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This is a part of the 2017 Distribution Trends Special Issue. The annual feature was researched and written by MDM based on interviews with dozens of distributors, industry experts and manufacturers. MDM also conducted a survey of its readers to uncover the trends outlined in this issue.
2017 Distribution Trends Special Issue
Optimism without really knowing why. Revenue growth among electrical distributors varied greatly in 2016, with the average among the Top 25 companies at 0.5 percent. The outlook for this sector is mostly positive for 2017, with many distributors hopeful of a ripple effect from increased infrastructure investment and general positivity from the residential and commercial construction markets. "There's a lot of optimism and distributors are seeing growth in the market but they don't really know why," says David Gordon, Channel Marketing Group.
The prospect of tax reform and an infrastructure plan – specifically the ripple effect of serving companies that directly benefit from those investments – are hard to quantify but have distributors bullish on the coming months and years. "It's moving in the right direction," Gordon says. "Overall growth will end up being 4-6 percent."
Companies must widen the net for talent acquisition: Part of the reason companies are struggling to find talent is the U.S. unemployment rate is so low. "There's only x number of bodies out there," Gordon says. And when distributors require applicants to have industry experience, it further narrows chances of filling positions. Losing institutional knowledge when long-time employees retire may be problematic, Gordon says, "but people coming into the industry will accumulate that knowledge and may accumulate it at a faster rate because of better systems to train them. It comes down to identifying the core attributes you want in your workforce."
Companies considering acquisitions more carefully. M&A activity was tepid across distribution in 2016, and electrical was no exception. One deal that caught the industry's eye was Fargo, ND-based wholesaler Border States Electric extending its geographic reach by acquiring Shealy Electrical Wholesalers, based in North and South Carolina. Other activity included Sonepar acquiring three companies, WESCO International acquiring Atlanta Electrical Distributors LLC and Graybar acquiring Cape Electrical Supply. A hot topic at the National Association of Electrical Distributors national meeting in Boston in May was a panel discussion titled "Harmonizing Cultures of Merged Companies," which featured Graybar's Kathy Mazzarella and Border States' Tammy Miller discussing the importance of culture when acquiring assets.
Merger & acquisition highlights in 2016:
Sonepar acquired Beacon Electrical Sales & Supply, EMG van de Meerakker and Grove Madsen Industries; Cheyns NV.
WESCO International acquired Atlanta Electrical Distributors LLC.
Graybar acquired Cape Electrical Supply.
Border States Electric acquired Shealy Electrical Wholesalers.
Crescent Electric Supply acquired Home Products Etc. LLC.
EIS Inc. acquired Communications Products and Services.
Average growth for companies on the Electrical Market Leaders list: 0.5%