Electrical Wholesaling's annual Top 200 ranking does a fine job of listing all the largest distributors in the land, and the accompanying analysis shows you who bought who over the past year; distributors' growth forecasts; and the most efficiently operating distributors, as ranked by sales-per-employee.
That type of analysis is all critical to paint a picture of the largest distributors in electrical wholesaling and to provide a bit of insight into the industry in which they operate. But it's also of interest to learn how these distributors maintain and improve their rankings in the Top 200, and which companies are growing the fastest.
Industry publications tend to shine the spotlight on the companies that make the most acquisitions, and that information is available in last month's issue on pages 26-27. But plenty of independently owned and operated electrical distributors are growing as fast or faster than the big acquirers in the business.
How are they doing it? Certainly, basic financial blocking-and tackling goes a long way in this industry — keeping a tight rein on accounts receivable and inventory turns, taking cash discounts from suppliers whenever possible, and using the leverage of buying/marketing groups' volume-purchasing agreements to get a break on pricing with vendors.
Many of the companies in the Top 200 are using some common strategies to grow. These companies aren't battening down the hatches and waiting for an uncertain economic climate to blow over. They are investing in new facilities, markets, technology and people. Quite a few companies were investing on multiple fronts. For instance, in addition to opening new locations, they may be installing new software in the company. Or along with hiring new employees and investing in a management-training program, they are going after new market segments.
Some of the Top 200 respondents investing across multiple fronts include: Argo International Corp., New York; Fromm Electric Supply Corp., Reading, Pa.; Griffith Electrical Supply Co. Inc., Trenton, N.J.; NESCO / Needham Electric Supply, Canton, Mass.; Schaedler Yesco Distribution Inc., Harrisburg, Pa.; and Werner Electric Supply Co., Neenah, Wis.
Details on the expansion efforts of these companies and other distributors are provided in the accompanying tables. The companies listed here are the firms that volunteered specific information on their growth initiatives and are not the only distributors in the 2008 Top 200 making these investments.
New digs
With all the emphasis on acquisitions, it's easy to overlook just how many new branches electrical distributors open every year. Growing through branch expansion can have some advantages over acquisitions growth strategies. You can use your existing computer system instead of sweating out the conversion of an acquired company's computer network; there isn't any new corporate culture or personalities to adapt to; and it's a great way to promote from within and give star employees new responsibilities. Elliott Electric Supply, Nacogdoches, Texas, was particularly busy with new branches in 2007 — the company added 12 new locations.
The human element: Investing in people and employee training
Everybody talks about the importance of training and finding, keeping and motivating employees, but in this competitive labor market it's a lot tougher than it sounds. Matt Brnik, president, Schaedler/Yesco, said beefing up his company's management ranks and developing the proper structure to handle 65 percent growth the company anticipates over the next five years is the most difficult puzzle the company's management team is trying to solve in 2008.
New software and tools of technology
Distributors break out in a cold sweat at the mere mention of a software upgrade or conversion. It's a major investment - and often a cranium-splitting headache. But as the brain, heart and communication system that drives any distribution business these days, a new business software system is either a necessary evil or a wonderful tool that can be used to analyze and grow the business, depending on your perspective. Quite a few Top 200 distributors made the investment in the past year. Eclipse distribution software was most common in these conversions or upgrades. Two companies were implementing radio-frequency and/or wireless technology in their warehouses: American Electric Supply, Inc., Corona, Calif., and Yale Electric Supply Co. Inc., Lebanon, Pa.
Gunning for growth in new markets
Despite a rather lukewarm endorsement of the green market from many Top 200 distributors as a whole, the companies that had identified it as a growth opportunity were very enthusiastic about the sales prospects in it. Sonepar USA, Philadelphia, is rolling out an environmental initiative on a grand scale across the United States. Said Francois Chatin, vice president of marketing and communications for Sonepar's U.S. operations, “More end-users and contractors are interested in green products and we have to be knowledgeable in the current and future energy-saving, eco-friendly products on the market. Sonepar USA's sustainable development program, called ‘BlueWay,’ promotes energy-saving lamps and creates awareness of other eco-friendly products and develops their sales on the market. Many of our subsidiaries have specialized departments dedicated to supporting energy-saving sales and projects.”
Indeed, change appears to be constant with the distributors who are investing profits back into their businesses.
About the Author
Jim Lucy
Editor-in-Chief of Electrical Wholesaling and Electrical Marketing
Jim Lucy has been wandering through the electrical market for more than 40 years, most of the time as an editor for Electrical Wholesaling and Electrical Marketing newsletter, and as a contributing writer for EC&M magazine During that time he and the editorial team for the publications have won numerous national awards for their coverage of the electrical business. He showed an early interest in electricity, when as a youth he had an idea for a hot dog cooker. Unfortunately, the first crude prototype malfunctioned and the arc nearly blew him out of his parents' basement.
Before becoming an editor for Electrical Wholesaling and Electrical Marketing, he earned a BA degree in journalism and a MA in communications from Glassboro State College, Glassboro, NJ., which is formerly best known as the site of the 1967 summit meeting between President Lyndon Johnson and Russian Premier Aleksei Nikolayevich Kosygin, and now best known as the New Jersey state college that changed its name in 1992 to Rowan University because of a generous $100 million donation by N.J. zillionaire industrialist Henry Rowan. Jim is a Brooklyn-born Jersey Guy happily transplanted with his wife and three sons in the fertile plains of Kansas for the past 30 years.