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2002 ElectroForecast

While respondents to CEE News' 2002 ElectroForecast survey were not particularly optimistic about this year's business prospects, most weren't singing the blues either. More than half of the electrical contractors surveyed see their sales growing, but at pedestrian single-digit growth rates. Electrical distributors who responded to the survey weren't nearly as optimistic. Only the most bullish were

While respondents to CEE News' 2002 ElectroForecast survey were not particularly optimistic about this year's business prospects, most weren't singing the blues either. More than half of the electrical contractors surveyed see their sales growing, but at pedestrian single-digit growth rates.

Electrical distributors who responded to the survey weren't nearly as optimistic. Only the most bullish were looking at anything approaching 5% sales growth, and most of the distributor respondents were either hoping to hold even with 2001 or expecting sales declines of up to 5%.

As one might expect, contractors and others in the electrical construction field saw fallout from the recession and the 9-11 events as the two biggest obstacles that they face this year. While the general tone of the respondents was that business would pick up some time around mid-year, several respondents said if terrorists attack the U.S. again in 2002, it could cripple an economic recovery.

None of the electrical contractors, electrical distributors, electrical manufacturers or independent manufacturers' reps who responded to the survey believe the economy is in a freefall. Many see the current state of economic affairs as a traditional economic downtown that was made worse by the 9-11 attacks.

The fact that auto companies have cut down on construction has affected one Midwest electrical contractor, who also said his company's backlog was dropping, work had slowed down and there were more bidders per job.

One Illinois-based rep said the downturn actually started in the fourth quarter of 2001, and that his company's industrial business was hit hardest. “If the interest rates continue going up and employment doesn't improve, residential will continue decreasing, which will not allow a rebound in 2002.”

Another rep, Richard Osborne, president, Richard Osborne Enterprises Inc., Lebanon, Maine, agreed that this business cycle isn't unusual, but that after the 9-11 attacks, “It was like we froze for two weeks.”

Despite their concerns about the economy, on the contracting side, CEE News' readers seem to be aggressively exploring new avenues of business such as datacom, and more specifically, home networking. A surprising number of survey respondents saw alternative energy sources such as photovoltaics, wind energy and fuel cells as new market opportunities.

Other electrical professionals were exploring these new markets, too. Jimmy Jones, president, JJ Electric Agent Inc., a rep agency in Amarillo, Texas, said sales to wind farms developed into a nice piece of business for his company during 2001. “We were able to sell wire, cable, insulators and steel poles,” he said.

While electrical contractors had different ideas on the new market opportunities that offered the most potential, they were in agreement on two areas of the business: the need for electrical distributors to get back to basics in how they service the needs of electrical contractors and the role of e-business in the electrical world.

Distributor relations

In one sense, the contractor-distributor relationship has changed over the years because e-business technologies and communication tools like Web-based ordering; online product specifications sheets, computer-to-computer links, e-mail and job-site ordering from personal digital assistants (PDAs) have allowed distributors to offer 24/7 service. But when asked for ideas about what would most improve their distributor relationships, electrical contractors were strictly back-to-basics:

  • Offer better pricing;
  • Deliver materials faster and more dependably;
  • Stock a broader array of products in more depth;
  • Have knowledgeable salespeople.

While some of these suggestions would seem like Servicing Contractors 101, they were the most common responses for improving contractor-distributor relations in the 2002 ElectroForecast survey. H.J. Druhl, owner, Guardian Electronics, Lexington, N.C., said, “Distributors need sales personnel who are knowledgeable of the products and can get prices and availability information to me promptly. Many times second and third calls are necessary to get this information.”

When asked what he would tell all of the electrical distributors that he buys from if he had all of them in the same room for 30 minutes, Edmund Yahn Jr., Yahn Electric Co., Inc., Wheeling, W. Va., would ask for their best prices upfront. Other electrical contractors were more concerned with local inventory levels. Thomas North, owner, Miami Cove Electric, Garibaldi, Ore., would tell his distributors to, “do a much better job of managing your inventory to put an end to back orders.”

Pricing and new product information were two key concerns for Dennis Kornel, owner, K&S Sales & Service, York Neb. “Do more showing of new products,” he said. “Keep prices as competitive as possible and provide more help for contractors on warranty parts.”

One residentially-oriented California electrical contractor kept his suggestions short-and-sweet: “Get competent sales staff, know your products and keep plenty of inventory,” said Bob Ludecke, owner, Bob Ludecke's Electrical Services, Big Bear Services, Calif.


Respondents were almost universally skeptical about the impact that e-business now has on the electrical business. Douglas Powell, president, Powell's Electric Service Inc., Hatboro, Pa., said, “We've seen too many (dot-com) companies skyrocket and then plummet…We use local vendors who supply the local area. Nothing worldwide is going on here.”

Guardian Electronics' H.J. Druhl isn't interested in e-business. “I need to have personal interactions with ‘real’ people who understand business problems. E-business is too impersonal and a waste of time.”

While the contractor respondents to the 2002 ElectroForecast survey were underwhelmed with e-business, some of their business partners in other areas of the electrical business saw its potential in certain areas. The chief operating officer of one of the largest electrical manufacturers in the U.S. said because some of his company's customers had been “burned” by their past experiences in e-business, they are cautious about getting back into it.

“One has to be patient, as many are not ready and progress will not be as fast as desired,” he said. “But the e-world clearly presents a significant opportunity to be more efficient and effective. We are committed to be there and to be ready as the world evolves.”

There seems to be a perception in the marketplace in this admittedly unscientific sampling of respondents that larger companies are more interested in e-business than smaller companies. Vernon Bishop, president, Excelite Inc., Altoona, Pa., a lighting manufacturer, said his smaller customers have a “wait-and-see attitude” on e-business, while bigger customers were more interested.

Russell Leonard, vice president of sales and marketing, Federal Pacific, Bristol, Pa., is excited about e-business, and said while his customers have mixed feelings about e-commerce, the electrical world will be touched by the Web more in the future. “I view our e-business system as another tool, not a means to eliminate people of processes along the chain,” he said.

One large New Jersey distributor agreed with Leonard's evaluation that the Web will be part of the industry's future. “It has a place, but it has not materialized to any extent. The Web had disappointed many, but all see an eventual future,” said Richard Cooper, president, Cooper Electric Supply Co., Tinton Falls, N.J.

Dan Marlinga, president, Michigan Electric Supply, Flint, Mich., echoed the evaluation of many on e-business when he said, “The investment is too great and the return is too little and too long.”

An electrical distributor in northern California has an interesting perspective on e-business because many of his customers are technical companies that one would think would embrace e-commerce. Yet Burt Schraga, president Bell Electrical Supply Inc., Santa Clara, Calif., said, “We are in the middle of Silicon Valley, yet our customers, even high-tech ones, are still using phone and fax.”

One South Carolina manufacturers' rep, who requested anonymity, had several interesting comments on the biggest trends of 2001 and the danger signals that he sees for 2002. Along with the merger of electrical companies, and the ever-increasing importance of microprocessors, he said national pride was one of the biggest events of 2001. He said mergers and acquisitions will continue to have a major effect on the electrical business in 2002.

Yet one of his other comments on danger signals may be even more intriguing. As electrical professionals plot their courses of action for 2002 amidst the questions about economic recovery, potential terrorist attacks, consolidation, e-business and new markets, he cautions others in the electrical industry to not “mistake motion for action.”

Home Improvement

The current recession and move by Americans to spend more time at home after the Sept. 11 attacks have sparked an increase in expenditures on household renovations — and the stock prices of some “home-and-hearth” stocks such as Lowe's and Michaels (arts and crafts).

Source: FMI Corp.'s 2001-2002 U.S. Markets Construction Update

Big Box Construction

With Big Box retailers cannibalizing each other and retail sales slipping in many markets, store construction is on a downward trend. During the 1990s, the construction of mega-stores by Home Depot, Wal-Mart and Best Buy dominated this market, and now that many metros are saturated, construction of these behemoths is tailing off.

Source: McGraw-Hill Construction Information Group's 2002 Construction Outlook

Office Construction

It's a turbulent time in the office construction market, with a dearth of demand for new space in tech centers like Silicon Valley, San Francisco and Boston's Route 128 corridor, following the dot-com crash. Boston's downtown office vacancy rates also have climbed to nearly 12% in the third-quarter of 2002. Industry observers aren't sure how many tenants will return.

Source: McGraw-Hill Construction Information Group's 2002 Construction Outlook

Utility Construction

The utility market has seen some wild swings in recent years, with a 17% surge in 2000, 32% growth from 2000 to 2001 and a double-digit dip forecasted for next year. Some pockets of the utility market still look prosperous, including the construction of smaller facilities and markets with tax incentives for alternative power sources.

Source: McGraw-Hill Construction Information Group's 2002 Construction Outlook

Single-Family Housing

With the average size of new single-family homes topping 2,200 sq ft, the sales-per-house for electrical contractors will continue to grow. The next few years look good for the continued health of the single-family home market, as NAHB is looking for a sharp spike in construction in 2003.

Source: National Association of Home Builders (NAHB)

Total Housing Starts

With mortgage rates expected to stay below 7% for 2002, the housing market should remain one of the strongest segments of the U.S. economy for the near future. “Upsell” opportunities in these new homes for electrical contractors include state-of-the-art dimming systems, home networks and surge-suppression equipment.

Source: National Association of Home Builders (NAHB)

Multi-Family Housing

Demographics play a huge role in the demand for multi-family housing, and with first-time homebuyers unable to afford single-family homes in some markets, empty nesters scaling down and moving into townhouses or apartments and the continuing popularity of condominiums and timeshares in resort areas, this market should remain healthy.

Source: National Association of Home Builders (NAHB)

Factory Construction

Although few factories are operating at or near capacity, McGraw-Hill's 2002 Construction Outlook sees a modest increase for the construction of factories in 2002. At press time, industrial capacity utilization was hovering near 73% — a double-digit drop from last year. The tech industries have been hit the most in the industrial market.

Source: McGraw-Hill Construction Information Group's 2002 Construction Outlook

School Construction

The demand for new classroom space at schools and colleges makes the educational market possibly the strongest segment of the entire construction market. With elementary school enrollment near its peak, the demand for high school and university construction should be even stronger in the future.

Source: McGraw-Hill Construction Information Group's 2002 Construction Outlook

Medical Construction

The construction of hospitals, medical buildings, outpatient care clinics and other health-care facilities is picking up again after softening for two years. The health of this market has become more dependent on the major health-insurance providers that control so many of the facilities.

Source: McGraw-Hill Construction Information Group's 2002 Construction Outlook


Developed by the editors of CEE News, Electrical Wholesaling and Electrical Marketing newsletter, the ElectroForecast 2002 survey is intended to offer a quick snapshot of the issues that will confront electrical contractors, electrical distributors, independent manufacturers' reps and electrical manufacturers during the next year. It's not intended to be a statistically verifiable piece of research, but it does offer some interesting insight into what's on the minds of electrical professionals. Here are the key issues that surfaced in the survey:


  • Lingering worries about 9-11 and the possibility of more terrorist attacks on U.S. soil.

  • Massive corporate layoffs.

  • Many of the survey's respondents now seem to regard e-business with the same skepticism of a street-smart New Yorker looking at a “genuine” Rolex watch being sold by a Times Square street vendor.

  • Unemployment and a lingering recession could sour the residential construction market, one of the few bastions of strength in the U.S. economy over the past year.

  • Electrical distributors have to focus more on service basics if they want to improve their business relationships with electrical contractors.


  • Most respondents think the recession will end by mid-year.

  • Despite the recession, the voice/data market continues to be good business for electrical contractors.

  • Some electrical contractors have found alternative energy sources such as wind energy and photovoltaics to be profitable avenues of business.

This forecast was developed from a CEE News survey and materials published by the McGraw-Hill Construction Information Group, New York, FMI, Raleigh, N.C., and the National Association of Home Builders (NAHB), Washington, D.C.

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