The electrical industry has come a long way since the dark days of 2001, 2002 and 2003.
Some segments are seeing positive industry growth; in other segments, the negatives are improving. If your business is primarily focused in the industrial market, you should already be seeing single-digit positive growth. If you are mainly in the contractor market, especially commercial, the growth is still negative but not double-digit negatives like in the first half of 2003. If you can tough it out for another quarter or so, DISC Corp. predicts smooth sailing at least through 2007.
For 2003, electrical distributors’ industry performance was down 3.5 percent from the 2002 level — a cumulative industry sales decline of nearly 16 percent since the peak in 2000.
Since 2000, cumulatively, the distributor-served contractor market decreased 22 percent while the distributor-served industrial market declined almost 20 percent. The partial offsets were the institutional and utility markets.
The industry still has a long way to go in 2004. Look for sales to increase a paltry 2.4 percent, led by the industrial and institutional markets. The contractor market is expected to decline fractionally.
For 2005, DISC’s analysis points to a rebound in all major segments with total industry sales increasing 8.5 percent led by the distributor-served contractor market. For the first time in five years, look forward to seeing all major segments in plus territory.
The California market. Let’s look at how these economic trends are affecting California, the nation’s largest distributor-served market. With nearly $8 billion in sales, the state generates 12 percent of all electrical supplies and apparatus sold by distributors.
As a result, California’s markets are hotly competitive, and they offer multiple opportunities to grow business both in total revenues and in profitability. There are lots of niches to serve, and with smart marketing a distributor can differentiate its business from the competition.
The California market was ahead of the curve at the peak of the distributor cycle in 2000. Total U.S. sales were up 11 percent while total sales in California were up nearly 14 percent. The similarities end there. While the distributor-served industrial market advanced nearly 7.5 percent in 2000, the California industrial market was up a whopping 14 percent.
As the nation moved through the downside of the cycle, the California industrial market was more in tune with the overall U.S. performance. However, the distributor-served contractor market diverged significantly, and both distributors and manufacturers serving the contractor market in California nose-dived compared with the overall U.S. contractor market.
For example, U.S. distributor sales to contractors in 2002 declined 13 percent while in California they decreased nearly 17 percent. But while the U.S. contractor market in 2003 was off “only” 9 percent, the California contractor market continued its slide with another 17 percent decrease — this despite a fairly robust housing market.