Many talk about digitizing the channel and the emerging/present digitalization of the industry and then wonder why e-commerce sales as a percent of distributor sales are not higher. One major reason is that many distributors’ key customer is a contractor.
The issue, in many cases, is that 45% of industry revenue is generated from contractors. This number is even higher for IMARK Electrical members. There are 60,000-80,000 of them and they have widely varying capabilities. And from a purchasing viewpoint, 30-40% of their business is likely to be project oriented.
As we all know, some contractors are very digitally-savvy. Others are, shall we say, “challenged” and still have AOL email addresses. The large ones, let’s call them the ENR (Engineering News-Record) Top 600, have IT departments focused on automating the business and improving productivity and profitability. A good number subscribe to Trimble (the Trade Service people) for data and estimating systems and there are other estimating and procurement/ERP/accounting systems that contractors use.
Needless to say, it is a diverse market rather than a monolithic entity with similar behaviors.
The January issue of Electrical Contractor magazine had an article spotlighting some key findings from the 2020 JBKnowledge ConTech Report, which shared contractor digital habits. The report, which had about 3,000 respondents of which 10% were electrical contractors, had some interesting data points:
- 92% of construction workers use smartphones (which says they can open apps, handle texts, access websites, et al…but it doesn’t mean that they will respond to the multitude of e-marketing and marketing/sales text messages that you could send them daily! They will filter out the noise).
- 20% use six or more construction apps in the field (they’ll integrate with their ERP/estimating/billing systems as well as key project management workflow tools). There is an opportunity to integrate with key procurement tools (distributor tools, third-party services such as Nevaka and Retrolux and others) as well as delivery services.
- Mobile devices are used for reviewing project documents, creating project documentation/emails, viewing BIM models and viewing installation documents.
- 70% are willing to bid on projects that involve BIM (and remember, with about 300 electrical responses, these are probably the larger and more sophisticated contractors). Generally speaking, BIM is driven more from the general contractor level than the sub-contractor level.
- 40% of respondents report using pre-fabricated construction with 75%+ of this being for commercial projects; only 12% are for residential (probably for track homes).
- 40% of those using prefab say it’s giving their company a strategic advantage.
Some other interesting insights in the report, which are validated through anecdotal conversations with contractors and distributors include:
- 62% of contractors rely on spreadsheets for estimating (which correlates to what we know about the electrical estimating packages…and this percent is low…remember, it only refers to “survey respondents”).
- 27% rely on spreadsheets for take-offs (some are using software tools such as Retrolux for lighting retrofit projects; some ask distributors to do it for them).
Takeaways
- As a distributor, how much do you know about how your contractor customers do business and the systems they use? How could you help them with their processes? Integrate with them to improve their productivity (don’t position it as “reduce their costs”) and make it easy for them to do business with you. Consider conducting a survey of your customers to ask them key questions and then integrate the information into your CRM/marketing database. Determine which platforms you can facilitate (or should promote/populate). Arm your salespeople with the key questions (caution: you know they will rarely ask unless you follow-up).
- Categorize your customers and, perhaps, interact or serve different groups differently.
- Some distributors are developing tools to integrate email into e-commerce.
- Others are using services such as Conexiom to convert email into EDI.
- Distributors and manufacturers should have Innovation Teams (or this could be facilitated by marketing groups) looking at understanding companies like Nevaka (launching in the Pacific Northwest), which helps facilitate jobsite ordering (and change orders) and is powered by e-commerce product content from Distributor Data Solutions and Retrolux (focuses on supporting ESCOs and contractors focused on lighting retrofit projects).
- For a free copy of the JBKnowledge ConTech Report, visit https://jbknowledge.com/2020-construction-technology-report-survey.
This is another one of those areas where “size matters” in the electrical industry but where marketing groups can aggregate insights to share with members or advisors such as us (Channel Marketing Group) can share ideas and industry insights to understand marketplace dynamics and to uncover relationships that can help optimize opportunities.