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Land of the Giants

June 1, 2003
To win their wars with the large electrical packages in the future, niche manufacturers must fight the battles that they know they can win. Here are five

To win their wars with the large electrical packages in the future, niche manufacturers must fight the battles that they know they can win. Here are five ideas that electrical distributors can use to evaluate future comrades in arms.

Hung on the walls of the office lobbies of many small electrical manufacturers are the now-yellowing photographs of the entrepreneurial inventors who started these companies.

These entrepreneurs nurtured and shaped their brainstorms in cramped machine shops, garages and basement workshops through long and arduous processes of trial-and-error into the polished products that formed the foundation of these companies--and of today's electrical manufacturing industry.

Many of the companies that these entrepreneurs started up have been sold to larger manufacturers. Over the past two decades, companies such as Emerson Electric Co., St. Louis, Mo.; Hubbell, Inc., Orange, Conn.; Thomas & Betts Corp., Memphis, Tenn.; BICCGeneral, Highland Heights, Ky.; Essex Group, Inc., Fort Wayne, Ind.; Cooper Industries, Inc., Houston, Texas; and Thomas Industries, Inc., Louisville, Ky., have put together enormous product packages in large part through acquisitions that crank out millions and sometimes billions of dollars of electrical product sales. Some of these companies can provide over 20% of all the electrical products that typical electrical distributors stock in their warehouses.

But the spirit of entrepreneurship still runs strong in the electrical wholesaling industry. Dozens of scrappy, often family-owned electrical manufacturers survive and very often thrive against competitors many times their size. Large companies throw a ton of incentives toward electrical distributors to entice them to commit what they hope will be an ever-increasing amount of their inventory investment and salespeople's selling time. These incentives are usually linked to the well-known distributor programs such as Bussmann's BussPlus and T&B's Signature Service that offer distributors marketing benefits, rebates and other spiffs based on the volume of business they do with the company.

However, plenty of good reasons still exist for an electrical distributor to include a balanced mix of mega-manufacturers and niche specialists in his or her vendor portfolio. While there's a ton of documented evidence about the cost savings (less duplicate inventory, less time spent training salespeople in multiple product lines, etc.) of going single-line, situations exist where distributors prefer to carry more than one vendor in a product area. Some distributors don't want to be "owned" by any one manufacturer in a particular product area, and keep a few secondary lines as insurance policies just in case something goes haywire in their relationship with their primary vendor. Other distributors enjoy the cat-and-mouse negotiating tactic of playing one vendor off of another in hopes of winning price concessions or other niceties.

If you are reevaluating your vendor mix and are shopping for some niche companies to balance out your portfolio, the following strategies will help you narrow down your list of prospective partners.

Ask the questions that will define a future relationship. You don't want any surprises when you take on a new vendor. If the vendor happens to be a smaller firm with a nonexistent or limited track record in the electrical market, move even more carefully. For starters, you must ask questions about the company's background; product specifics; sales policy; pricing; packaging and labeling; merchandising, advertising and promotional strategies; distributor training; buying-group participation; trade show coverage; and electronic commerce.

It's a workout to think of all the questions that you need to ask concerning all of these areas. One handy resource with over 150 questions that distributors need to ask new vendors is "The Electrical Marketer's Survival Guide," published by Electrical Wholesaling/Intertec Publishing Corp. and available for $29.99 by calling 1-800-543-7771.

Partner with companies that have built a product niche and then market the hell out of that niche to end users. It all starts with the quality of the product. The small companies that break away from the pack don't do it with a me-too product without features in some way discernibly different from other competitors in the market. For instance, there's a lot of interest in the lighting world right now in LED lamps because of their incredibly long lamp life of 100,000-plus hours and the inventive colors that these lamps can emit. One LED manufacturer that has taken the Lightfair show by storm the past two years with wins in the show's 1998 and 1999 product showcases is Color Kinetics, Boston, Mass. Along with producing lamps capable of some wild color schemes, the company was a big hit with attendees with a booth packed with amusing applications for the lamps and manned by employees wearing silly hats with the LED lamps bobbing about on springs. Another niche lighting manufacturer has quietly made a name for itself in a product area well-known for high-volume product runs of plain-vanilla products: fluorescent fixtures. H.E. Williams, Inc., Carthage, Mo., manufactures top-of-the line fluorescent fixtures to carve out a piece of the lighting market against huge competitors such as Lithonia Lighting, Inc., Conyers, Ga., and Cooper Lighting, Inc., Elk Grove Village, Ill. The company uses product features like a durable powder-coat finish to differentiate its product line from competitors.

Listen to your customers. Never overlook the real-world input you can get from your customers at the counter, in the field or at trade shows about the product lines that interest them most. Electrical manufacturers spend a ton of money trying to influence the buying preferences of end users and to drive the business to distributors with advertising, trade shows, direct-mail campaigns, Web sites and dozens of other different ways, but they often forget to tell their distributors that they are doing it. The feedback you get from your customers is one way to evaluate how successful the manufacturer has been at building demand for their products.

Survey the local reps on the hot new manufacturers. Unless the product line is ultra-technical and requires a full-time salesperson, niche manufacturers new to the electrical market usually go through a network of independent manufacturers' reps. You may have to cut through a little smoke and B.S. from a rep who wants to offer some overly enthusiastic feedback about the lines he is currently pushing, but a few phone calls or meetings with other reps in the market should give you a picture of the most interesting new products on the street.

Give bonus points to the vendor that you sense will out-hustle and out-service any competitor. This is probably what's going to make the difference for a smaller manufacturer. Few companies manufacture products that are one-of-a-kind gamebreakers, so they must rely on service to win over distributors. This is particularly true if they manufacture a product that's difficult to differentiate. If a company doesn't impress you during the courting process, don't expect them to do it after you are married to them for a few years.

When adding new vendors or reevaluating existing lines, there aren't any easy solutions to picking the right partners. In the end, you will still have to go with your gut. But if you start your search with these strategies, you can eliminate a lot of problem relationships before they ever have a chance to get started.