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Coronavirus Slams Industry with -20% Sales Declines Common in Many Local Markets

March 20, 2020
Several dozen industry executives provide insight into the experiences so far with the Coronavirus.

To get a sense of the impact of the Coronavirus on the electrical market, earlier this week EM’s editors surveyed electrical manufacturers, electrical distributors and independent manufacturers’ reps on their experiences to date. Survey results are still coming in, but responses from more than 70 industry executives offer excellent but at times sobering insight into the impact of the COVID-19 virus. We realize this situation is changing day-to-day, but believe the following report is a solid pulse check for where the electrical industry is at right now.

The dramatic decline in sales. Of the 45 distributor and rep respondents to our survey, 62% had seen a slowdown. The impact was sudden and dramatic for these companies. The average decrease in business for the 31 respondents who provided data was -22%. Even more sobering was how quickly the downturn hit these companies, as 59% of them said they started noticing the slowdown less than a week ago.

Surprisingly, manufacturer respondents had not yet seen such a dramatic impact. Of the 28 companies providing data, approximately 61% said their business had not yet slowed down because of the Coronavirus. For the electrical manufacturers who had seen a slowdown, the decrease was in the same ballpark as the decrease for distributor and rep respondents at -19%. The majority had also seen the decline just in the last week.

Legrand’s John Hoffman, executive VP of sales and market development, said while the company’s overall business had not yet slowed down, they had noticed a business disruption on the coasts, with sales off in Massachusetts, New York, New Jersey and California. He said projects were slowing down in New York City and that he expected construction to stop in San Francisco for three weeks. “Overall business is very strong,” he said. “This could be due to some people stocking up.”

China sourcing update. Hoffman added that the company was not experiencing any supply chain issues. “Our China operation is at nearly 100%, product has been shipping and no back orders,” he said in his response.

Several manufacturers said manufacturing is starting to come back online in China. Others commented that they were glad their companies manufactured or sourced most of their products in the United States or Mexico. Said an executive from one large manufacturer, “We have had a slight delay in shipping and receiving products produced in China, but suppliers are coming back up to speed and we only project a slight blip in supply volume in Q2.”

“We are lucky that we manufacture over 80% in US, and only manufacture very limited in China,” said another. “Our workers in China are back to work as of last week. We are hearing of backups in shipping and customs.”

Michael Billett, regional sales manager, Phoenix Support Systems, said his company was not experiencing any supply chain issues because of its domestic manufacturing capabilities. “Over 95% of our products are manufactured in Niles, OH, using domestic steel,” he reported. “The little that we import, we have sufficient inventory in place.”

Local market sales reports. Geographic market areas all over the United States are being impacted in one way or another by the Coronavirus, but judging from survey responses, it seems Boston, New York, Philadelphia, San Francisco and Seattle are being hurt the worst in the early days of the crisis. Distributor and rep respondents from all over the United States are doing many if not all of their sales contacts by phone or email because face-to-face sales meetings have all but stopped in many markets.

In Boston, which is in the middle of a transformative construction boom, this week’s decision by Boston Mayor Marty Walsh to shut down all construction jobs for several weeks rocked the market. One large New England rep has already taken a -25% hit to sales.

Jeff Jervah, regional vice president for Legrand, said the feedback he has been getting from the field has been “all over the map.” “From construction being shut down to the local/state government and distributor personnel not allowed on site, and distributors not being allowed to conduct a traditional sales call face-to-face,” he said.

One Top 200 Texas distributor whose sales are down -15% over the last week said they were not allowing any reps in their building until further notice. “Our contractor customers are not allowing any salesmen in their buildings, either. Job sites, as of now, are still working,” he said.

And while the Coronavirus was top of mind for survey respondents from Texas, several commented on the dramatic decline in the oil market, which has severely cut demand for oil and is a major economic crisis in its own right.

Social distancing gets real. While every region of the country has its own unique set of economic challenges because of the Coronavirus, many respondents commented on some of the same issues. A big one was tied to social distancing. Said a large Ohio distributor, “Big impact in Ohio. Face-to-face calls have been reduced to emergencies only and counter business has slowed. Now hearing cases of contractors being asked not to return to job sites for two weeks; major manufacturer creating panic by encouraging distributors to order 30-day supplies; and concerns among employees.”

One East Coast independent rep said his agency’s 90 employees are all working remote. He added that distributors in Washington, DC, and Baltimore seem busy, but that it “seems like panic to finish jobs.” “All offices and job sites are not allowing visitors,” he said. “We are waiting for a full closure of DC. Engineers and architects are still busy.”

Philly: Hard times for a tough town. Several Philadelphia area reps and distributors reported sudden declines of -20% or worse. “The Philadelphia region has been hit hard,” he said. “Major constructions sites are still open. But our sales are down -25% in two days.”

Another Philadelphia rep, whose sales are down -10% to date, said the main issue is “an inability to communicate.” “We have to do everything by phone or e-mail, so it’s slowing the process,” he said. “But as of today, we are still open, and our job sites are still active.”

Sean Healy, Colonial Electric Supply, King of Prussia, PA, reported his company’s sales have dropped -20% over the past week. “We expect this to get worse before it gets better,” he said.

The Midwest also gets whacked. Several Midwestern distributors also reported big sales declines and a slowdown in construction. One distributor in the Minneapolis-St. Paul market said his company’s business is off -50%. “Our business is slowing on a daily basis, particularly at our will call counters,” he said “We are still making deliveries, but expect those to slow as well. Inspectors in some areas are not visiting job sites, so that in and of itself will slow the progress of construction.

“Many manufacturing facilities are taking steps to limit outside personnel into their buildings (drop shipments without entering or not taking deliveries at all).”

One of the larger distributors in the St. Louis market said that while Missouri has not yet been hit as hard as some other markets, he is hearing that some area universities and hospitals may shut down construction projects. He says his company is taking all precautions to minimize the effect of the Coronavirus and, if employees’ job responsibilities allow for it, they are now working at home. “Customers are starting to limit the electrical distributors from visiting,” he added.

The view from the West Coast. As one of the largest reps on the West Coast, the team at ElectroRep, Sausalito, CA, gets a good perspective on the current business climate in California, Pacific Northwest, and through the Intermountain states. Kelly Boyd, the company’s president and CEO, expects business in the Pacific Northwest and Northern California markets to take a -25%-plus hit in the next few months.

He has seen construction projects shut down in San Francisco, San Jose CA, and in the Pacific Northwest, and said major building owners including Facebook and Amazon have shut down major facilities and projects in many parts of the country for a few weeks.

However, Boyd sees some major sales opportunities — as well as supply chain challenges — when the Coronavirus crisis passes. “There will be an explosion of upturn when the time comes to turn back on the faucet,” he says. “That will create supply chain challenges and price opportunity.”