IMARK Group has more than 830 member companies. These companies operate more than 3,000 branches across North America.
Several of our members are quite large in size and frequently mentioned in the electrical trade press due to their size and influence. In many ways, however, the heart and soul of IMARK Group are the small to medium-sized companies serving their customers quietly and out of the spotlight every day.
The smaller companies operate in an environment where they face larger peers, big-box stores and online retailers in a fierce competition for market share.
With competitors constantly targeting their customers, these small businesses remain focused on developing and implementing strategies that reduce customer attrition and promote growth.
Executives from some of IMARK’s smaller member companies recently talked to IMARK Now about the areas of their operations that bolster them with the necessary strength to continue to win in business.
In an era of industry disruption in which Amazon looms large, many smaller IMARK members are researching and testing tactics, such as digital marketing and e-commerce, to keep long-time customers and attract new ones. However, many continue to rely on tried-and-true customer service methods that they already execute well and know best.
“The strengths of being a small, local company are that we know our customers well, we know the market and we know the area,” said Derek Coen, chief operating officer at Atlantic Electric Supply in Washington, D.C. “Our customers appreciate this. They also appreciate that we are dedicated to customer service and are focused on the details and being accurate. Customer service is not just a saying for us. It is our survival.”
Remaining small and familiar are business advantages in an atmosphere clogged with industry consolidation, according to Steve Hughes, vice president of NEO Electrical & Lighting Center in Chardon, Ohio. “The ability to get a hold of someone is what our customers like the most,” Hughes said. “And we’ll help them fix any problem. For instance, if a customer places an order and we accidentally make a mistake, we’ll fix it. A big company would never fix that. We hear it all the time. Large distributors and big-box stores make customers handle everything themselves. We believe in superior customer service.”
When a company is small, employees can spend more time with customers to answer questions and solve problems. Small distributorships can also conduct business faster than their larger competitors, according to Robbie Hamilton, president of Black Electrical Supply Inc. in Greenville, South Carolina. “We are able to make quick decisions,” he said. “Customers seem to like that they can get close to the owner, build a trust relationship and get the help they need when they need it.”
Brian Saunders, president of Arrow Electrical Supply in Detroit Lakes, Minnesota agreed that a small distributor’s greatest strength is its ability to act fast. “If there are issues with an order, we can respond to those issues much faster than a larger company,” he said. “We have a quicker reaction time because the levels of approvals aren’t as high here as far as our decisionmaking process goes.”
Small Companies, Big Opportunities
Small electrical distributors have numerous opportunities to build business in areas where their larger competitors can’t tread. For example, Saunders said, a small distributor may not have the quantity of items a larger distributor can carry but it typically has a wider range of products in its inventory. “We can commit deeply to a product line,” he said.
Large chains don’t have as vast of an inventory and can also be intimidating to certain customers. Hamilton sees customers who want personal attention and prefer to shop in smaller businesses. “We try to sell service more than price,” he said.
While it may be difficult for smaller companies to compete with pricing, they have an opportunity to win over customers with added services that they won’t get anywhere else. “Thanks to the internet, pricing is essentially all the same,” Coen said. “We provide product knowledge, attention to detail, superior customer service, training, an ease of doing business and local credit. These are our strengths. There are clients out there that appreciate these strengths. Our opportunity comes with finding those clients and servicing them well.”
In small towns, lighting retrofits present another big opportunity for the local independent electrical distributor. “Lighting companies are providing discounts and we’re supplying retrofit projects in small businesses from the dress shop on the corner to the bakery in the strip shopping center to big office buildings,” Hughes said. “More efficient lighting systems with discounts on the backside are easy sales.”
There are weak links in small distributors’ armor. Hamilton said there’s a particular area in which “the larger chains eat our lunch.” “We can’t compete in the marketplace on commodity items such as copper wire and steel conduit,” Hamilton said.
Saunders also noted competitive pricing as a problem. “We’ll be committed to a manufacturer and then the sales rep decides to go to the big guy down the street and give him better pricing because he can sell more,” he said. “We want to be treated as equals.” As baby boomers retire from the electrical industry, Coen sees recruiting, hiring, training and staff development as pain points. “Few people have the career goal of working for an electrical distributor,” he said. “In a strong economy, that difficulty is more pronounced. The candidates who we do find have little or no knowledge of electrical products. Recruitment, training and development are more crucial than ever.”
Hughes agreed with Coen with regard to the difficulties of finding help. “We could easily put two more people to work,” he said. “There aren’t many young kids who want to do this. Children grow up with dreams of being police officers, firefighters, astronauts; no one picks electrical supply. Young adults should be made aware that ours is a super busy industry where no one is out of work.”
The electrical industry is evolving at a rapid rate when it comes to the people, technology and new competitors involved. When asked what changes their businesses and customers feel most keenly, all of the distributors interviewed agreed technological advances are making the most impact. “We do not see technology as a threat,” Hughes said. “We’re on the cutting-edge of technology and we have a connected group of customers, so there’s nothing but advantages when it comes to using it. We’ve tripled sales in the last 20 years with the same amount of employees. The only thing you can attribute that to is using more technology each day.”
Hamilton said his company also welcomes new technology but with one caveat. “If it can improve our purchasing, invoicing, product information and bottom line, we are for it,” he said. “Our customers always expect expedited results. The drawback is simply the online purchasing from Amazon and other online sites. They are aggressive and taking business from us on the items we can normally make higher margins on.”
Technological changes in conducting business aren’t affecting Saunders’ company as much as they are companies in bigger cities. “Our customers do have smartphones, so we’ve implemented a lot of texting,” he said. “But updating our computer software or website are just not priorities for us right now. It could cost $80,000 to $100,000 to update and maintain the computer system and the benefits and payback are not there for us right now.”
Coen sees technological advances as a blessing to business, although they take time to understand and implement. “Technology is certainly changing and keeping up is a challenge. This goes for us and for our customers,” he said. “On the bright side, technology continues to drive efficiency. All aspects of our business are more efficient today due to technological changes. This will continue as better programs and applications are developed and prices drop. Things such as an integrated web storefront or a company-wide training and development program would have been impossible for us to consider just a few years ago. Now, we are making plans to incorporate them.”
In Their Corner
Some suppliers and sales reps do a great job of servicing small electrical distributorships. Coen said the best suppliers and reps to have in his company’s corner are those who conduct business with ease. “Things such as competitive pricing, low freight allowed levels, quick deliveries, limited back orders, high-quality products and easy returns are greatly appreciated,” he said.
Hughes also had praise for suppliers with a quick and easy return process. “If I can get a [Return Goods Authorization] in a couple of days and get money back in a week, I think that is great service,” he said.
Suppliers and reps who encourage and conduct new product training are also highly sought after business partners for smaller distributors. “We do regular lunch and learns and counter product demonstrations,” Coen said. “The more comfortable our sales staff feels with the products, the better they are able to demonstrate and promote them. Without fail, the suppliers and reps who encourage training see higher sales with us.”
Hughes added, “All I want the reps to do is show me the new products. It takes five minutes. They can do it through email now.”
Hamilton said sales reps spend a lot of time on long conversations but they rarely talk about products. “We do need good relationships but good ol’ boy pats on the back don’t get either of us anywhere. It helps when they are knowledgeable about the products they sell and bring the products or a piece of literature by to put a visual in the salesman’s mind.”
A good working relationship with a manufacturer and/or sales rep comes down to trust, according to Saunders. For example, he recently called an IMARK supplier for competitive pricing and the company proved it wanted to maintain his business by dropping prices 20 percent across the board. “Trust is huge,” he said. “If I lose trust with a rep or manufacturer, it gets to be tough.”
In It to Win
Although the proliferation of chains, big-box stores and online sales may sometimes make it look like small electrical distributors are in a losing bout for their livelihood, they are actually well-positioned to compete and win with seasoned staff, product knowledge, vast inventories, added services and superior customer service.
“It’s our business and we keep going and we keep fighting the bigger guys,” Saunders said. “We can’t give the store away because we have to make a profit in order to survive, so we do well by having the products our customers want and delivering great service.”
And even if they have to go all 12 rounds, small distributors have a key characteristic that their large opponents lack. “Small businesses are more nimble,” Hughes said. “Big companies are like elephants and small companies are like gazelles. When the elephant comes up to the edge of a cliff, all it can do is sit and watch as the gazelle runs by and leaps right over the rift.”