In the last half-century, electrical distributors have played a vital role in the success and growth of the power industry. Through established distribution networks, brands such as Schneider Electric have been able to engage with electricians and contractors worldwide, providing solutions and services to help them meet the demands of their customers. Electrical distributors have also been able to adapt to changing industry trends to keep their business models competitive despite varying market cycles and evolving technology.
The last five years, however, have been particularly challenging. Digitization has been a game changer for all players involved – from manufacturers and distributors to electricians and end-users. In countries such as Switzerland, Netherlands, and Denmark, more than 50% of electrical distribution is now conducted online, which has forced distributors to recast their business model significantly.
Transformation drivers beyond digitization
Along with digitization, several other factors are re-shaping the landscape of the electrical distribution marketplace:
- Market concentration. Through mergers and acquisitions, dominant players are consolidating with an eye toward increasing market share, adding technical expertise, and/or expanding value-added service offerings.
- Pricing transparency. E-commerce is driving price transparency regardless of purchase channel, putting pressure on traditional distributor margins as offline and online prices converge.
- New technologies and IoT. Customers are looking for more sophisticated and technically complex solutions, necessitating that distributors and the electricians they serve develop new competencies.
Bottom line: distributors have had to reevaluate their business models, adding more services and solutions to strengthen their value proposition and reduce the importance of price as a choice factor.
Growing with green products
Electrical distributors are expanding their offerings with a focus on green products, reflecting a larger, cross-industry trend worldwide. Electric vehicles (EVs) are one emerging category where distributors see potential for future growth. For example, Audi has teamed with Amazon and Electrify America to help kickstart its EV ecosystem. When you look at what’s down the road – by 2040, there will be 530 million EVs in service compared with 2.8 million in 2017, and 560 million charging points compared with 3.1 million – it’s easy to understand the trend toward green products distribution. The proliferation of solar and storage solutions in the residential market represents another promising opportunity for electrical distributors. Many have established divisions dedicated to green solutions in order to capitalize on their potential to provide incremental growth. The first movers will have an advantage as green products become mainstream in the coming decade.
Supporting the Winners of Tomorrow
Schneider Electric recognizes the challenges distributors face in their transformation journeys and is committed to helping them become futureproof players amid all the change. To guide and support its partners as they evolve their business model, the company offers the following recommendations:
- Understand your customers’ needs. Identify the main pain points for your customers – electricians, panel builders, contractors, OEMs – and align your internal processes, including IT, with these needs so you can be efficient and agile in providing solutions to real problems. Invest in a robust CRM tool to gather the data you need to understand and respond to the marketplace.
- Take an omnichannel approach. Combine your physical and digital models to cater to different customer preferences. Apply digital marketing strategies based on data generated by your CRM to respond better to market needs and opportunities.
- Bolster your digital presence. Improve your digital visibility throughout the customer journey with tools such as online catalogs, configurators, quality content – photos, videos, tutorials, etc. – and, especially, apps.
- Specialize to add value. Create more value for your customers – and greater profits for your business – by developing new competencies in areas such as industrial automation, energy efficiency, smart homes and buildings, project management, custom logistics, training, and predictive and corrective maintenance.
- Reinforce your core values. Don’t lose the traditional values you’ve always offered your customers – local service, product knowledge and availability, and your understanding of their business. Amid all the industry change, these remain as key differentiators.
- Prepare for the future. Get the training you need to navigate the digital transformation and provide more value to your customers.
- Build a partner ecosystem. Create alliances and partnerships with companies and brands that complement your offering and provide the innovation and support you’ll need to succeed in the future.
To the future, together
The future is promising for those electrical distributors who are transforming their business to respond to emerging industry trends and the changing needs of their customers. And because implementing some or all of the above recommendations can be challenging, Schneider Electric is ready to support its distributor partners on every step of their journey, providing them with:
- The best solution portfolio in the industry
- Innovative and efficient technology that fulfills the demands and requirements of today’s marketplace
- Programs and training that let distributors become more specialized
- Content and materials to speed the digitization of their business
- Expert technical and consultative support whenever they need it
To learn more about how Schneider Electric is forging special partnerships with distributors to enhance their productivity and futureproof their business in the digital age, visit https://www.schneider-electric.com/en/partners/distributors/.