Two of the feature articles in this month’s issue dig into several of the alternatives electrical manufacturers have to distribute their products in the electrical wholesaling industry.
EW’s 2016 Electrical Pyramid provides a simple graphic representation of the channels of distribution. And in “Battling the Energy Pirates”, you will learn about BOSS Controls, Pittsburgh, a start-up marketing an innovative controller for plug-in electrical loads that’s currently looking for distributors, system integrators and installers with a unique blend of talents in distribution, IT and energy.
Today, traditional distributors probably sell more than 70% of all electrical products. Best-in-class full-line distributors have built and maintained that commanding market share with a well-known package of value-added services aimed at supporting their basic formula for success — getting products to customers when and where they want them at a reasonable price.
This formula has added up for years and will continue to work for shelf-good products that don’t take much explanation and don’t go obsolete. But will these time-tested services work in the future for electrical products that incorporate IoT-enabled sensors, or the latest LED and solid-state technology?
At BOSS Controls the Internet of Things is already a reality, because it collects data on a customer’s energy usage through its SmartPlug devices, stores this information in the cloud and provides the software that customers can use to work with electric utilities to reduce their energy bills.
And as EW’s editors found out in the Top 200 survey, distributors have lots of questions about how to manage their inventory investment in LEDs because of concerns about obsolescence. We will be publishing an article on this issue in next month’s edition.
Another force to reckon with is Amazon. The company presents both challenges and opportunities for electrical distributors. The Amazon Prime delivery service has set the bar for online shopping and product delivery and many customers now expect the same seamless shopping experience they get with Amazon from their sources of supply for electrical products. The company’s AmazonSupply business also functions as an online distributor and is aggressively promoting its capabilities in the electrical market. Over the past few months, these efforts included advertising test equipment on www.ecmweb.com, the web-site of EW’s sister publication, Electrical Construction & Maintenance.
Along with being a competitor, Amazon also can be a business partner for those distributors that choose to market their electrical products with its web services. Go to amazon.com’s Business, Industrial & Scientific Supplies web page and check out how many vendors are already selling products there, particularly in the lighting area. While utilizing Amazon’s web services is an option for distributors who prefer to let Amazon handle their online store rather than having to make a six-figure investment in building their own, the company takes a big cut — apparently up to 15% in some cases — of any sales generated through its site.
While the IoT and LEDs or challenges from Amazon are game-changers for this industry, it’s not the first time distributors have had to adapt to survive. Take a look back over the past few decades, and think about how radical it was for companies to transition from managing their inventory on index cards to relying on computer software to do it. And remember all the chatter in the 1990s about how Home Depot might put distributors out of business? That didn’t happen for lots of reasons, including the fact that distributors invested in re-merchandising their counter areas to offer customers better shopping experiences.
Distributors can profitably distribute new-tech products like LEDs or IoT-enabled devices, and they can compete with Amazon for online sales. But becoming real players in these areas will mean making investments in product expertise, software and marketing. Standing pat right now won’t cut it.