Thinking differently is the key…
In today’s turbulent market place electrical distributors need to embrace new trends and ways of working to ensure that contractors and manufacturers also benefit. Here Newey & Eyre’s CEO, John Hogan, explains what electrical wholesalers can do to ride out the recession, what trends and legislation changes everyone should keep their eyes on over the next 12 months and how embracing different ways of selling could be the shot in the arm companies need.
As everyone is aware, these are difficult times for any business and electrical distribution is no exception, however there are ways that wholesalers can prosper, primarily by keeping up-to-date with amendments to legislation that will undoubtedly have a major influence on product direction.
The biggest development in trends for the electrical wholesale market over the coming months will stem from legislative changes that are about to impact on the industry. From September 2009 the EU begins the progressive withdrawal of inefficient lamps from the market with the primary goal being to make a considerable contribution to reducing Europe’s carbon emissions, approximately 25 million tonnes of CO2 a year.
Therefore, understandably, the major focus of attention has been on the phase-out of traditional incandescent lamps, which will have a significant effect on the domestic market.
Certain business sectors, such as the hotel and leisure market, will also be affected, but there are plenty of well established energy-efficient alternatives available including CFLs, energy-saving halogens and a growing number of LED light sources.
The main change for the commercial sector will come with the removal of T8 halophosphate fluorescent lamps in 2010, followed by T12 fluorescent tubes two years later. In a sector that is dominated by fluorescent lighting, this will undoubtedly have a major impact.
As lighting is such a fundamental part of the electrical wholesalers’ staple revenue, the lamp market and consequent rapid developments in technology via the leading manufacturers must be embraced. In truth, all energy efficient products and technologies will be key over the coming months with the Government’s increasing focus on carbon reduction, alongside higher utility bills, ensuring such trends continue.
Wholesalers also need to look at sustainability as a whole, as its importance looks likely to continue to grow. For example, Newey & Eyre proactively seeks suppliers who recognise the importance of utilising recycled materials within their manufacturing process.
With competition for projects increasing, contractors may try and cut corners by using counterfeit products but wholesalers need to impress on their customers that their reputations depend on the quality of the products they install. While cutting specifications might secure short term profits, it will do little to enhance a company’s long term standing and future business. Wholesalers need to reinforce this message by stocking products that are sourced from a robust and certified supply chain.
Keeping on top of legislation changes and product developments will ensure that businesses do not fall behind but this is not the only answer as no one solution will "fix-all" and guarantee success, however there are some recommended steps that wholesalers can take to minimise risks.
Sensible cost management is an obvious target for every business but in wholesaling it must be a primary focus. The right management of stock and inventory costs can make the difference between a wholesaler still trading at the end of the downturn or not.
Stock levels must be kept in balance with levels in the market place, as inefficiencies will always cost a business dearly but in a recession they can be far more serious.
Closely managing logistics and freight costs is another area for concentration. Spending on promotions and advertising does not have to be eliminated but money does have to be spent wisely. Wholesalers must also keep an eye on managing bad debt. Electrical distribution is part of a chain and one where the contractor can easily get dragged in to problems, so wholesalers need to be vigilant, keeping a careful eye on everything that is going on with credit control.
One of the most important steps has to be to stay close to the customer, understand exactly what their needs are and how they are changing. This way wholesalers can ensure the products and services being offered exactly meet their requirements in a changing market place.
As part of staying close to customers, offering them a high level of service incorporates presenting as many routes to purchase as possible and one of the ways to make contractors’ lives easier is the ability to order online.
Online retail is an additional tool in the armoury of an electrical wholesaler that does not really have any drawbacks, as long as the price files are managed and run correctly. An online store is an additional sales channel, after the physical branch has closed, the contractor has a couple of extra hours to be able to purchase products for the next day, so it is all about offering flexibility.
With business continuity high on the agenda, there has been a rise in the demand for quick installations, giving contractors increasingly tight time frames to get jobs finished with potential penalty payments for late completion.
There are a number of reasons why an installation may need to be carried out beyond ‘normal’ working hours; for example, working in commercial environments can often mean access is limited and speed is of the essence. The timeframe in which to complete work in the retail sector is also short, the "24/7" lifestyle which we all demand is having a dramatic effect on the way installers approach timings for projects.
This ultimately has a knockon effect on ordering stock out of hours, so contractors are starting to use the Internet to make their purchases. At Newey & Eyre significant numbers of orders placed on Neweys
Online are made after branches have closed. The ability to order "out of hours" means they do not have to nip away from a job to make sure they get to a branch before it closes.
Online purchasing is a winwin service as it is a complementary trading tool, the sales are still processed via the branches while customers have access to another service channel, i.e. another way of ordering. The key to success is ensuring contractors are assured of the right price, which is why Newey & Eyre account holders can see and purchase items at their agreed prices when buying through the website, ensuring they receive all the same great discounts whether trading inbranch or online.
Online can also be a way of helping contractors by providing them with additional information and knowledge about upcoming technologies and legislation. It will be this information that is necessary to help contractors to secure business in this highly competitive market place.
To be an effective wholesaler in today’s market requires additional focus and the ability to adapt to changing conditions, while ensuring the customers’ needs are being met and a tight rein is kept on controlling costs.
In tandem with this, wholesalers also need to make sure they can offer as many sales channels as possible, as contractors will learn to rely on progressive distributors to keep their own businesses moving, thereby embracing the recession as an opportunity, not an obstacle, to success.
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