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1,000 Nicks: How distributors fail

Feb. 11, 2014
Too many electrical distributors don’t look past the borders of the electrical market in search of long-range trends that could impact their business. 

Did you ever stop and think about why some electrical distributors die?  What were the reasons for their demise?

Consultant Bruce Merrifield was for many years a regular speaker at electrical industry meetings. One thing he said that always stuck with me is that distributors usually perish from a thousand different nicks rather than from one competitor that cuts them off at the neck with one cut from a sharp competitive sabre. Let’s take a look at some of the most common “nicks.”

Forgetting what got you there in the first place. Two of the feature articles in this issue explore how distributors can compete with emerging alternate channels like AmazonSupply. The best strategy isn’t anything you have to pay a business consultant $25,000 to develop. Just continue getting the right products to the right customers when and where they need them at a reasonable and profitable price, and you will probably be okay.

Focusing on sales and not profits. Cutting prices to oblivion is no way to run a successful business. It’s all about adding profit dollars per order.

Not having a succession plan. You could write a book about the family businesses that go out of business because the founder hadn’t taken the time to groom the next generation for leadership roles.

Not investing in training for employees. Sandy Rosencrans, City Electric, Syracuse, N.Y., and the 2013-2014 chairman of the National Association of Electrical Distributors, St. Louis, Mo., invests a ton in training her salespeople. She says in her presentation to the audiences at this round of NAED regionals that when people ask her why she isn’t worried about competitors stealing her salespeople after she invests so much in training them that she would rather go to market with smart salespeople than uneducated ones.

Not believing that what happens in the electrical market often happens in other distribution niches, too. Too many electrical distributors don’t look past the borders of the electrical market in search of long-range trends that could impact their business. That distributor of propane tanks, natural foods or plastic packaging with a branch in the same industrial park as you may be facing many of the same challenges, but he or she may have  a different perspective on how to solve them. Stop by for a visit and see what you can learn.

If you want to take a deeper dive into the industry trends facing the distribution industry as a whole, check out the National Association of Wholesaler-Distributors (NAW), Washington, D.C. NAW conferences offer a terrific opportunity to network with non-competing distributors in different lines of trade from around the country. 

Believing your past success will directly correlate to future success. Like the mutual company advertising says, past performance does not guarantee future results.  There’s no harm in reminiscing about that whale of a sale, new customer you brought on after a long but successful courtship, or the star salesperson you hired who has really turned around that territory, as long as you learn from each success and try to apply it to a new situation today.

Not realizing your customer base is always changing. Joe McPartland, the long-time editorial director of Electrical Construction & Maintenance (EC&M) magazine, EW’s sister publication, used to always say his magazine’s subscribers (electrical contractors, facility maintenance personnel and electrical engineers) were always on parade. As well as he knew the magazine’s audience, he realized the magazine’s subscribers were changing every day — new folks were subscribing to the magazine, some were changing companies or leaving the electrical industry and others were always retiring.

The same is true with your customer base. People are always moving in and out of the industry. The customers who wandered into your counter area today will be different from the folks who stop by tomorrow. Each and every new contact you make refreshes your network. Don’t be one of those people who wake up one morning and realizes that half of their best customers over the years have moved on or don’t have that same buying influence.

It’s just one of a thousand different nicks that could do you in.