The European Electrical Wholesale Trade Yesterday - Today - Tomorrow

The editor of "electrical business news", Wolfgang Jauch, gave a well-received presentation on the international electrical wholesale trade.
Below are some excerpts:

The protagonists in this business are independent distributors with one or more branches, wholesale chains such as Rexel, Sonepar, Hagemeyer and buying/marketing groups like Fegime, Idee or Imelco which operate at an international level.

In 2006 the worldwide wholesale markets for electrical goods amounted to approx. EUR 144 bn. 50% of this was generated in North America, 29% in Europe, 8% in Central and South America, 7% in Asia and the Pacific Rim and 6% in Japan.

Development of sales at chains and buying groups:

Worldwide Sonepar, Rexel and Hagemeyer have generated sales of EUR 15.5 bn in 2006. The rate of increase in the last 6 years stands at 36% globally, 26% in Europe and 78% in America.

78% up in America – this is certainly an interesting figure, proving how intensively the big three have been working this overseas market in the last few years.

The buying groups Fegime, Idee and Imelco had sales of approx. EUR 11.7 bn in 2006. Overall, these three have increased sales by 46 % in 6 years. The comparable figure for the chains in Europe stands at “only” 26% - a clear indication of the ever-growing significance of buying groups in and for Europe.

The total market in Europe was EUR 41 bn. Sonepar, Rexel, Hagemeyer and other wholesale chains had a 47 % market share in Europe.
Internationally operating buying groups like Fegime, Idee, Imelco dominate 38 % of the market.
The remaining 15 % of the European cake is in the hands of the independent wholesalers.

Development of the wholesale trade with branches:

In the last few years we have recorded an enormous rise in the number of branches. In 2000 the chains had roughly 330 companies with 3,200 branches. In 5 years, through organic growth and acquisitions, over 850 branches have been added to this number.

Since 2000 the buying groups have also taken a giant step forward. 260 additional distributors and 1,000 additional branches have been recorded. It can be seen quite clearly that more and more independent wholesalers are taking shelter under the umbrella of buying groups. This is a trend which will continue to grow.

Forces of competition in the electrical wholesale trade:

We have 5 forces of competition which strongly influence the electrical wholesale trade.

1. Competition between existing rivals
2. Threat of substitute products / services
3. Threat of new competitors
4. Bargaining power of suppliers
5. Bargaining power of customers

Growth strategies of chains and international buying groups:

The direct route to this growth is taking over or acquiring wholesale companies. Generally this year and the coming year will be characterized by takeovers, not just in the electrical wholesale trade but in the industry as well.

The chains will employ a policy of selective regional acquisitions i.e. they will strengthen their position in the regions and countries in which they are already represented and then concentrate on new markets.
In the fragmented electrical wholesale market there is naturally great potential for takeovers. Regions which today have simple wholesale structures compared with Europe and America will become increasingly and more rapidly the centre of interest. Just think of China, India, Brazil and Russia.

The strategy of the international buying groups is basically aimed at acquiring existing buying groups in as many countries as possible. The three big players, Fegime, Idee and Imelco, are only jointly represented in Germany, the Netherlands, Italy, Spain, Norway and Poland. In the other countries you only find one or the other: this means that every buying group still has a lot of blank areas on its map of Europe to fill in.

In countries where there are not any buying groups, partnerships are forged with major wholesalers who are not members of chains. In countries in which the group is already represented a further group could be admitted.

Everything points to the fact that the number of free, unaffiliated wholesalers will continue to decrease. They are joining forces and forming buying organizations to secure a better position.

Electrical and sanitation:

The core business of the electrical wholesale trade is electrical items. However, sanitation, air-conditioning and heating products are increasingly to be found in the product range of electrical wholesale companies.

It is obvious that the electrical and sanitation sectors are growing together more and more. The first reason: In view of the increasing automation of domestic technology it cannot be conveyed to the end customer that these two trades are separate.
The second reason is the trade’s efforts to grow sales in markets which are becoming narrower and narrower.

Electrical wholesalers are taking up sanitation products into their range. But that is just one side of the coin. The other side is that sanitation wholesalers are also rounding off their program and taking over electrical wholesalers.

Where will the electrical wholesale trade stand in 5 – 6 years?

Very generally it can be said that there will be takeovers on a grand scale in the next few years – in the industry and the trade.

Chains:
The wholesale chains will continue to grow because the wholesale market is highly fragmented which provides a favorable climate for takeovers.

Sonepar and Rexel will strengthen their position globally, with the focus on the USA, Europe and China.
Hagemeyer will concentrate rather on Europe, although in the last few days Hagemeyer has been treated as a candidate for a takeover by Rexel.
Solar is concentrating on Scandinavia and on expanding its competence in sanitation.
Onninen will expand and secure the position it has reached so far.

American wholesale chains are expanding, but not into Europe. Their targets are first and foremost the USA and Canada, after that Mexico and Latin America and then the Far East.

Individual wholesalers:
Wholesalers with two or three branches will not be able to carry on in the long term. If they wish to remain in business, they must join an existing buying group or employ a niche strategy.

Small and medium-sized buying groups:
These will no longer exist in 5 – 6 years, simply because the process of concentration is becoming faster and faster in Europe.

Internationally structured buying groups:
With their modern structures and pan-European operations, they suit the interests of globalized manufacturers. Fegime, Idee, Imelco and, with concessions, Gewa will continue to grow in the next few years. The large buying groups will concentrate on Europe for the foreseeable future.

Co-operation between electrical and sanitation associations:

In the next few years there are undreamed-of opportunities for internationally operating buying/marketing groups.
There is a variety of possibilities; for example:

a) The national electrical buying group opens a new sanitation division with members from the sanitation sector
b) The national electrical buying group co-operates with a national sanitation buying group
c) The international electrical organization co-operates with foreign sanitation associations.

The complete manuscript “European Electrical Wholesale Trade
Yesterday – Today – Tomorrow” with over 60 pages, containing 29 color tables, text in English and German, may be ordered for EUR 193 (incl. VAT) through EMR Euro Marketing + Research, Boschstr. 32, D-71336 Waiblingen or info@emr-online.de

EMR Euro Marketing + Research
Boschstr.32
D - 71336 Waiblingen
Tel: +49-7151-379149
Fax: +49-7151-370140
E-Mail: info@emr-online.de

EMR Euro Marketing + Research specialises in supplying services tailored to the needs of the international electrical industry.

The survey »Structures and interrelationships in the international electrical wholesale industry«, which appeared for the first time in 1995, has brought EMR widespread international recognition. Besides the European survey, the latest features available are investigations of the electrical wholesale trade in Canada, Australia, New Zealand and South Africa. The EMR surveys are referred to and quoted in countless publications on the subject of the internationalisation of the electrical wholesale trade. Furthermore, the EMR surveys have also for some considerable time been standard works of reference at a large number of well-known companies at home and abroad when it comes to sales planning and key-account management.

A new milestone was reached for the electrical industry in 1999.»electrical business news – focus on the international electrical industry« appeared, the very first trade newsletter especially about and specifically for the international electrical industry – an indispensable aid in the hard competition for markets and market shares. Every 3 weeks there are reports about takeovers, trends, business indices, indicators for the industry and turnover figures, strategies of manufacturers and wholesalers in Europe and overseas, in a choice of German or English language versions.

For many years now EMR has specialised on analysis, business transactions and strategy consulting in the world wide electrical industry. As a result we have developed a range of services which make it easier for all those involved with the industry in any way (manufacturers, wholesalers and institutions) to establish themselves in international business or improve their presence. The cornerstones of this new service, »EMR – Connecting Businesses«, are strategy consulting, market analysis and business partner search.

This release was published on openPR.