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"The Electrical Distributor" Magazine

March 22, 2006 -- Weekly Column -- by Joe Salimando

Distribution Roundup: Lighting & More 

I attended all three NAED regional confabs in this past meeting season. At two of the conferences, Bernie Erickson of OK Electric Supply Co. (Perth Amboy, N.J.) was one of three distributors on a panel about the lighting business.

Erickson was, to me, a revelation. To give you the lay of the land – as I see it, there are potentially six “players” involved in a lighting project (or the lighting portion of a larger electrical job):

    1. Lighting designer
    2. Energy auditor (a specialist does this; the audit can be limited to lighting or go beyond it)
    3. Manufacturer
    4. Manufacturer’s rep (“lighting agent”)
    5. Distributor
    6. Contractor.

You can add the general contractor if you like. That would make seven. Here’s how it might look from the end user’s angle: Without knowing specifics about anyone’s “fee” or gross margin, it appears that he/she/it is supporting one heck of a lot of families when buying that recessed can, chandelier, occu sensor, or dimmer.

Erickson’s company is a stalwart NAED member. But his company transcends the “distributor” model. OK Electric Supply will do four of the six tasks delineated above – and will help end-user customers arrange for a fifth.

What am I talking about?


Designs, Audits & More

As he demonstrated twice, Erickson (and his people) stays up-to-date on lighting technology. They “know” products, including new lighting ideas from major suppliers – and those niche-filling, neat new products from suppliers minor.

OK handles lighting designs. Erickson told a story about a recent case in which his company designed a lighting retrofit for a New Jersey casino encompassing 35,000 fixtures.

OK also performs electrical audits. Erickson told a “cute” story of company’s first-ever energy audit.  The end-user asked him to name a price for the service (separate from product sales). Erickson had no idea what the market would bear, so – he named a price. When the job neared completion, the customer told him there was extra money in the budget . . . couldn’t they buy more lighting, or better controls, or something, and spend every dollar of the budget. Didn’t OK have more ideas?

From where did these lighting bonanza dollars come?, Erickson asked. Came back the reply: “From you – you charged only half of what we budgeted for the audit.”

From that, OK has learned; the company now charges an audit fee of a nickel to a dime per square foot (that might or might not be the going rate in your area). That fee is key; in the event the client does not go forward (or “shops” the energy retrofit to a distributor other than OK) – Erickson’s company still gets paid.

In addition to design and audit work, the company is – of course – an electrical and lighting distributor. In traditional lighting work, the designer has a relationship with the lighting rep, who often ends up in control of the job. When OK Electric Supply handles lighting design and/or auditing, guess what? The rep does not end up in control of the job.

Finally, if the end-user asks, OK will handle lighting installation, too. That doesn’t mean the company does the work; instead, it brings the job to a contractor customer. This repositions OK from “they just handle products” to “they provided all about all of the help we need.”

If this is unique in distribution, I’m not sure why it has to be.

If you’ve read all of the above, you might have come to one of two conclusions:

A.     Erickson’s company is not a distributor. It’s a stocking ESCO.

            Or

B.      OK Electric has its hands around a really neat business model for an electrical distributor . . . one it wouldn’t be hard for your company to adopt.

My choice is B. I wonder whether I am alone in this; after all, I’m no distributor – I am merely an ink-stained writer who has read and wrote about your business for years.

It appears that I’m not alone in my thinking. By chance, about 20 minutes after one of the lighting panel discussions, I wandered back by the meeting room. Standing there, talking lighting strategies, was Bernie Erickson – with five others picking his brain.