Contractors Sound Off On Their Love/Hate Relationship with Private-Label Products

April 27, 2007
While electrical distributors, reps and manufacturers love to talk about the good, bad and just-plain ugly aspects of private-label products, what matters most is if the ultimate customers will buy them

While electrical distributors, reps and manufacturers love to talk about the good, bad and just-plain ugly aspects of private-label products, what matters most is if the ultimate customers will buy them.

The short answer is, “It depends.” Electrical contractors and other end users will consider private-label products for some applications and in some product areas, but wouldn’t touch them with a 10-foot stick of conduit in others.

To find out what electrical distributors’ customers think about privately labeled products, David Gordon, president, Channel Marketing Group, Raleigh, N.C., and Allen Ray, president, Allen Ray Associates, Kennedale, Texas, worked with Electrical Wholesaling and its sister publication, Electrical Construction & Maintenance (EC&M), to conduct an e-survey that would explore the value of brands in the electrical marketplace and the exposure and acceptance level of non-branded products. An analysis of the results of this survey will be published in next month’s issue of Electrical Wholesaling.

Approximately 12,000 e-mails were randomly selected from EC&M’s database. A 4.7 percent response rate was received, exceeding traditional blind e-survey response rates of 2 percent. Respondents were offered a copy of the survey results and, at their option, an entry into a sweepstakes for one of four high-definition televisions. To validate open-ended responses, a number of telephone interviews were conducted.

Almost 20 percent of the end-user respondents said they know at least one distributor selling private-label products. The most frequently mentioned distributors were: Rexel Inc., Dallas (19.8 percent); City Electric Supply, Orlando, Fla. (12.1 percent); Graybar Electric Co., St. Louis (12.1 percent); and W.W. Grainger, Lake Forest, Ill. (5.5 percent).

To better understand the commitment of end users to brands, electrical contractors were asked about their purchasing habits. Here is what we found out:

• 66 percent of the respondents ask for specific manufacturer names when they order products from electrical distributors.
• 44 percent of the time electrical contractors place orders not using a specific manufacturer’s name and instead request a certain type of product using generic terms.
• 23 percent of the time electrical contractors mentioned a distributor name when they order products.

Distributors’ customers frequently know which lines they carry, so we weren’t surprised responses were skewed toward manufacturer names. The frequency with which electrical contractors place orders by product type or in generic terms wasn’t really surprising, either. It’s safe to say respondents were “brand apathetic” in these situations and that they were willing to accept any manufacturer’s brand or a distributor’s own brand. These product categories are most susceptible to pricing pressure, and therefore less-expensive private-labeled products.

On the flip side, electrical contractors are quite brand sensitive in certain product categories, and they often will request a specific manufacturer or are willing to accept a known manufacturer of specific type of product. As expected, brand sensitivity or apathy depended on whether the customer was focused in the industrial, commercial or residential markets.

Industrially oriented installers. Industrial contractors favor brand-name products as a measure of quality but said lack of pricing competitiveness can provide opportunities for less expensive lines. When input from customers involved primarily in maintenance and repair operations (MRO) input was solicited, some respondents were surprisingly willing to try non-branded products that were UL listed or used for non-critical systems.

Respondents fell into two camps: willing to try/use private-labeled products or focused on name brands for quality and support issues. Those customers who were willing to use private-label products said specs written “or equal” are moving to non-branded products. Spec products tend to be more expensive.

Commercial contractors. These end users are concerned with product quality.They would prefer to “buy American” if price is comparable and they feel name-brand manufacturer benefits include warranty coverage and population of information in contractor billing/estimating systems. But price can still be king depending upon product category. One commercial contractor said private-label products don’t stay in the market long enough to be a major factor.

Residential contractors. These contractors are the most apt to purchase private-label products due to price benefits. For the most part, they do not perceive product quality differences, and believe homeowners and their other customers don’t know brands or see differences in quality. Additionally, the pricing benefits of non-branded products enable residential contractors to earn jobs and retain project profitability.

Said one residential electrical contractor, “Some unbranded products such as recessed fixture trims appear to be identical to branded products. We will not pay for a brand-name lamp if we can find a lower-priced alternative that will give satisfactory results.”

Multi-focused contractors. Twenty-eight percent of the respondents said they were “multi-focused” (typically meaning industrial/commercial for larger contractors and commercial/residential for smaller distributors). These are core customers for many distributors. They prefer name brands due to concerns about quality, reliability, warranty and product-liability coverage. However, due to pricing, an increasing number are willing to install non-branded products as long as the products are UL listed and will pass inspection.

With product quality becoming less of a differentiator, price drives many decisions. According to one electrical contractor, “Name-brand product quality has declined over the years as has local product support. I suspect we get more information via the Internet than from our distributors. Although our purchase volume has gone up with specific distributors, product and sales support are waning. Good prices allow us to get the jobs.”

Another respondent said, “We have ‘price-house distributors’ approach us all the time. For certain product groupings, they have great prices and deliver in a timely fashion. But more often than not, these same supply houses don’t offer the name-brand products approved for a job. We become suspect of a distributor when they substitute non-branded or product with their name without notifying us before hand.

“While on most of our residential jobs we are only concerned that the product is good for the first year, we have industrial contracts that demand certain brands, even when there is a substantial cost differential. I would say in those situations there is a perceived name value to our customer, as they are asking for it by name and part number. Outside of the industrial setting, price and delivery rule the landscape.”

What Contractors Are Saying About Private Labeling

“Most of the time, private-labeled products are just as good and of the same quality or better. There is always a risk, but the difference in cost usually makes up for the risk.”

“Quality of a product has to be adequate to ensure we don’t have an unacceptable rate of call-backs. As long as the items are of equal quality, price and availability become the deciding factors.”

“We would try different brands if they proved reliable, but we would rather pay more for the reliable product.”

“I have serious quality concerns with unbranded electrical products and will not purchase or install them.”

“Unless it is critical to quality, I will buy generic to save money.”

“Manufacturer brands have been around a long time and have established a good and consistent quality product. Generic products generally don’t stay in the market long enough.”