11/23/2009
NEWS BRIEFS
Ireland at STAFDA: Recession Provides Market Share Opportunities
Attendees fill the aisles at STAFDA’s convention in Atlanta (courtesy STAFDA).
Black & Decker vice president Les Ireland knew the global recession had shifted from a market to market battle to an “all out economic disaster” in early 2009 when he and other manufacturers began hearing their customers say “I don’t care what the deal is, I ain’t buying!”
In his state of the industry address to the Specialty Tools and Fasteners Distributors Association meeting in Atlanta, Ireland said that in the first quarter of 2009, the days of “a loaded customer is a loyal customer” shifted on manufacturers to new terms such as category management; vendor managed inventory, and supplier consolidation.
Many distributors recognized that carrying multiple lines of power tools, saw blades, or hammers was not prudent in this difficult environment and quickly took action to drive preferred suppliers in key categories of their business.
“For an industry that had prided itself on having broad selections and stock in the barn, the pressure on inventory forced many difficult decisions, many that are drastically needed within our industry,” Ireland explained.
“People resources” have been hurt as companies who once supported large sales organizations were forced to whittle their workforce into smaller teams with fewer resources.
“Recently I even saw a manufacturer paying spiffs just to make calls with sales reps, regardless if they generate any new sales orders,” Ireland stated. “A fifty dollar bill for three user calls! The old phrase ‘it’s tough out there’ has taken on a whole new meaning.”
Having learned tough lessons in reducing overhead costs and managing plant absorption as restructuring and plant layoffs become routine, business leaders must now prepare to meet the economic recovery.
“It will take significantly more discipline to control the ride back up than it did to react to the ride down.”
Ireland, whose mother worked on a B & D assembly line in Maryland while he was growing up, said professional tools sales are estimated to rise 3.7% per year to surpass $20 billion by 2013, with one-third of this new demand forecasted with the North American market.
“Based on our last several quarters, 3.7% is a welcome start, but we will need to see the trends in both commercial and residential construction begin to shift substantially driving stronger pull through of inventories existing in the channel,” Ireland stated.
Ireland said U.S. stimulus funds will continue to funnel a great deal into the public works sector, so if your business plans center on bridges, highways, schools, hospitals, or military facilities, you are on the right path to take advantage of the economic investments.
“Keep in mind most of the stimulus spending is still in the pipeline with over $350 billion left to be allocated.”
Ireland called the 2010 business environment “challenging” as companies “battle for the limited growth opportunities with existing accounts” while searching for new channels and customers to drive top line revenue.
“‘New Lower Prices’ has become the lead marketing strategy in the down economy, which when heavily advertised makes the role of a STAFDA sales rep even more challenging,” Ireland explained.
Likewise, the growth of internet providers has many construction buyers searching for the best price on line, often overlooking the services that the local STAFDA house may provide.
“Gone are the days when the only thing a purchasing agent had in his trailer was your catalog and the local distributor’s phone number.”
STAFDA manufacturers must address what they can provide STAFDA distributors, beyond price, that will assist them in selling the goods and services they provide including delivery, training, and jobsite support, Ireland emphasized.
The challenge for STAFDA distributors will be developing a communication plan that clearly identifies what makes STAFDA different than Hilti or the emerging competitive channels.
“What is your competitive advantage and are you utilizing the resources available from the manufacture to drive those selling points in the market?”
Ireland noted that Hilti and the other direct sellers are reeling from an 89% plunge in net income in 2009, with negative double digit sales figures forecasted for the year, forcing a mandatory 15% reduction in global costs.
The question for STAFDA, Ireland explained, is whether this reduction in their “competitive advantage” gives you the edge to take share in 2010.
“Many of the aggressive distributors amongst you are stating they see the economic shift as the biggest opportunity to compete against the direct sellers and convert users to STAFDA brands and services.” ©2009 GlobalFastenerNews.com
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