LightFair 2011 and a Changing Lighting Market

The 2011 LightFair Show, held May 17-19 in Philadelphia, according to all we've spoken to was a resounding success.  While there was some initial trepidation about moving to Philly for a year and the potential for a decline in attendance, exhibitors gave Philly rave reviews ... great attendance, up to 30% less expensive (thanks to NY unions!) and plenty of great meeting space and restaurants.

While much has been written by others regarding LightFair, a couple of observations:

• Have you looked at the exhibitor list?  If not, check out this list and see how many companies you've never (or rarely) heard of?  The lighting industry is expanding exponentially. And all of these companies are selling to someone (and not necessarily through electrical distribution!). I've spoken to one company that had 314 end-user leads for direct follow-up.  This begs some questions:
• Is electrical distribution THE channel of choice or just A channel?  Why has this occurred?  Is this true in your area (and would you know if it isn't?)
• Whom are these companies that are buying direct and as an electrical distributor how do you reach them?
• What channels will customers purchase from?
• Why shouldn't a manufacturer sell projects direct if that is what the "customer" wants?
• As a small / emerging manufacturer, with distribution being difficult to reach due to the need for the "right" reps as well as rebates / marketing groups, what are the fastest, most effective, means to market ... direct? other channels?
• If you are a distributor focused on growing your lighting or energy efficiency business, were you / should you be at this show ... visiting booths and possibly exhibiting? Or maybe bring a "lightfair" show to your area?
• From lighting industry expert Bill Attardi's newsletter, "Did you attend Lightfair this year? In my fortunate life in the lighting industry, I have attended virtually every Lightfair Show.  For me, this was the most exciting show ever as it is clear to those of us who attended this one that the lighting industry is going thru a metamorphosis.  Major electronic conglomerates exhibited and are looking to participate in the unfamiliar digital electronic lighting industry of the future.  The unbelievable focus on solid state lighting (SSL) was something to see. This LEDfair is the harbinger of what's to come. I cannot wait to see how it will all shake out."

Bill sees the changes that are going on in the lighting industry and has designed a unique Solution Selling seminar.  According to Bill, "There is no question that to sell into this eclectic lighting market, new sales skills are a must. Start the learning process with Sales Pro Solution Selling: http://www.attardimarketing.com/salesprosolutionselling/".  Bill is the consummate salesman and with his experience as a manufacturer and in the distribution industry you can be sure that the content is on target.

In speaking with manufacturers and distributors, some lighting industry observations:

• What does it mean when ...
• GE and Philips start to use reps in the electrical industry?
• E-conolight, which sells to end-users / contractors direct (and sends lots of catalogs), is purchased by private equity?
• OSRAM Sylvania launches a line of lighting fixtures and a line of LEDs specifically for Lowes (and eventually they will have stock to make acquisitions with when Siemens spins them off through an IPO)?
• Companies many of us would portray as contractors don't mention the "C" word and position themselves as energy efficiency companies?

Is the lighting model changing or just becoming more diffused? If lighting is an important product category to you, do you want to be a demand creator or just a bidding house? Do you have someone who is focused on the lighting market for you? Are your lamp and key fixture lines sharing information with you about the market?

And what else are you hearing about lighting and lamp manufacturers?Think LEDs are just a short-term craze?  In speaking with a lighting manufacturer, he jokingly said "I actually saw a new technology that everyone seems jazzed up about – it was called LED’s"

Value of Marketing Groups to Manufacturers

Over the past few months, and most recently at the NAED Leadership Summit, we’ve heard from a number of manufacturers lamenting about participation in marketing groups. While some work the groups well and focus on the group’s members with targeted marketing strategies, some of the issues we’ve heard include:

• “All, or substantially all, of our competitors are part of the group. So what is the benefit for me? I recognize that I need to belong just to keep pace.”
• “They keep negotiating for more and more money. Every conversation is about rebate. Few, if any, are about growing my business.”
• “They call themselves ‘marketing groups’, but where’s the marketing?”
• “As an engineered products company (not a commodity) with selective distribution, we’re questioning the value of the groups.”
• “The old rationale of belonging to streamline rebate negotiations and processing is no longer valid. We’re having lots of distributors asking for additional rebate and technology has made the process easier. Our finance people are questioning the value proposition.”
• “With such a high percentage of distributors in one of the groups, I wonder how they can outperform our other groups / chains.”
• "We wonder how much, if any, business we'd lose business if we left the group but redistributed the rebate to those who support us."

Given the comments we’ve heard, we’d like your thoughts.

• What are the benefits of groups to manufacturers, if any, anymore?
• Are groups avenues for manufacturers (who've been in the group 5+ years) to grow their business or are they alternative profit streams for distributors (and why are manufacturers responsible for distributor profitability?)
• Would distributors prefer a reduction in price in lieu of rebates?

Let us know and also take our survey on “Value of Marketing Groups to Manufacturers” (its anonymous and we’ll report back results on ElectricalTrends.)

2011 NAED Leadership Summit (aka National) Observations

The following post was originally posted on Wednesday, May 11. It is being reposted as Google / Blogger had technical issues on Thursday and "lost" the posting.

Last week I attended the NAED Leadership Summit in San Diego (yes, a long way to go for 2 days, but if need to be where the customers are!) and wanted to share a number of observations.
 Overall the feeling from many was "a good meeting", although this posting will be sent to, and read, by more people than attended the conference. According to the registration list, there were 80 unique distribution companies in attendance (84 if you included divisions of Rexel).  The distributor list seemed to have larger companies that are more industrially-focused, hence skewing marketplace feedback.  There were some manufuacturers and distributors that were on the list but never seen ... too busy in their suites having meetings.
 Some thoughts, observations and comments that we heard:

• A number of people commented on the distance (although San Diego had great weather) and the fact that the meeting was only two days.  The two days was an issue as most manufacturers and distributors were booked, having little time to meet with smaller manufacturers / distributors and no time for hallway meetings and networking. In fact, the second general session, which had a good speaker and an economic outlook panel, was poorly attended.
• Some asked about the branding of the meeting and felt that the name may make smaller distributors feel disenfranchised. Additionally, someone commented, regarding the brand, "where are the leadership type seminars to help senior management?"
• Showing the usage of technology, many were texting to confirming meeting times and places. The technological revolution has now hit the electrical industry!
• Heard from many distributors of manufacturers expanding into new product categories that are not their core and where they have no expertise - just looking to sell something or get on the latest craze.  This creates conflict for distributors.
• John Burke from Kirby Risk presented their supplier evaluation report at the Manufacturer Advisory Council Forum. Very comprehensive and professional. Terri Dumas from Rab presented their thorough approach for business development with a distributor.
• Social media was top of mind with a keynote presenter discussing it and a session at the Manufacturer Council (which was open to distributors). This social phenomena is having implications for manufacturers and distributors in how they interact with prospects, customers and employees. The opportunity is there, however, the speakers didn't share approaches or ideas on 1) how to develop an e-strategy, 2) setting goals for a social marketing initiative or 3) ideas for distributors / manufacturers to consider (afterall, everyone has heard of Facebook, YouTube, LinkedIn, a blog, Twitter, and Flickr).
• Overall business reports were encouraging with industrially-oriented distributors up 15-20% (and most have some type of energy initiative).  Did hear of some construction-oriented distributors doing "decent" but they were in larger cities and had been recipients of larger projects.  The resi / light commercial market is "nominal" - at best.
• On the lighting side, from speaking with a couple of fixture manufacturers, "LED, LED, LED" - and the product keeps changing requiring continuous education on the part of reps and distributor salespeople to stay even with customers.
• ElectricSmarts and IDEA announced a "strategic partnership" in conjunction with ElectricSmarts' launch of its new catalog system on Saturday night. Unfortunately didn't hear much about it during cocktail parties / at meetings. Here's an interesting snippet from their press release "Through the strategic partnership, ElectricSmarts Network will provide manufacturer-authorized IDW data to end-users, and IDEA will offer ElectricSmarts’ SMART eCat web-based e-catalog to distributors for use on their websites." The reality is that eCat will probably be syndicated to any distributor that wants it (not just IDEA members). It's interesting that ElectricSmarts is looking to get IDW attributed data to use in its NetPricer product to reach contractors. Does this mean that IDEA has its eyes on the contractor market and is planning to compete with Trade Service's TraSer SX (or let ElectricSmarts do it?) Also interesting that manufacturer content is being syndicated to a non-distributor.  Wonder if manufacturers approve of this?
• IDEA announced a service that they are soliciting feedback on called B2B Partnership Rating Program (PRP) which is essentially a scorecard of a manufacturer's data. They are seeking input and plan to release to the industry in Q3 2012! Sounds like a concept seeking approval. Interestingly, it was placed on general session attendee seats but there was no reference to it during the session ... did it surprise NAED or not receive support?

That was the highlights that we heard (other than we had a number of very effective meetings). If you attended, what else did you hear or find interesting? If you didn't attend, why and what would entice you to attend?

Infor Acquires Lawson Software

Over the past few months rumors have circulated that Infor was looking for the best fit software company to acquire to complement its business. Infor has over 75,000 customers in a number of verticals ranging from distribution to healthcare, automotive to manufacturing. Finally comes word of an agreement for Lawson to be acquired by Golden Gate Capital (GGC Software Holdings, Inc.) and Infor for a deal valued at $2 billion. Click here to read the press release.

The fit for Infor and Lawson is that they both have worldwide user bases that generate huge cash flow streams. Lawson bring to the new partnership a CLOUD offering for internal and external applications. The External offering enables companies to test the Cloud concept before considering a more extensive offering such as Amazon EC2. The Internal Cloud offering offers the business user the opportunity to consolidate their IT infrastructure, while reducing their costs and reallocating IT staff to more strategic activities. To read more about this offering click here.

Within a very short space of time, the electrical industry has witnessed a couple of high profile companies be either rolled up (Activant being purchased and emerging as Epicor) or making an acquisition (Infor along with a Venture Capital company acquiring Lason).

The question becomes, what does this mean to electrical distributors? Will these companies continue to focus and allocate resources to improving their systems? Will customer support be strengthened? Will new products be offered and the systems be more robust? Or will the companies be more financially driven to enable returns to their shareholders?

While we wish each company the very best, what do you think the affect will be if you own an Activant product (P-21, Trade Service Systems Array, Eclipse or Eagle) or an Epicor product or a Lawson product or an Infor SXE or SXA+?

And how does a Cloud offering affect your approach to your ERP needs? Do you foresee yourself considering a Cloud offering in the next 3-5 years?

Frequent Communications Drive Sales, and E-Marketing Generates Awareness

Ran across a couple of things today that caught the eye....over 30 manufacturers are involved in ElectricSmart's e-Cat launch (including some surprising names), ABB used a convention specific blog and did you know that good sales and marketing requires 14 times?

And now the specifics:

• ElectricSmart is launching its SmarteCat product on Saturday night at the NAED Leadership Summit.  The catalog has over 30 manufacturers in the initial launch.  Some of the participating manufacturers are Rockwell Automation, Schneiddr Electric, GE Energy, GE Lighting, Lutron, IDEAL, Ronk, Shat-R-Shield, Thomas & Betts and Philips / Advance.  An impressive array.  The service looks interesting, and if someone signs up for a Premium account, they can have access to pricing. Can easily print or email specific pages to customers (or to self).  And it's neat how there are featured videos embedded into catalogs. The tour is a nice feature.

What this shows is that manufacturers are convinced that more and more customers (end-users and contractors) are looking for information on the web.  I don't know the pricing, but if it is inexpensive enough, could envision manufacturers using this as another document repository to reach more customers.

• ABB held their Automation & Power World Conference last week in Orlando.  Impressive show with over 5000 attendees.  They blogged from the show, sharing important information from various speakers.  Nice way to communicate to various audiences. With the growth in social marketing, this is the tip of the iceberg in how manufacturers, or distributors, can extend the reach of a face-to-face meeting to enable non-attendees to gain value.
• Reportedly 14 is the magic number, as in the number of times you should contact an "inactive" customer to capture some awareness from them. While no salesperson wants to call on a customer 14 times to hear "no, we don't need anything", marketing can play a big role in developing an "interactive sales and marketing engagement strategy".  Marketing has the ability to be an "alternative sales person", helping maintain relationships, share information and eventually generate revenue. This article states 14, I've also seen 18, but the point of the matter is "frequency of communication captures mindshare, mindshare captures marketshare." Do you have an integrated sales and marketing engagement strategy? Do you believe that non-sales engagement can generate sales?

Do you communicate 14 times to underperforming customers? Are you actively marketing via "e"? Should distributors market via "e" or is this a manufacturer's way of going around the channel? Or are they defending their brand in support of the channel?

Gas Beyond $4.00. Impact on Your Business?

I was returning from a meeting with a client this morning and needed to put gas in the rental before the return.  While gas has been creeping up, today was the first time I paid $4.00 per gallon (and yes, I know that there are 5 states that are averaging over $4.00 for regular unleaded).


As we know from the last couple of times that there were gas spikes, typically distributors start to think of how they can reduce costs, shift costs or increase revenues (margins, fees) to minimize the incremental expense, especially with the concurrent erosion in margin over the years (and other increasing operational costs).


This time, while we've heard some comments, there haven't been many nor are we hearing of many distributor surcharges, service revisions, minimum orders requirements, etc.  Is it that we've become used to the increases, the pain isn't enough, you don't think anything can be done because you don't think your competitor will make a change, or we feel this is just the "cost of doing business"?

In 2008 and late 2005 we conducted distributor surveys to ascertain how distributors are responding to soaring fuel costs (click here for some of our 2005 findings).  Should we do it again?

What are you doing with $4.00 unleaded regular gas (and expected to go higher for the summer) and more for diesel?  Will this eventually change an industry business model? What happens if we see $5.00? $6.00? Are manufacturer minimums increasing? Are your's?