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2013 Market Planning Guide

Dec. 11, 2012
Once we get past the air of uncertainty over the outcome of the presidential election and the nightmares over what could happen if we don’t avoid the “fiscal cliff,” 2013 should shape up to be a decent year for the electrical industry.

For an industry where the same basic evergreen truths of customer service govern how businesses are managed year after year and generation after generation, it’s interesting to note that when it comes to the business of forecasting sales of electrical products, it seems each year bring with it a new set of economic parameters that set the foundation and boundaries of the business conditions ahead.

Last year at this time, some economists thought the economy might fall back into a recession and were offering dual forecasts to cover that probability and the more likely slow-growth scenario. The year before that, they were pretty sure the economy had bottomed out after the recession and that it was ready to begin a long, slow slog back to respectability.

Several weeks before the presidential election, there’s no question that uncertainty rules because of the lack of clarity over who will be U.S. president next year and concerns over the resolution of the fiscal cliff. With that uncertainty comes caution about investments in new employees, equipment and other capital expenditures among Electrical Wholesaling’s readers and their customers. This wasn’t as a big of a concern several short months ago, when many business owners inside and outside the electrical industry were more enthusiastic about their businesses’ prospects. You see it in stock market, where for most of the year the basic market indices were racing toward some nice gains well ahead of yearly averages, before tailing off over the past month or so. And the editors of Electrical Wholesaling saw it in the survey returns of Top 200 electrical distributors back in April, when dozens of the largest electrical distributors in the land said they expected double-digit increases in their 2012 sales. Some of those same companies probably aren’t quite as optimistic today.

That’s because market realities like the sluggish recovery, concerns over the global economy and the toxic political debates on both sides of the aisle on Capitol Hill and on the presidential campaign trail have a funny way of messing up expectations, blanketing the country in a fog of uncertainty and making business owners cautious about making investments in their businesses. Indeed, 71% of distributor respondents to Electrical Wholesaling’s annual survey for its Market Planning Guide said they weren’t planning on making any major capital expenditures next year. However, of the 87 distributors who said they were investing in their business next year and offered some insight into the nature of their corporate purchases, the shopping list reflects the increasingly electronic nature of the business world, as approximately 14% of respondents said they would be purchasing tablet computers; smart phones (11%); and ERP systems (4%). Other purchases included delivery trucks (18%) and material handling equipment for warehouses (12%).

Even in this uncertain environment, survey respondents still expect their sales to grow 5.2% in 2012 and a more modest 4.4% in 2013. Electrical Wholesaling doesn’t forecast out beyond that to 2014, but Herm Isenstein, president, DISC Corp., Orange, Conn., does, and you will be very interested to see what he expects in 2014 in his article “Hold Steady Another Year,” on page 36. For next year, be alert to market opportunities in the following niches.

Residential market. This market niche, which accounts for an estimated 17% of electrical distributors sales and should hit $16.2 billion next year according to Electrical Wholesaling data, is on the mend. While it’s not really in the sweet spot of most commercial/industrial electrical distributors, an improving residential market is the foundation of most recoveries in the construction market, because once those new housing developments go in, the strip shopping centers follow, and they are loaded with restaurants, shops, gas stations and other retail and commercial construction that’s very definitely of interest to electrical distributors. And once people buy new homes, they tend to go on a buying binge for furniture, electronics and all the other niceties of modern living, and that primes the pump in U.S. factories still making those products.

Lighting retrofits. No mystery here. Retrofits of existing buildings were perhaps the healthiest market segment during the long recession, and they continue to have good potential. New lighting systems are still marching into the market with ever-more efficient products and no-brainer return-on-investments that pencil out nicely in less than three years for bean counters. And that’s not even counting the more cutting-edge LED systems with 50,000 hours of life, which are constantly improving their payback scenarios in an increasing array of applications, including hard-to-maintain applications like warehouses, parking garages and municipal lighting systems.

Labor-saving gadgets. EW’s editors continue to be amazed at how many interesting new products hit the market each year from both established electrical players and contractors-turned-entrepreneurs. They may not be your next million-dollar sale, but they sure are fun to sell, and helping customers do their jobs faster, safer or better is always a great door-opener.

Conclusion. This recovery sure seems different than other business cycles. But in looking at where we have been and the sales forecast and market opportunities ahead, we can all learn from a famous quote generally attributed to Mark Twain: “History may not repeat itself, but it does rhyme.” So even if your customers aren’t singing the same song during this recovery, see if you can pick up on the rhythm that worked for your company to prosper in a similar business cycle of yesteryear and try to make it into a hit again this time around.

How to Use The Market Planning Guide

The market planning data in this issue is divided into nine regions of the United States. For each region and state, you’ll find sales forecasts for this year and next year, along with the three prior years’ sales. In addition to the sales forecasts, which are prepared by Electrical Wholesaling’s research department, you’ll also find an economic snapshot of the region and employment statistics for four of electrical wholesalers’ major customer groups: electrical contractors, the commercial market, the industrial market and government.


Our forecasts are based upon responses to Electrical Wholesaling’s annual Market Planning Guide (MPG) survey. Each year, the magazine asks electrical distributors for their previous year’s final sales results, sales predictions for the current year, and predictions for the following year. It also asks respondents how sales for the first six months of the current year compared with the first six months of the previous year. This year, Electrical Wholesaling mailed 4,874 surveys (both by mail and via e-mail) and received 300 usable responses for a 6.2% response rate. Respondents reported an average sales-per-employee number of $526,331 for 2011, down from the $541,519 respondents reported last year for 2010 and quite a bit lower than the $666,635 average sales per employee for the 130 respondents to this year’s Top 200 survey who provided both sales and employee figures for 2011. Regional sales-per-employee numbers are provided on page 18. Be sure to check how your company’s productivity compares with the national and regional averages when it comes to sales-per-employee.

Employment data. The employment numbers help develop forecasts for customer buying potential. Compiled from publicly available data at, the website for the federal government’s Bureau of Labor Statistics (BLS), the Regional Factbook data published in this issue is just a small sampling of what what’s available from BLS. If you want to drill down into more specific types of customers, search for the Current Employment Statistics (CES); if you want to dig into specific types of jobs look for the Occupational Employment Statistics (OES).

EW’s Customer, Market and Product Mixes

There’s one big change in how we are handling this data. It’s only available online at Just go to the website and click on “EW Top Hits” and then “Market Planning Guide.” The Customer Mix and Market Mix are great resources if you’re looking for sales breakdowns for full-line distributors’ key customer and market segments. The Product Mix data offers valuable insight into the product areas that have the most mind share with electrical distributors. Over the years, some of the product categories have been consolidated or eliminated because their contributions to electrical distributor sales were consistently less than one percent. See the text accompanying the chart for a full explanation of the changes.

Getting the full picture on a market area isn’t that difficult. When developing any market forecast, gathering some basic data on the size and makeup of the market is the first step. Let’s take a look at some of the ways you can crunch the numbers we’ve provided to tailor them to your specific business and market.

Sales estimates. One of the most common uses of this resource is for developing a business plan, whether it be for internal use as your guide for next year or for a presentation to an investor or banker. You will need something that states the size of the local market, and these sales figures are a documented source you can use “as is.”

This data will also be helpful in establishing a sales forecast for your company and your region, comparing nearby or far-flung markets with an eye to opening or closing a branch, and evaluating promising areas of new business. One question distributors should ask themselves — and suppliers will be asking — is: “Are our sales into the market at the level they should be?” Look at the estimate of the overall sales in your market in comparison with your company’s sales.

Employment in major customer markets. In addition to sales forecasts, employment numbers make up a large part of the regional profiles. The number of people employed by a company or in an industry tends to rise and fall with the volume of business it’s doing. Employment figures, therefore, act as a gauge to business prospects and conditions in end-user markets.

Employee counts can help you compare the relative sizes of various end-user groups in your area. You can also compare the make-up of one market area to another, and consider new customer markets or ones that you could be serving better.

If you track the employment figures for each market over time, you’ll see broad economic trends unfolding in your market.

You can also use these employment figures to make your own multipliers or you can use the national multipliers we’ve already calculated.


Each multiplier is a dollar figure that represents the average amount of electrical products distributors sell to each particular type of customer, on a per-employee basis or other “economic factor.” (See EW’s National Multipliers on page 17). When used with the employment figures in the regional profiles, the multipliers help establish the amount of business electrical distributors could do with major customer groups in your area, and in total.

For instance, you can go into greater detail by using locally available sources of information on employment or other measures in end-user industries. The professionals at the nearest business library should be able to direct you to a source for the numbers you need. These multipliers are also a good option for determining sales in an area of the country not covered in the list of major metropolitan areas in the regional profiles. The same approach applies if you want to look at one county in an MSA that covers six counties. You would have to obtain employment figures or economic factors from local sources.

For instance, to find the number of electrical contractor employees in Addison, Ill., a city not detailed in the East North Central regional profile, you could contact the local Chamber of Commerce, a nearby union chapter, the state university, the state’s department of commerce or the local library to track it down.

These multipliers come in handy if you want to approximate the amount of sales available from a particular account. For example, if a manufacturer employs 300 people, by applying the multiplier of $698, you would expect the facility to purchase about $209,400 worth of electrical MRO products this year.

Using multipliers results in a dollar figure for market size that tells the level of business electrical wholesalers in the area could do if every potential customer there bought a typical amount of product from them. It tends to be a larger number than actual distributor sales. You can also use EW’s multipliers to track sales through different types of customers over time. Let’s do that for sales through electrical contractors. At the peak of the current business cycle in Oct. 2007, electrical contractors had 943,700 employees, nationally. Using EW’s multiplier of $46,585 in sales for each electrical contractor employee, that’s $43.9 billion in sales at the market peak. With the drop in employment at electrical contractors to 743,500 as of August data, potential sales slid 26 percent to an estimated $34.7 billion.

Summary. Here’s a forecast you can use in your cocktail party conversations over the next few months: Don’t expect much change in the overall economic picture until after the election and after Congress has hammered out some sort of resolution to avoid the fiscal cliff. Assuming that cooler heads and common sense prevail and Congressional leaders agree on a workable solution — possibly a dangerous assumption whenever politicians are involved — we could see a decent first quarter of 2013. From that point on, the market drivers appear to be in place in the all-important nonresidential construction sector to push the electrical industry toward solid but not spectacular growth in the mid-single digits.