Changes to the 2002 Census of Wholesale Trade and What It Means to the Electrical Industry

Nov. 1, 2005
While perusing the forecast numbers in Electrical Wholesaling's Market Planning Guide this year, you may have noticed that the industry appears to be

While perusing the forecast numbers in Electrical Wholesaling's Market Planning Guide this year, you may have noticed that the industry appears to be “shrinking” — from 2005 estimated sales at $89.4 billion published in EW's November 2004 issue to the $73.3 billion estimated 2005 sales published in this issue. The industry is not shrinking, but there were changes to the definition of an electrical wholesaler, according to the U.S. government. Here's the story.

Every five years the U.S. Census Bureau releases its Economic Census of Wholesale Trade, which captures the universe of the industries operating at the wholesale level. Typically, it includes new businesses not around five years ago and excludes companies no longer in business or no longer in the wholesale industry. It also releases national sales numbers, along with some sales numbers at the state and metropolitan level.

Economic Census information is collected for years ending in “2” or “7” (for example, 1992, 1997 and 2002). The numbers are compiled, checked for correctness, validity, etc., and are available about two years after the data are collected. The most recent data were collected in 2003 for the year 2002. They were released this year.


Part of the 1994 North American Free Trade Agreement (NAFTA) of the United States, Canada and Mexico called for a unified three-country classification system. The North American Industry Classification System (NAICS) was created in 1997. This new classification system redefined wholesalers versus retailers. The approach was to define businesses on a production function basis versus in terms of who the customer is. That was the theory. As a practical matter, the redefinition raised a host of related issues, but the bottom line was the establishment of a set of rules that would define retail versus wholesale trade. A few of the rules are given in the chart above.

Who is an electrical wholesaler?

In 1997, the implementation of this definition into the Census of Wholesale Trade, particularly for the electrical wholesale industry, met with some definitional issues regarding electrical distributor counter sales, and sales to builders and contractors. Counter sales were treated as “walk-in business,” and distributors doing a substantial portion of business with contractors were considered retail. As a result, a number of electrical wholesalers were reclassified as retailers. Their sales numbers were not included in the Wholesale Trade report but were instead included in the Retail Trade report.

Comparison with earlier Census of Wholesale Trade reports

The difference between the reported electrical wholesale sales numbers in the 1997 Census report and the previous 1992 Census was substantial. In fact, the 1997 number was $38 billion, which was $5 billion less than the 1992 Census of $43 billion. In other words, the 1997 Census showed that the electrical wholesale industry had decreased by nearly 12 percent between 1992 and 1997 — clearly, not a reasonable scenario.

Reconciling the Numbers

Electrical Wholesaling and DISC Corp. knew (as did others associated with the electrical industry) a coding issue existed. The DISC fix was to obtain data on the electrical wholesalers at the state, metropolitan statistical area (MSA) and county level classified as retailers and add that into the published Wholesale Trade Report. That brought us back to a Standard Industrial Classification (SIC) code 5063 industry definition (the former definition), and our numbers were then consistent with previous Census of Wholesale Trade Reports. That combined number, those distributors who were in the $38 billion group and those distributors who were placed in the retail industry ($23 billion) was $61.7 billion. Electrical Wholesaling also raised its estimate to $61.7 billion.

Testing Assumptions

In 1998, DISC Corp. had the final numbers for our economic indicators driving the electrical industry and we locked in on our estimate of the industry for the year 1997. Our number was $64.2 billion compared with the SIC 5063 definition from the Census Bureau of $61.7 billion, which was available in 2000. The percentage difference was 3.9 percent.

This difference is not happenstance. DISC always checks the validity of its numbers against the Census Bureau benchmark; the checkpoint historically has always been less than 5 percent. This is a cumulative difference over a five-year period, which translates into an average annual difference of less than 1 percent.

The 2002 Census of Wholesale Trade

The 2002 Census of Wholesale Trade reports that the electrical wholesale industry in 2002 sold $57.9 billion of electrical supplies and apparatus. That number is based on some revisions in the definition of how electrical distributors were classified compared with the definitions used in the 1997 Census.

However, an issue still exists with how to classify distributors that do business with builders and contractors and retail lighting showrooms. I suspect that some distributors who do business with contractors again wound up in the retail industry, depending on the other mix of their business. Also, I am confident that distributors who have lighting showrooms, for example, and do some of their total business through retail lighting showrooms were again classified as retailers, not wholesalers. Again, this depends on their mix of other business.

The total of $57.9 billion is closer to how the industry sizes itself compared with the 1997 Census, but I believe it is still a bit short. For example, the DISC number for 2002 was $67 billion before benchmarking to the 2002 Census. This is a number that is consistent with an SIC code industry definition because we simply extended our 1997 number throughout the following five years. Incidentally, Electrical Wholesaling also extended their numbers to be consistent with an SIC code definition before benchmarking to the 2002 Census. EW's number for 2002 was $72 billion. Both DISC and Electrical Wholesaling have now benchmarked to the new 2002 Census number of $57.9 billion.

Bottom line is that the “industry number” is a bit light and there is no correction for it at this time. This will not violate how you do business. The difference is not so great that the credibility of the numbers is destroyed. And, it will not do damage to your performance measures. The key focus is to track your business in a consistent manner over the next five years, and you can do that using either the EW survey approach or the DISC economic model approach, or both. But for now everyone gets a bonus, an automatic increase in market share.

One last comment

The Bureau of the Census is open to comments and change. We have industry leaders and trade associations (both NAED and NEMA) who can and should be working closely with the Census people to ensure that the Census of Wholesale Trade in 2007 will define our industry as businesses in the industry define themselves. Contact Yvonne Wade, branch chief, Census of Wholesale Trade, at (301) 763-2725 or [email protected].

Herm Isenstein is president of DISC Corp., Orange, Conn., ( a market analysis and forecasting company for electrical distributors and manufacturers and a frequent contributor to Electrical Wholesaling. You can reach him at (203) 799-3673 or [email protected].

RETAIL OR WHOLESALE NAICS1 IMPLEMENTATION RULESRetail Wholesale Primarily sells from a storefront. Sells to general public. Primarily sells from a warehouse or office. Sells to other wholesalers and retailers. Uses extensive displays to solicit walk-in traffic. Uses little or no merchandise displays and does not solicit walk-in traffic. Sales to the general public. Little or no sales to the general public. Nonstores selling directly to customers, mail order, catalogs, and through Internet. Sells nonconsumer durable (capital) goods. 1North American Industry Classification System
About the Author

Herm Isenstein

Herm passed away in Sept. 2019 at the age of 86 from brain cancer. He was a good friend to the editors on the staff of Electrical Wholesaling and a prolific writer for the magazine for 15 years.

During his 30-plus years in the electrical industry, Herm Isenstein was the premier economist in the electrical wholesaling industry  If you have any questions about DISC's subscription-based data services, contact  Chris Sokoll, DISC's president at  at  346-339-7528.

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