The new year will no doubt see its historic share of economic volatility, political turmoil, technological advancements and cultural/societal trends—and these will all present industries across the board with a range of opportunities and challenges.
Below, IMARK electrical distributor executives nationwide share their predictions for business activity in 2024, the industry developments they’re most excited (or concerned) about, and how manufacturers and their reps can best collaborate with distributors to maximize sales and growth.
George Vorwick, United Electric (Wilmington, Delaware): United Electric Supply—a 100% employee-owned company founded in 1965 and headquartered in Wilmington, Delaware—is a regional distributor focused on industrial and commercial construction. We’ve developed specialized teams focused on delivering engineering, configuration and start-up services for the industrial and building automation markets to complement our traditional product group teams.
Ryan Kuchenmeister, K/E Electric Supply (Mt. Clemens, Missouri): Founded in 1988, K/E Electric Supply services Metro Detroit, the surrounding counties and its suburbs.
Steve Helle, Granite City Electric (Quincy, Massachusetts): Granite City Electric was founded in 1923 and is currently celebrating its 100th anniversary. We have 31 locations and service most of New England and Albany, New York.
Jeff Metzler, Lonestar Electric (Houston, Texas): Lonestar focuses its distribution efforts on Texas’ largest metro areas, including Houston, Austin, Dallas and San Antonio, with current expansions into other cities in the state. However, our team and customers partner on projects across the United States.
Michael Doris, Mars Electric (Mayfield Village, Ohio): Mars Electric is a family-owned business founded in 1952 and we operate out of 12 branch locations in Northeast Ohio.
Business Activity Predictions for 2024
Kuchenmeister: We’re anticipating mixed business activity in 2024. There seem to be varied responses from different contractors—some are busy right now while others are hunting for work. A year ago, contractors couldn’t see straight because of their heavy workload; they were overwhelmed, and so were distributors. Now the level of activity depends on who you ask. Sales activity is still strong, but there appears to be change on the horizon.
Helle: We see 2024 as a ‘single-digit’ growth year with fewer supply chain challenges in most product categories except switchgear, which will continue to be a massive problem.
Metzler: Lonestar is blessed to see continuous growth stemming from the hard work of each of our team members and efforts to align with our vendor partners; as a result, our sales in 2023 were 40% higher than in 2022. And with expansion efforts focused on the west and south Texas markets, our leadership team is forecasting 2024 sales to be 25-30% higher than 2023.
Doris: We see things slowing down, especially in small to medium-sized projects. This is being driven by reductions in bank lending, higher interest rates, material supply issues and gear lead times, all leading to end users and developers being more conservative.
Vorwick: We’re preparing for a mild recession in Gross Domestic Product (GDP) in 2024, due mainly to economic conditions associated with tighter lending practices and higher interest rates. However, we expect that the electrical sector will expand moderately into next year, supported by improving supply and investments associated with the Inflation Reduction Act and the Infrastructure Investment and Jobs Act. These long-term investments in economic growth encourage the ongoing electrification of transportation and near-shoring of manufacturing. Additionally, increasing geopolitical tensions continue to add friction and cost to global supply chains, supporting construction as manufacturers continue to re-shore/near-shore production to North America.
Market Segment Predictions for 2024
Helle: Residential construction and industrial markets will be strong. Office buildings of most any kind will be off significantly.
Metzler: Commercial construction projects are booming in our market, which is keeping our distribution hubs very busy. We’re also seeing significant growth in the renewables and industrial segments; projects like solar farms, OEM facilities, and oil and gas all seem to be in higher demand and our team is fully prepared for them. On the other hand, multi-family projects show signs of slowing after years of growth—most major Texas metro markets saw a decline in 2023.
Doris: We believe that hospital spending will be very strong—e.g., local hospitals looking for more space and new buildings in order to add more services and capacity to their operations. Electric vehicle (EV)-related business should continue to increase, K-12 schools and universities have projects set to start in 2024 and water/wastewater projects are currently in design to improve infrastructure.
Vorwick: Given the increasing adoption of artificial intelligence tools (AI) for business and data analytics, we believe that data center construction will continue to experience robust growth. Aging baby boomers are requiring increasing medical care, which will contribute to a growth in hospital renovations and construction, which are two markets we’ll be highly focused on in 2024. Other trends we’re tracking involve baby boomers who have decided to age in place and older millennials who are purchasing larger family homes. These trends, along with the number of homeowners who won’t move (because their current mortgage rates are substantially lower than today’s rates) are negatively impacting housing availability, which will support long-term new home construction.
Kuchenmeister: For whatever reason, big money seems to keep pushing for work to get done. There’s a lot to be said for the commercial contractor who’s flexible and can adapt to the economic environment. Those who are hungry to grow their business will succeed.
Exciting Opportunities in 2024
Metzler: Our lighting and lighting controls division is excited about the International Energy Conservation Code (IECC) 2021. They’ve done their homework and are ready to ensure code compliance and modernization of lighting controls in commercial projects, all while simplifying the installation process. Another exciting opportunity is the EV charging funding available through the National Electric Vehicle Infrastructure (NEVI) Formula Program and the Texas Commission on Environmental Quality (TCEQ). Whether it’s at a federal or state level, our Integrated Solutions team is already working with clients to maximize their funding.
Doris: Among other things, we’re excited about the federal infrastructure bill and the opportunities it will lead to as well as the growth in EV-related business. We also see business opportunities in the growth of sales through e-commerce and the increasing number of people purchasing online and in understanding how AI is going to impact our business and our relationships with customers and vendors.
Vorwick: The application of digital tools including AI are increasing speed, efficiency and our ability to analyze data to make more informed business decisions. We’re implementing tools to speed order entry, refining pricing strategies and improving the value of our inventory investments. Also, as discussed, the long-term electrification of transportation and demand for cleaner energy continues to create growth opportunities; these include increased demand for everything from our core products to selling and configuring software to enhance the efficient use of electricity due to increasing demand, along with newer products like charging stations and services to support the transition from our reliance on carbon-intensive energy.
Kuchenmeister: What gets and keeps us excited? Going to work and seeing what’s out there. There’s still lots of product innovation happening, which is great, and there’s no shortage of opportunities to keep us thinking about where we’re headed as an industry. We’re also excited about the workforce coming up— many of the younger folks we’ve seen entering the workforce have been outspoken about getting aligned with a company they can stay with for their career. There are young people out there who are willing to put their heart and soul into their workplace and career. It takes mental energy and physical resources to find these people, but the effort is totally worth it.
Helle: All products which are used in the building or refurbishment of our infrastructure will flourish. EV charging station installation will be active, but more importantly, the infrastructure around, under and connected to these stations will be very strong. There’s currently nowhere near enough of that infrastructure in homes, parking lots or other applications in most of the United States to accommodate a significant boom in the sale and use of electric cars.
Business Concerns for 2024 and Beyond
Doris: We’re concerned about how disruptive technological innovation could be to the business, but we’re trying to be on the front end to be ready for it. We’re currently seeing challenges with finding employees who understand our products and industry and have the ability to step right in. We’re creating a training program to develop people who may not have industry knowledge but have great skill sets that will enable them to get up to speed quickly. Due to a potential economic recession/decline, we’re working to ensure that we have a strong balance sheet to ride out whatever’s coming and take advantage of any opportunities that might fall out of that.
Vorwick: Our challenges are well known and include constraints on the availability of qualified employees, ongoing consolidation and the increasing investments needed to thrive in a rapidly evolving digital environment. These challenges are also strategic opportunities for distributors who invest in their employee-value proposition (including structured learning and development programs) and enhanced customer services. As IMARK members, we also have opportunities to invest together in digital innovation. Digital innovation can be disruptive; we need to be intentional in our approach toward researching and investing in these opportunities.
Kuchenmeister: The challenges for business involve bridging the old with the new. We all have business traditions and ways of thinking that make our industry great, but how do we bridge those with new tech, AI and all of the analytical tools we have at our fingertips? As a society and economy, we still have to put a human touch on these things.
Helle: The most significant challenge is clearly switchgear delivery. All of the major manufacturers currently have enormous backlogs and are quoting lead times that are three and four times longer than ever before with many of the proposed delivery dates exceeding one year or even more.
Metzler: Some of 2023’s issues are bleeding into 2024. Among them, our growth and expansion demand constant hiring of quality teammates. Our leadership team is very protective of our culture, and they work alongside our HR department to make sure that the caliber of our new hires matches the quality of the service we provide. Another hurdle our team constantly faces involves supply chain issues; panel boards and switchgear often have 40-week lead times, so our operations leaders strategically invest in stocking high-demand items and work with our Integrated Solutions team for sub-assembly and shop services to constantly innovate creative solutions.
How Suppliers and Reps Can Help
Vorwick: Our strategic suppliers and representatives share one timeless characteristic in common—an intense focus on our customers’ success along with the discipline of documenting and holding each other accountable for achieving our commitments.
Kuchenmeister: In our experience, the reps and vendors who are attentive, energetic and creative are the ones who succeed. You can’t manage people via email. In a business world that requires digitization for efficiency and human interaction for connection, be both. It’s not hard to embrace both ways of doing business.
Helle: Suppliers who teach us how to use their products in discretionary business that we handle day in and day out always do better with Granite City Electric. That type of rep or company isn’t the ‘norm’ anymore and the pressure between most reps and distributors is getting more intense. Also, services performed and billed is a market segment which will continue to grow. As switchgear deliveries continue to be problematic, refurbishing or upgrading existing equipment is often a better and more cost-effective solution for everyone involved.
Metzler: We have great respect for our manufacturer and rep partners, who consistently innovate with us to address customer pain points. Representatives are great about sharing resources with our sales team to maximize growth and service opportunities. Our manufacturers maintain a high level of communication and focus on strategic supply chain planning. These close partnerships are an integral part of helping our team ‘make it happen.’
Doris: We encourage suppliers and reps to partner with us on technological advances and to be nimble and flexible in order to make interactions with them and our customers more efficient. It’s about proactively working together, planning strategies and following through on them to identify and capitalize on win-win opportunities for all of us to increase business.