President's Blog

The results are in: Typical distributor sales, margins and compensation all increased last year, and that’s some long-awaited good news for our industry.

These numbers come from the 2012 NAED Performance Analysis Report and the 2012 NAED Employee Compensation Report – two key benchmarks for distributors looking to strengthen their businesses by gauging their operations against their peers.

Both reports are stocked with valuable electrical industry statistics, such as:

• Typical distributor sales jumped 16 percent between 2010 and 2011 – double the increase seen from 2009 to 2010.
• Median 2011 distributor margins reached 3 percent -- 1.6 percent higher than in 2010.
• Outside sales compensation increased 8 percent from our last comp survey in 2010.

If you haven’t already, I encourage you to order copies of these reports. Then, use the data to:

• Demonstrate progress – Compare your 2011 performance with years past to uncover improvements. Explain to stakeholders how positive steps you took helped deliver those results.
• Set goals – Set your data against that of high performers to set numbers-driven goals for the next five years. The benchmarks will also show you which areas your peers are increasing investments in and where they’re cutting back. 
• Strengthen vendor relationships – When meeting with vendors, use inventory and ROA data as starting points for setting realistic common goals on sales and margins.
• Motivate employees – Recognize your employees for any gains and then give them something to strive for, using unmet benchmarks as targets. Also check the 2012 Employee Compensation Report to be sure you’re still paying them competitively!
• Take it to the bank – or any other business partner that wants to understand how profit is made in a high volume, low margin industry. Industry benchmarks like PAR offer third-party support for showing what’s reasonable and typical.

Earlier this year, more than 200 NAED members took the time to go back through their 2011 operations and respond to our questionnaires for our annual PAR and bi-annual Employee Compensation Report.

I want to thank those distributors for participating. Not only do they get personalized reports that go deeper into these findings, but they’ve also done the industry a huge favor.

We’ll be opening the PAR survey period back up in January 2013. In the meantime, how will you use these benchmarks? Share your ideas with the industry in the comments below.

Do you have something you’d like to say to your reps in Washington D.C. but aren’t sure how you can be heard?

Raise your voice with the industry at next month’s 2012 NAED Congressional Fly-in. NAED is busy scheduling meetings on Capitol Hill, where members will tell their local elected officials exactly what’s on their mind.

Last year’s inaugural event resulted in more than 100 meetings with lawmakers and staff, and -- judging by the many new faces signed up to attend -- we’re on track to achieve great results again this year. For those planning on joining us, here are a few tips for getting the most out of your meetings with legislators:

• Prepare: Register for this webinar to get advice on making an impact on your legislators. This event covers everything  from the logistics of a Capitol Hill meeting to developing a strong message.
• Think through your story: Be ready to talk about yourself and your business. Remember, your legislators represent you, and they want to know how the policies created in D.C. play out for the folks back home. Your story helps illustrate that.
• Get briefed: You don’t have to be a policy expert. NAED will provide onsite advocacy training and background on the issues to help you speak the language of your elected officials.
• Don’t panic: If you get caught off guard by a question, fall back on your personal story and refer staffers to NAED’s registered lobbyist, Ed Orlet, with specific questions.
• Follow up: Keep the connection going after the Fly-in by sending an email or thank you note when you return home. Use this chance to reiterate any points of significance.

As I’ve mentioned before, the Fly-In, part of the NAED Government Affairs initiative, is an excellence chance for our industry to educate lawmakers about the real-life effects of their policies on business. If that inspires you, it’s not to late to join us. Register before the hotel cutoff on June 18.

This week, tEDmag.com carried a story about a cabling manufacturer that switched to the distribution channel after more than a decade of selling direct.  The reason? Its contractor customers asked for it.

Every so often, we hear rumblings in the age-old direct vs. distribution debate. In fact, a member recently pointed out an article in BICSI News Magazine that took the pro-direct view.

It’s always important to remember our manufacturing partners and customers have options, but it’s equally important to remember the vital role distributors play in the supply chain.

Distributors bring value to both sides of the supply chain. They are the pipeline that moves product, allowing customers and manufacturers to focus on the things they do best: Win and complete projects, and craft and make innovative products.

Many contractors buy for reasons beyond price. Timely, local deliveries, inventory management, credit services and third-party advice -- these are just some of the critical services distributors pass on to customers, saving them time, costs and resources they might otherwise burn through.

Likewise, we provide the infrastructure manufacturers need to bring their products to market. Promotional support, custom-order coordination, logistics and returns are among the benefits we offer our supply partners. While there will always be manufacturers that choose the direct selling approach …

We’ll Still Be Here

Hundreds of manufacturers still value the $70-billion-plus electrical distribution industry as the best route for bringing product to market. Here’s why:

• Convenient, one-stop shopping: Distributors stock an array of brands, technologies and supplies to meet the needs of their customers. They package individual supplies into convenient, time-saving kits and store the products until you need them. Imagine the investment you’d need in warehouse space alone if you had to start buying direct.
• Trained and experienced sales professionals: Many have years of experience under their belts and are trained and well versed in electrical products. The Certified Electrical Professional designation helps contractors recognize these individuals. Distributors require hours of annual in-house training, and many manufacturers work with their distribution partners to provide sales training.
• Logistical infrastructure: Electrical distributors understand the needs of the markets they operate in because they’ve spent decades cultivating local contractor relationships. As their customers grew, many also expanded, opening branches in strategic locations to bring the same timely and dependable services to their customers.

What We Can Take From This Debate

For many in the electrical industry, this debate is a no-brainer: Direct buying and selling just isn’t a practical, all-encompassing solution. There are, however, people who continue to like to undermine our channel.

Let these moments be reminders that our industry is operating under fiercely competitive conditions and that demographics, supply-partner concerns and customer needs continue to change.

This debate will continue so long as technology excites and enables the sell-direct crowd. And distributors need to be listening.

Virtually anyone can set up shop online, but can these folks replicate our value-adds? We need to be watching for unseen challenges they recognize first and what other solutions they bring to the table.

Similarly, the debate exposes the necessity of websites and e-commerce capabilities. These are no longer options. If you don’t have a web presence, you don’t exist to a growing rank of customers that turn to Google before anything else. Plain and simple.

NAED is arming its members with the resources and tools they need to take their businesses ahead. Visit the NAED Technology Task Force to obtain strategies and best practices for using technology to effectively engage customers.

One final thought: Lack of product knowledge is a common charge among manufacturers that choose to sell direct. Distributors have a responsibility to ensure their sales teams are familiar and confident in their knowledge of the products they sell.

Professionalism and quality are essential for maintaining the viability of the channel. Encourage your people to participate in programs like EPEC, CEP and other resources on the NAED Learning Center. Investing in ongoing industry training and education shows your customers and supply partners you take these traits seriously, while also strengthening your business.

This week, the NAED Women in Industry Forum met in Idaho for three days of professional development, education and networking.

There, the Forum presented the 2012 Women In Industry Trailblazer award to Nancy Goedecke, chairman and CEO of Mayer Electric Supply. I’d like to extend big congratulations to Nancy, who’s known throughout the industry  for her strong leadership, commitment to excellence, and dedication and support to helping others in and beyond the industry.

The Women in Industry Forum plays an important role in securing a promising future for our industry. With every bootcamp and conference, educational session and luncheon, this active group fosters a supportive and encouraging environment for women serving our channel.

This group is vital for promoting the electrical industry as a welcoming, diverse place for new talent and potential business partners.

Men may make up the majority in today’s channel, but, as demographics indicate, women are quickly filling our pipelines for talent, customers and business colleagues. Consider these stats from Trends Magazine:

• Two-thirds of college degrees granted in the United States and Europe today go to women;
• 40 percent of female college students are studying business, compared to just 2 percent in 1966;
• Woman-founded companies in the last 10 years have increased at twice the speed of businesses founded by men; and
• Women-founded companies employ more people than the 500 largest companies combined.

We can’t leave these figures out as we ask ourselves big-picture questions, such as where will our future employees come from, what direction is our market heading in or what does diversity look like in our industry. We also can’t overlook the impact on men and families and how that affects our approaches to policies like staffing, benefits and career paths.

How will these demographics impact your business? Are you taking steps to prepare for tomorrow’s workforce? Have you considered the different ways men and women process information and communicate, and what this means for engaging customers and business partners?

I’d love to hear other thoughts on how the industry is preparing for these changes. Leave your comments in the form below or connect with us on Facebook and Twitter.