Thursday, April 30, 2015

E-commerce growth presents opportunities for electrical wholesalers

In 2014, the electrical wholesale market was estimated to have grown by 4% compared with 2013. In 2011 and 2012, the market was supported by price rises driven by high raw material costs, development of high value technologies such as LED lighting and expansion into the renewables sector. This positive trend has continued through to 2014, though at a significantly slower pace.
Overall factors supporting the market include growth in specialist markets, product development, demand for additional services and non-core products, and evolving legislation leading to a requirement for higher specification and new types of products, in addition to an improving economic and construction background. Factors negatively affecting market growth include wide ranging government spending cuts, continued low levels of construction, increased price competition, a growing threat from competitive channels and longer product life-spans reducing the replacement market. 
The market is dominated by three large companies which together account for around two thirds of the electrical wholesale market. Electrical wholesalers remain market leaders in the distribution of electrical products and are particularly strong in core product areas such as electrical accessories and lighting equipment. Direct sales and specialist distributor channels are the most significant competitors to the electrical wholesalers with electronic component distributors, trade catalogues operations, internet retailers and merchants also significant.
Electrical wholesalers continue to widen product portfolios, introduce additional value-added services and embrace e-commerce to become more flexible and remain competitive in the difficult trading climate. Cables and lighting remain the largest product sectors within the electrical wholesale market and product sectors experiencing relatively good performance in the current market include electrical accessories such as cable systems, circuit protection and wiring accessories as well as lighting and renewable products.
Changing legislation is likely to continue to motivate a move towards higher specification products, particularly in heating, ventilation and lighting control where many end users are seeking to control operating costs more closely through improved technology. It will also lead to product development to meet new and improved standards, allowing both manufacturers and wholesalers to add value.
“As contractors’ usage of internet channels to source products increases and wholesalers move into more specialist markets, wholesalers may find a reliance on a wide branch network becoming less important and favour central stocking and distribution centres” said Keith Taylor, Director of AMA Research. “A growing use of e-commerce will provide opportunities for wholesalers to sell niche products more efficiently.”
The electrical wholesale market is expected to continue to grow in 2015, although at a modest rate, with current forecasts for construction output and for the economy in general suggesting that the private sector will see slow recovery. From 2016 onwards, the market increases at average growth levels of 2-3% per annum and is expected to reach a value of just over £4bn by the end of the forecast period.
The ‘Electrical Wholesale Market Report – UK 2015-2019 Analysis’ report is published by AMA Research, a leading provider of market research and consultancy services within the construction and home improvement markets. The report is available now and can be ordered online at www.amaresearch.co.uk or by calling 01242 235724.

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