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EVs Hit a Rough Patch

Jan. 29, 2024
Jim Lucy2015 1025

Green Shoots Despite a Potential Drought

June 2, 2023
Top 150 distributors continue to invest in their businesses despite an uncertain economy.

After reading through Top 150 survey responses from more than 100 senior executives at electrical supply houses, I came away impressed with the resiliency of these industry leaders.

They were optimistic in their 2023 revenue forecasts and unafraid to invest in new business ventures to grow their companies. They are also realists, and the majority of them sense that we are either already in a recession or will see the U.S. economy slip into one by 1Q 2024.

Walking on the sunny side of the street.

More than half of the 93 execs who offered 2023 growth forecasts said they expect double-digit growth this year, and only six distributors said they don’t expect any growth at all. None forecast a decline in sales.

Despite a possible recession on the horizon, they are quite confident in their ability to manage in any business climate.

Supplying trophy jobs.

Many economic indicators point to a slowdown in the construction industry. However, Top 150 distributors are currently involved with or expect to be supplying EV battery and semiconductor plants, data centers, airports, utility grid revitalization, ports, hospitals and even some downtown office construction.

Sometimes, the fastest-growing project business they are involved with is in a tightly defined niche. For Jo-Kell Inc., Chesapeake, VA, car washes have been solid business. “The largest projects we have seen (and see in the immediate future) are in the automatic car wash OEM sector,” said John Kelly, the company’s chief corporate officer. “Our business in that market tripled in the past year, and we expect even more growth over the next year.”

Investing in new branches.

Opening a new branch location is one of the largest capital expenditures a distributor can make, but in 2022 and 2023, Top 150 distributors were playing the long game and branching out on a grand scale.

City Electric Supply (CES), Dallas, opened more new branches than any other distributor over the past 12 months, launching 50 new locations. The company currently has 592 U.S. branches and 76 locations in Canada.

Branch expansion has always been an important growth strategy for Elliott Electric Supply, Nacogdoches, TX, too, and in the past year the company opened new locations in Dripping Springs, and Forney, TX; Denver; and Shawnee, OK. Crescent Electric Supply, East Dubuque, IL, also opened multiple locations with new branches in Des Moines, IA; Louisville, KY; and Seattle. Wholesale Electric Supply, Texarkana, TX, opened five new locations, and Chelsea Lighting, New York, opened locations in Chicago, Philadelphia and Fort Lauderdale, FL.

Overcoming long lead times.

Like distributors, electrical manufacturers are also managing their businesses in the face of tough economic conditions. Two Top 150 distributors said electrical manufacturers are currently devoting more resources to strengthening their supply chain than on launching new products. Said John Eggleton, president & CEO, Kirby Risk Electrical Supply, Lafayette, LA, “Manufacturers are focused on managing their supply chains and adjusting specs accordingly but seem to be holding off on innovation.”

Molly Sheehan, ESG business analyst, Turtle & Hughes, Linden, NJ, is thinking along the same lines. “Manufacturing resources in new product development have been dedicated to supply chain resiliency,” she said. “We have not seen many new products launched.”

Tom Nelson, communications director, Border States, Fargo, ND, succinctly summarized the optimistic tone I saw in this year’s Top 150 responses.

“To be in distribution today has never been more rewarding,” he wrote in his response. “The supply chain challenges that exist require distributors to collaborate between manufacturers and customers more than ever before. Distributors are a more important part of the supply chain than ever before.

“Our industry is growing in awareness, and the next-generation workforce is intentionally getting engaged and involved. Exciting times for the distributor of the future!”