wondering what the view was like over the next hill. While climbing different peaks in the Appalachian Mountains, I always found myself thinking about how far I could see from the top of the ridge.

The electrical industry is in a similar place right now. Electrical distributors, reps and manufacturers have climbed out of the economic swamp and are steadily making their way up the hill. But they are wondering what the business fundamentals will be like when they reach the top. They are asking themselves if it will it be a different view than what they have seen before and if they will be prepared for what they see.

This issue's package of articles on state of distribution industry software, electronic business communications and social media has a distinctly “over-the-next-hill” feel to it. It got me thinking about what the electrical world may look like when we get through this business cycle. With all that's happened in the electrical market, the “new normal” will undoubtedly be unlike anything we have seen before.

Executive Editor Doug Chandler's articles on distribution technology (page 18) and the feature, “Social Media 101” (page 22) offer an excellent snapshot on some of the technological and communication tools distributors, reps and manufacturers will have at their disposal as they crawl out of the economic wreckage to confront the new market realities. Some of this software and many of the social media tools either weren't fully developed or were just a blip on the electrical industry's radar screen when we entered this recession two years ago, and each in its own way can help your company get its groove going again.

It's tough to peg exactly when pent-up demand for electrical supplies will start fueling momentum, but for argument's sake let's say it's a year from now. How will the electrical market have changed? Here are some of the most likely points to ponder.

Banks will have much stricter lending standards. Money will be available for companies with blue-chip balance sheets, but they will have to work harder to get it.

The electrical distributors that survived the downturn with the strongest balance sheets will have opportunities to grab market share. Surprisingly few electrical distributors have gone out of business so far during this economic downturn, but some companies will emerge bloody and battered — and unable to maintain market share or be ripe for acquisition by bottom feeders.

Homebuilders will be much more conservative with speculative building. Demand for new homes should be much closer to reality now that it's not being fueled by sub-prime mortgages and other questionable financing schemes, and builders will act more responsibly.

Private-equity firms will be back in the market with cash. Acquisitions are just starting to pick up again throughout business world. You can expect to see some of the same action in the electrical market over the next few months.

End users will use iPhones and Blackberries to download product data, news and other industry information. Affordability and bandwidth improvements will give more end users access to more product data and industry information at the job-site via mobile communication devices. Downloading product videos may still be a bit of a stretch for some users, but it's not that far away.

Twitter and LinkedIn are more commonly used communication tools. Savvy marketers will be able to use Twitter and LinkedIn to keep in touch with the parts of the electrical audience who have already bought into these communication media.

Distributors will run into ESCOs while going after LED retrofit work. Good market opportunities don't go unnoticed, and energy-service companies are all over the potential of LEDs. With their expertise in digesting return-on-investment scenarios and familiarity with financial incentives from utility-rebate programs and tax breaks from federal, state and local energy programs, they will be formidable competitors.

How do you think the market will have changed once the economy improves? You can offer your prognosis at EW's new LinkedIn page, or by e-mailing me at [email protected]. We will publish the most intriguing responses in next month's issue. Happy climbing!