Have you noticed many of the local electrical supply houses in your market selling to larger companies? It’s part of a national surge in acquisition activity in the electrical wholesaling industry that’s quite possibly the biggest ever. In the past five years, Electrical Wholesaling magazine, EC&M’s sister publication, has counted more than 60 mergers or acquisitions. Combined, these deals represent millions of dollars in sales of electrical products moving from many family-owned independent distributors to a handful of large national and regional distributors. Many of these deals were done by WESCO Distribution Inc., Pittsburgh; Sonepar North America, North Charleston, S.C.; Graybar Electric Co., St. Louis; Rexel USA, Dallas; and Consolidated Electrical Distributors (CED), Irving, Texas.
These acquisitions have fueled consolidation in the electrical wholesaling industry, and Electrical Wholesaling estimates the 10 largest electrical distributors have enormous clout in the electrical market. Together, they had combined 2023 revenues of more than $75.5 billion. That’s approximately 52% of the $145.3 million in 2023 sales Electrical Wholesaling estimates was sold through U.S. electrical distributors. If you're looking for more information on the 10 largest distributors, click here to download this free e-book on them.
Because of all these acquisitions, this year, Electrical Wholesaling had to trim down its annual ranking of the largest distributors in North America from 150 companies to 100 companies. The fifty largest companies are in Table 1 below, and you can click here to see the rest of the rankings.
In the past two years alone, Sonepar or one of its subsidiaries has acquired eight large independent distributors, including most recently Echo Electric, Council Bluffs, IA; Electric Supply Center, Burlington, MA, as well as Madison Electric Co., Warren, Mich.; Standard Electric Co., Saginaw, Mich.; Electrozad, Windsor, Ontario; Billows Supply, Philadelphia; Sunrise Electric Supply, Addison, Ill.; and Electric Supply of Tampa, Tampa, Fla. Other national or super-regional distributors were active acquirers, too, including Rexel, which in 2023 or 2024 bought Electrical Supplies Inc., Miami; Buckles-Smith, Santa Clara, Calif.; Teche Electric, Lafayette, La.; and Talley Inc., Los Angeles, a large VDV specialist.
Graybar Electric, Consolidated Electrical Distributors, and Border States Electric also bought some big distributors. Graybar acquired Shepherd Electric Supply, Baltimore, and Blazer Electric Supply, Colorado Springs, Colo.; CED bought Parrish-Hare Electrical Supply, Irving, Texas; and Border States Electric acquired Dominion Electric Supply, Arlington, Va., and Winston Engineering, West Hollywood, Calif.
You may or may not see much of a change in your local supply house if one of these large distributors purchases it because these companies very often try to keep local management and employees in place after the acquisition — and being part of a larger company can often give smaller firms access to resources to grow the business that they previously did not have when they were privately owned. When one of these larger chains moves into town, they can provide some tough competition for the independents still in the market, particularly on pricing. Theoretically, these larger companies can negotiate more lucrative volume purchasing discounts for the products they buy from electrical manufacturers, and then pass some of the savings on to customers. Many of the remaining independent electrical distributors battle this price competition by banding together with other distributors in buying/marketing groups like the recently merged Affiliated Distributors, Wayne, Pa., and IMARK Group, Bowie, Md., to receive better pricing from the electrical vendors in these groups.
Not every remaining independent distributors sees the growth of the largest distributors as an insurmountable obstacle. Some respondents said smaller distributors can still react faster to market opportunities and may have better access to local talent.
At Inline Electric Supply, Huntsville, Ala., Bruce Summerville, president said, “We are one of the last multi-location independent distributors left in our area of the country. My perception is that fact, along with us being a 100% ESOP, gives us an advantage in recruiting new ‘A players’ to our team. The bigger guys that we are competing with are probably going to put a bit of a squeeze on our margins, but overall I am confident that we will be able to outperform them due to having better and more qualitied people.”
Richard Booth, electrical division manager for Coburn Supply, Beaumont, Texas, says the acquisitions sometimes give larger companies advantages with their vendor relationships. “Big-name companies come into play with stronger vendor relationships than an independent regional has in some cases,” he wrote in his response. “It forces the smaller distributor into corners we have to fight out of. Vendors who promised to work with you as you entered a new market now back out of that agreement when the larger national chain gobbles up the competition."
No major progress in switchgear lead times yet
Unfortunately for electrical contractors and distributors’ other customers hoping for some relief in the astronomical lead times for switchgear, the situation doesn’t sound like it will improve anytime soon. Only 8% of the respondents to Electrical Wholesaling’s Top 100 survey thought things would get back to normal by the end of the year, and 59% of Top 100 distributors don't think lead times for switchgear will improve until 2025.
A slowing economy in the second half of 2024?
This year’s companies have seen plenty of challenges. On average, Electrical Wholesaling’s Top 100 distributors are fairly optimistic about the 2024 business climate, but 43% of respondents see business slowing in the second half of 2024. Sixteen percent of respondents said they already saw signs in 2Q 2024 that the economy is contracting. On a positive note, none of the respondents see a recession anytime in 2024.
While 39% of respondents saw their sales growing between 1% to 5% in 2024 and 10% were forecasting flat sales, 37% of respondents saw their sales growing at better than a 10% clip. Average annual sales increase for electrical distributors typically range between 4% to 8%.
Another concern for many Top 100 distributors is the continuing issues with switchgear delays, which are putting a crimp in project completion. In fact, 59% of respondents said they didn’t see lead times returning to normal until 2025.
Despite these challenges, Top 100 respondents were definitely investing in their companies to position themselves for future growth. Several distributors were replacing or upgrading their ERP computer systems, including Butler Supply, St. Louis; CEEUS Inc., West Columbia, S.C.; Chelsea Lighting, New York; Clayton Engineering, Wheeling, W.V.; and Metro Wire & Cable Corp., Sterling Heights, Mich.
A surprising number of companies were opening up new branches. Top 100 distributors told Electrical Wholesaling they opened up at least 123 branches in 2023 and 2024, led by City Electric Supply, Dallas, which opened up 40 branches over the past two years. Since 2018, the company has opened at least 181 branches in North America. Winsupply, Dayton, Ohio, was also in expansion mode and opened seven branches in 2023 and plans to launch 15 more this year. Border States Electric has opened at least seven new branches over the past year and Elliott Electric Supply, Nacogdoches, Texas, opened five locations in 2023 and has plans for “many more” in 2024. In total, the 100 full-line or specialty distributors operate no less than 6,846 branches in North America. If you count hybrid distributors W.W. Grainger, Lake Forest, Ill., and Fastenal, Winona, Minn., that total rise to 8,284 locations.
Mega-projects power construction sales growth for many Top 100 distributors
Many distributors on the 2024 Top 100 list were quite bullish about opportunities in the market because of all the electrical construction spending related to data centers, semiconductor plants, and electric vehicle (EV) or EV battery factories.
Not every Top 100 distributor is fortunate enough to have one of these mega-projects in their backyard. But the billions of dollars in the electrical spend for these projects now washing over the electrical wholesaling industry is quite impressive. Look at some of the biggest projects 2024 Top 100 distributors worked on or are currently supplying in Table 2 below.
Summary
Although consolidation is changing the ownership of many independent distributors (whether they are independent or owned by global distribution giant) they still must provide stellar service and reasonable pricing to win business from you and other end users in local markets. In particular, electrical contractors will always command tremendous mind share with these distributors because they very often account for 50% or more of the typical distributor’s business. Large or small, all EW Top 100 distributors want your business, and the smart ones are hustling to get it. As the saying goes in the electrical wholesaling industry, “Whoever is closest to the customer wins.”
