Electrical Equipment Wholesaling in The US Industry Report

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Electrical Equipment Wholesaling in the USAugust 2013 1
Powered up: A rebound in construction and demand for energy efficiency will drive growth
IBISWorld Industry Report 42361
Electrical Equipment Wholesaling in the US

August 2013
2 About this Industry
2 2 2 3 Industry Definition Main Activities Similar Industries Additional Resources 17 International Trade 18 Business Locations
Brandon Ruiz
32 Industry Assistance
33 Key Statistics 20 Competitive Landscape

20 Market Share Concentration 20 Key Success Factors 21 Cost Structure Benchmarks 22 Basis of Competition 33 Industry Data 33 Annual Change 33 Key Ratios
4 Industry at a Glance 5 Industry Performance

5 5 6 8 Executive Summary Key External Drivers Current Performance Industry Outlook
34 Jargon & Glossary
23 Barriers to Entry 24 Industry Globalization
25 Major Companies
25 WESCO International Inc. 26 Graybar Electric Company Inc.
11 Industry Life Cycle
13 Products & Markets

13 Supply Chain 13 Products & Services 15 Demand Determinants 15 Major Markets
29 Operating Conditions
29 Capital Intensity 30 Technology & Systems 31 Revenue Volatility 31 Regulation & Policy
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About this Industry

Industry Definition
This industry includes firms primarily engaged in the merchant wholesale distribution of electrical construction materials, wiring supplies, electric light fixtures, light bulbs, security systems and electrical power equipment for the generation, transmission, distribution or control of electric energy (e.g. switchboards, circuit breakers, switches and fuses). This industry does not wholesale electronic components.
Main Activities
The primary activities of this industry are Light fixture and light bulb wholesaling Motor and generator (except motor vehicle) wholesaling Relay and industrial control wholesaling Cable or wire wholesaling Security system wholesaling Switchgear and switchboard wholesaling Transformer (except electronic) wholesaling Electrical transmission equipment wholesaling
The major products and services in this industry are Lighting fixtures Motors and generators Power and distribution transformers Relay and industrial controls Switchgear and switchboard apparatus Wiring Other
Similar Industries
42362 TV & Appliance Wholesaling in the US Establishments in this industry are primarily engaged in wholesaling household electrical appliances. 42369 Electronic Part & Equipment Wholesaling in the US Companies in this industry are primarily engaged in wholesaling electronic parts and equipment.
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About this Industry
Additional Resources
For additional information on this industry www.anixter.com Anixter www.cednw.com Consolidated Electrical Distributors www.graybar.com Graybar www.wescodist.com Wesco International, Inc.
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writes over 700 US industry reports, which are updated up to four times a year. To see all reports, go towww.ibisworld.com
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Electrical Equipment Wholesaling in the US August 2013
Industry at a Glance
Electrical Equipment Wholesaling in 2013 Key Statistics Snapshot
Revenue
$143.7bn 1.4%
Profit
Annual Growth 08-13
$6.6bn
Market Share
Revenue vs. employment growth
15 10
4.6% $11.8bn 7,821

Wages Businesses
10 5
Annual Growth 13-18
WESCO International Inc. 3.1%

% change
Demand from building, developing and general contracting
Graybar Electric Company Inc. 2.4%
0 5 10
% change
0 5 10 15
Year 05 Revenue
p. 25
15
07
09
11
13
15
17
19
Year
20
07
09
11
13
15
17
19
Employment
SOURCE: WWW.IBISWORLD.COM
Products and services segmentation (2013)

Motors and Switchgear and generators switchboard apparatus
Key External Drivers
6.0%
5.8%
Demand from building, developing and general contracting Electric power consumption Housing starts Demand from manufacturing
7.0%
Other
Relay and industrial controls
34.9%
Power and distribution transformers
11.2%
Lighting xtures
p. 5
13.7%
21.4%
Wiring
SOURCE: WWW.IBISWORLD.COM SOURCE: WWW.IBISWORLD.COM
Industry Structure
Life Cycle Stage Revenue Volatility Capital Intensity Industry Assistance Concentration Level
Mature High Low Low Low
Regulation Level Technology Change Barriers to Entry Industry Globalization Competition Level
None Medium Low Low High
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 33
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Industry Performance
Executive Summary
The Electrical Equipment Wholesaling industry distributes electrical construction materials such as, wiring supplies, electrical light fixtures, light bulbs, security systems, electrical power equipment, switchboards, circuit breakers and fuses. Consequently, growth in industry revenue depends primarily on demand from building, developing and general contracting. Furthermore, demand for the industrys domestic electrical equipment products depends on the amount of demand from manufacturing, housing starts and
Executive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage
Renewed
manufacturing and construction activity will propel industry demand

electrical power consumed. These recession-induced declines in demand have escalated price-based competition and resulted in industry participants lowering prices, thus squeezing profit. Despite the recession weighing down on the industrys core market, construction and manufacturing, the Electrical Equipment Wholesaling industrys revenue is expected to increase at an average annual rate of 1.4% during the five years to 2013 due to the rise in housing starts. This growth includes a strong increase of 3.8% to $143.7 billion in 2013, indicating the industrys
recovery in line with downstream markets in manufacturing and construction. Because manufacturers purchase industry intermediate products as inputs for final goods, demand from manufacturing is crucial to the success of the industry. Additionally, the industry will benefit from increased consumption of electrical power because the more electrical power consumed, the more likely consumers will demand products that emphasize energy efficiency. Over the five years to 2018, the construction and housing market is expected to continue to recover from recessionary lows, benefitting demand for industry products. For example, housing starts reached a 30-year low of only 583,000 homes in 2009. However, 1.6 million homes are expected to be built in 2018. With the rise in housing starts, demand for industry products will increase because lighting fixtures, security systems and wiring components are key inputs in a new home. Additionally, as manufacturers continue to recover and shift to automated systems, demand from manufacturing facilities will spur growth for relay industrial controls, the largest product segment in the industry. As a result, revenue for the Electrical Equipment Wholesaling industry is projected to grow at an average annual rate of 4.6% to $179.6 billion in the five years to 2018.
Key External Drivers
Demand from building, developing and general contracting Building construction uses electrical equipment such as light fittings, insulated current-carrying wire, light bulbs, circuit breakers, switchboards, lugs and connectors, voltage regulators and switches. As building construction activity increases, so does demand for these electrical products. Demand from building,
developing and general contracting is expected to increase during 2013, but, given the recent erratic nature of construction and housing-related industries, it is still a potential threat for the industry. Electric power consumption The level of electric power consumed indicates the demand for electrical equipment. As more electric power is
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Key External Drivers continued
consumed, demand for electrical equipment increases. Electric power consumption is expected to increase during 2013, representing a potential opportunity for the industry. Housing starts The level of inventory and demand for new homes dictates the number of housing starts. Because it is an essential component, demand for electrical equipment will increase as the housing starts increase. The total number of
Demand from building, developing and general contracting
10 5
housing starts is expected to increase during 2013. Demand from manufacturing Automated production lines in manufacturing use electrical industrial controls to lower operating expenses such as labor. As the level of manufacturing activity increases, production lines expand and demand for electrical controls increases. Demand from manufacturing is expected to increase during 2013.
Electric power consumption
4,200
% change
0 5 10 15
Billion kilowatt hours

07 09 11 13 15 17 19
4,100 4,000 3,900 3,800 3,700
Year
20
Year 05
07
09
11
13
15
17
19
Current Performance
The Electrical Equipment Wholesaling industry was highly volatile during the recession, with industry revenue plunging 11.9% in 2009 but subsequently jumping 12.8% in 2010. Weaknesses in demand from residential construction and manufacturing slowed revenue growth in 2008 and caused the large revenue contraction of 2009. Since then, improvements in the economy have strengthened the industry. To this end, industry revenue is expected to increase at an average rate of 1.4% per year in the five years to 2013. Furthermore, the number of housing starts is expected to increase 25.0% in 2013, propelling
industry revenue an estimated 3.8% to $143.7 billion. Mounting evidence points to the consumption of fossil fuels as the main cause of the worlds changing climate. As such, the volume of electricity consumed in the United States is expected to increase at an annualized rate of 0.9% in the five years to 2013. Concerns about the environment, rising fossil fuel consumption, electricity prices and an aging electrical infrastructure are driving demand for solutions that provide secure and energy-efficient electrical equipment. Fortunately for the industry, demand for energy-efficient products provided some
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Current Performance continued
relief against the economic downturn. Where some manufacturing industries posted double digit losses in 2008 and
2009, the Electrical Equipment Wholesaling industry only posted such a loss in 2009.
Favorable legislation
The 2009 American Recovery and Reinvestment Act (ARRA) contains a number of tax and appropriations provisions that directly benefit the electric power industry and provide significant investment in energy efficiency, generation and infrastructure development. As a result of the ARRA, consumers who purchased a qualifying Energy Star-compliant, high-efficiency heater, ventilator, air conditioner or water heater in 2009 or 2010 received a tax credit to cover almost one-third of the cost of the investment. ARRA also
Government
initiatives promoted spending on electrical equipment despite the recession

includes several provisions to fund energy research and development, plug-in hybrid electric vehicles and the smart grid. These factors also contributed to the industrys resilience against a turbulent economy.
Key influences on demand
The Electrical Equipment Wholesaling industry sells a range of products, which have a broad range of end users. The diversity of products and customers makes the industrys performance reliant on a number of factors. At a broad level, construction and manufacturing activity have the most impact on the industrys performance. Construction makes up 34.0% of industry revenue, so this downstream market plays a significant role in determining the industrys performance. While housing starts have declined during much of the five-year period to 2013, they grew 29.0% in 2012 and are expected to gain 25.0% during 2013, which will bode well for industry revenue.
Industrial companies aim to invest more in automated equipment and processes to reduce their costs, though the economic downturn hurt their ability to invest. Due to computerization, power outages affect businesses more, potentially ruining whole enterprises. With a greater reliance on power, businesses attempt to protect themselves by investing in electrical products that help improve reliability. This includes uninterruptible power supplies, which are devices that maintain a continuous supply of electric power to connected equipment by drawing power from a separate source when utility power is not available. As industrial production grows through 2013, so will demand for industry products.
Industry consolidation
Industry players have undergone consolidation for a number of years. The larger players have gradually increased their market size via acquisitions,
usually leaving local brands in place. The ongoing trend of customers seeking to buy a variety of products from a single source, which reduces the cost
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Industry consolidation continued
associated with buying from multiple vendors, is expected to support consolidation. The industrys largest player, Wesco, acquired several firms in the past five years, with the most notable acquisition being RS Electronics in 2012. However, the slowdown in the US economy that began in 2008 may have hampered consolidation in smaller companies; the lack of earnings certainty in this industry led most operators to shelve acquisition plans. In line with a consolidating number of firms in the industry, the number of industry enterprises is expected to decline 0.3% to 7,821 in the five years
to 2013. Additionally, employment has declined in the past five years at an estimated average annual rate of 1.4% to 172,073 employees in 2013. This employment decrease results from operators efforts to reduce costs and maintain margins. Furthermore, the decrease reflects advances in technology. Specifically, automated inventory control software has replaced some jobs in the industry. As a result, during the five-year period, wages as a share of revenue are expected to decline from 9.2% in 2008 to 8.2% in 2013. A decrease in wage costs will also bolster profit.
Industry Outlook
In the five years to 2018, the Electrical Equipment Wholesaling industry is forecast to grow at an annualized rate of 4.6% to $179.6 billion, boosted by an initial 5.2% jump in 2014. Profit is expected to rise as a result of increased efficiencies and productivity through acquisitions and advanced inventory control software. Rebounding construction activity and industrial production will also continue to benefit the performance of the Electrical Equipment Wholesaling industry over the next five years.
Industry revenue
15 10
% change
5 0 5 10
Year 05
15
07
09
11
13
15
17
19
Energy efficiency promotes growth
Rarely have energy-related issues been so high on the political and social agenda in many parts of the world, including the United States. Electricity consumption in the United States is anticipated to increase at an annualized rate of 1.5% in the five years to 2018. At the same time, evidence increasingly points to fossil fuels as the main cause of the worlds changing climate. These factors, along with the aging electrical infrastructure, will drive demand for
industry solutions that facilitate secure and energy-efficient electricity. A June 2008 report by the Federal Energy Regulatory Commission stated that there would be tremendous investment needs in electricity generation, distribution and transmission from 2010 to 2030. Spending on power infrastructure is expected to grow over much of the next five years due to greater demand. Other factors that will contribute to this growth include aging
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Energy efficiency promotes growth continued
infrastructure and investment in more efficient electrical equipment that offers lower operating costs and more reliable power and minimizes environmentally harmful emissions. Demand for power infrastructure will also be promoted by increased brownouts and blackouts related to aging infrastructure (which sporadically create short-term demand for equipment) and enhanced national reliability standards set by the new North American Electric Reliability
Increased
blackouts due to aging systems will promote demand for industry products
Corporation. Furthermore, utility regulators are incorporating incentives for energy efficiency in utility-rate determinations, creating opportunities for infrastructure improvements.
Construction and industrial demand surges
Building construction activity will influence demand for electrical apparatus and equipment, wiring supplies and electric light fixtures. Building activity in the United States is expected to strengthen during the five years to 2018, with the number of housing starts forecast to increase at a strong annualized rate of 10.0%. In addition, the desire for more comfort in homes and for safety and security products will positively affect demand for electrical equipment in homes.
The level of industrial production in the United States affects domestic demand for industry products, particularly motors, generators, relay and industrial control equipment and, to a lesser extent, switchgear and switchboard equipment. Industrial production is expected to grow at an annualized rate of 2.8% over the next five years, albeit off a subdued base. Competitive pressures, environmental regulations and relatively high energy costs will drive US companies to spend on electrical equipment that is more efficient and facilitates automation.
Other future trends
Firms will undergo further consolidation in the electrical distribution market. Larger operators can service national and regional customers, and they are better able to invest in effective systems and offer a wider range of products and services. In addition, larger operators are better able to centralize functions (e.g. purchasing and accounting), strategically locate distribution centers and obtain economies of scale. These factors result in higher profit for successful large operators, while underperforming operators are forced to exit the industry. In the five years to 2018, the number of industry enterprises is projected to fall an
average annual rate of 0.2% to 7,732, but the number of industry establishments is expected to increase at an annualized rate of 2.3% to 14,941 as industry operators grow inorganically. As a result, employment growth is expected to jump at an annualized rate of 3.5% to 204,210 over the same period. E-commerce sales are projected to increase at a rapid rate, both helping and threatening the industry. Online technology has given rise to a customer self-service trend that is changing how wholesale distributors procure sales. The internet has made it possible for consumers to gather product
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Other future trends continued
information and specifications, obtain product prices and product availability information, communicate with salespeople via e-mail, access post-sales technical support information online and review their purchasing history online. As a result, wholesalers will increasingly focus on satisfying customers needs rather than taking orders, answering basic questions or providing readily available information. However, competition from online retailers selling products that wholesalers distribute will rise as well, somewhat restricting industry revenue growth. Wholesalers will increasingly use customer relationship management software products. These products automate day-to-day tasks for sales,
Competition
from e-tailers with similar products will rise, constraining industry growth
customer service, field service, call centers and marketing employees, strengthening customer loyalty and shortening sales cycles. Salespeople will become account managers focused on solving problems, handling complaints and suggesting other products and services, and they will act as the primary point of contact between the customer and the distributor.
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Life Cycle Stage
The number of enterprises is declining Industry services have changed little over the past five years The market is saturated
% Growth in share of economy
20
Company consolidation; level of economic importance stable
Maturity
Quality Growth
High growth in economic importance; weaker companies close down; developed technology and markets
Key Features of a Mature Industry Revenue grows at same pace as economy Company numbers stabilize; M&A stage Established technology & processes Total market acceptance of product & brand Rationalization of low margin products & brands
15
10
Quantity Growth
5
Many new companies; minor growth in economic importance; substantial technology change
TV & Appliance Wholesaling
Electrical Equipment Wholesaling
Electricians
Electric Power Transmission Electronic Part & Equipment Wholesaling
Lighting & Bulb Manufacturing
Decline
Shrinking economic importance
10 10
10
15
20
% Growth in number of establishments

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Industry Life Cycle This industry is M ature
The Electrical Equipment Wholesaling industry in the United States is in the mature stage of its life cycle. During the 10 years to 2018, industry value added (IVA), which measures the industrys contribution to the overall economy, is projected to grow at an annualized rate of 2.4%. This rising rate indicates that the industry will perform above the overall economy, as GDP is projected to increase an average 2.1% per year during the same period. IVAs growth roughly aligning with the overall economys
growth further establishes the industry as mature. Because of these factors, the industry is going through a consolidation phase. In the 10 years to 2018, the number of enterprises in this industry is expected to decline at an average annual rate of 0.3% to 7,732 firms. While this decrease is not extreme, it does explain the gradual fall of firms as competitors are swallowing each other up in order to maintain and grow market share as the industry has reached saturation.
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Products & Markets

Supply Chain
KEY BUYING INDUSTRIES
22112
Supply Chain | Products & Services | Demand Determinants Major Markets | International Trade | Business Locations
Electric Power Transmission in the US Electric power transmission and distribution utilities use transformers, cables, and transmission pole and line hardware. Electricians in the US Electrical contractors are the largest and fastest growing market served by this industry accounting for an estimated 34.0% of industry revenue in 2013. Major Household Appliance Manufacturing in the US Appliance manufacturers often purchase electric motors as inputs in final products. Automobile Electronics Manufacturing in the US This industry uses electrical products as inputs in final products and in the automation of production lines. Lumber & Building Material Stores in the US Many building materials stores stock electrical supplies.
23821
33522 33632
44419
KEY SELLING INDUSTRIES

33511 33531 Lighting & Bulb Manufacturing in the US This industry supplies electric lamp bulbs to wholesalers. Electrical Equipment Manufacturing in the US Electrical equipment manufacturers are a major source of products supplying power, distribution, and specialty transformers, generators, switchgear and switchboard apparatus, motors, and relay controls. Battery Manufacturing in the US Battery manufacturers utilize wholesalers as a distribution channel. Wire & Cable Manufacturing in the US Wire and cable manufacturers utilize wholesalers as a distribution channel. Wiring Device Manufacturing in the US Wiring device manufacturers utilize wholesalers as a distribution channel. Power Conversion Equipment Manufacturing in the US Electrical apparatus and other component manufacturers utilize wholesalers as a distribution channel for various electrical components.
33591 33592 33593 33599
Products & Services
Relay and industrial controls At 34.9% of revenue, relay and controls make up the largest product segment in this industry. The products are predominantly used for automation and optimization of industrial and commercial processes. Because products in this segment are primarily used in buildings (i.e. for controls used in buildings), demand is heavily influenced by building construction activity and demand from manufacturers, which has suffered in the past five years.
Wiring The wiring segment is expected to account for an estimated 21.4% of industry revenue in 2013, up from 20.0% in 2008. Wiring products include building wire, cables and conduits, all of which industrial contractors and electricians use. The construction and remodeling industries, both of which were adversely affected in the past five years due to the recession, drive building wire and cable volumes. However, the rise in housing starts is supporting product segment growth.
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Products & Markets
Products & Services continued
Products and services segmentation (2013)

Switchgear and Motors and switchboard generators apparatus
6.0%
5.8%
7.0%
Other Power and distribution transformers
11.2%
Relay and industrial controls
34.9%
Lighting xtures
13.7%
Total $143.7bn
Lighting fixtures Lighting fixtures are expected to account for an estimated 13.7% of industry revenue in 2013, with housing starts fueling this segments growth from 10.0% in 2008. Lighting fixtures have a fixture body and light socket to create artificial light. As more homes are built, the need for electrical equipment such as lighting fixtures becomes greater. To this end, lighting fixtures are benefiting from the rise in housing starts and residential construction activity. Power and distribution transformers Power, distribution and specialty transformers will account for an estimated 11.2% of industry revenue in 2013, up from 7.4% in 2008. This segment benefited from growth in demand arising from transmission network modernization, which required extensive purchase of power and distribution transformers to accommodate an increasingly demanding telecommunications network. Switchgear and switchboard apparatus The switchgear and switchboard apparatus segments sales will remain relatively stable and account for an estimated 6.0% of industry revenue in
21.4%
Wiring
2013, slightly up from 5.9% in 2008. Switchgear equipment protects the integrity of the power system, and its demand is influenced by the level of building construction and renovation activity (which uses low-voltage switchgear) and spending on transmission network substations (which use high- and medium-voltage switchgear). Meanwhile, the levels of building and renovation activity and industrial production affects demand for switchboard apparatus, which are pieces of equipment that direct electricity from one source to another. Motors and generators Motors and generators are estimated to account for 5.8% of industry revenue in 2013, down from 10.0% in 2008. Electrical generators (or dynamos) convert mechanical motion into electrical energy while electric motors are used in a range of products that require electricity to be converted into mechanical motion, including in consumer appliances and products used by processing industries. The decline in revenue share is a result of motors and generators being replaced by semiconductor devices, which are excluded from this industry.
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Products & Markets
Demand Determinants
Major overriding factors driving demand for electrical equipment include the level of and increase in demand for electricity, the cost of energy and electricity, the level of requirement for secure power to reduce the impact of power outages, construction activity in the United States and consumer spending. Further, some customers are seeking to more efficiently purchase a broad range of products and services from a single source, thereby eliminating the costs associated with purchasing directly from manufacturers or multiple sources. This trend has promoted demand from large wholesalers. The importance of these drivers and other determinants of demand for electrical equipment can vary by the type of product. Industrial controls Industrial control products are used for automation and optimization of industrial and commercial processes. Growth in industrial production (requiring automation solutions) and building construction (requiring controls for automating climate control and lighting) primarily drive demand for these products. Demand for relay and industrial controls has declined in the five years to 2013 because construction and industrial production have stagnated, along with their market share. Power and distribution transformers Factors determining demand for power, distribution and specialty transformer products include growth in demand for electricity, levels of profitability and capital expenditures in the power industries, the age of existing
infrastructure and demand for reliable supplies, and demand for, and investment in, renewable energy. In fact, the large increase in demand for renewable energy (and resulting increased demand for industry products) has helped to offset the negative effects of the 2008 and 2009 recession. Motors and generators Economic growth, industrial production and consumer spending (e.g. for motors used in consumer products such as appliances) determine demand for motor and generator products. Demand for switchgear equipment (equipment that protects the integrity of the power system) is impacted by spending on transmission network substations (high and medium voltage switchgear) and by building construction and renovation activity (low voltage switchgear). Demand for switchboard apparatus (equipment that directs electricity from one source to another) is impacted by building construction, renovation activity and industrial production, all of which have declined in the five years to 2013, but they are all projected to increase in the five years to 2018. Lighting fixtures The major factors determining demand for lighting fixtures include the level of construction activity, new technologies and new designs that can promote replacement demand, energy prices and concerns about the environment. During the past five years, concerns about the environment have created demand for more energy-efficient lighting, but strong declines in construction have offset demand.
Major Markets
Industrial users Industrial users of electrical equipment are the largest market served this
industry serves and are estimated to account for 44.0% of industry revenue in 2013. Industrial users are involved
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Products & Markets
Major Markets continued
Major market segmentation (2013)
10%
Commercial, institutional and governmental
12%
Utility
Industrial users
44%
Construction
34%
Total $143.7bn
in the maintenance, repair and overhaul of electrical devices to ensure products perform their required functions. The use of automation in production lines has increased demand for electrical equipment from the sector over the long term. However, declining manufacturing levels throughout the recession resulted in this market segment witnessing declines during the past five years. As consumer spending stimulates both domestic and foreign manufacturing, manufacturing facilities will demand more electrical equipment to automate their facilities. Construction Construction is expected to account for 34.0% of industry revenue in 2013. Electrical contractors are a large part of this major market. Recent growth in this market segment is attributable to the introduction of a number of regulations that increase the range of electrical installation and maintenance work that a registered electrical contractor must undertake. Furthermore, security consciousness has increased demand for alarm systems that the industry wholesales, which must be installed by electrical
contractors. Although demand from this market has declined during the past five years due to the decline in the real estate market (which also employs a large number of electrical contractors), declines were not as severe as from other markets. Commercial, institutional and governmental Commercial, institutional and government customers are expected to account for 12.0% of industry revenue in 2013. This fragmented market includes schools, hospitals, property management firms, retailers and government agencies. Some components of this market segment received stimulus funds during the past five years, softening declines in market share. Private and public power utilities Private and public power utilities are expected to account for 10.0% of industry revenue in 2013. This market segment mainly uses transformers, transmission poles and line hardware. Rising investment by utilities, along with efforts to improve energy efficiency and introduce green power, has promoted growth in this
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Products & Markets
Major Markets continued
market segment. This market segment has increased its share of revenue from 7.0% in 2008 as utility
companies satisfied pent-up demand from cautious spending in the wake of the recession.
International Trade
The value of imports and exports exchanged within this industry is accounted for at the manufacturing level and is thus not represented in this report.
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Products & Markets

Business Locations 2013
West
AK
0.2
New England Great Lakes MidAtlantic

MI
2.7
ME
0.3
WA
2.4
OR
1.3
Rocky Mountains ID
0.3 0.7
MT
ND
0.3
MN
SD
0.3
Plains
IA
1.1
1.8
1 2 3 NY 5.5 5 4 6 7 8
WI
2.1
PA
3.4
WY
0.3
West NV
0.8
NE
0.7
IL
4.8
IN
2.3
OH
3.7
UT
1.0
CO
1.9
KS
1.1
MO
1.8
KY
1.0
WV VA 2.0
0.4
NC
2.9
CA
13.6
OK AZ
1.8 1.3
AR
0.9
Southeast
2.0
TN
SC
1.3
NM
0.5
Southwest
TX
8.3
MS
0.6
AL
1.4
GA
3.2
LA
1.6
FL
6.9
West
HI
0.4
Additional States (as marked on map) 1 VT

0.2 1.2
Establishments (%) Less than 3% 3% to less than 10% 10% to less than 20% 20% or more
2 NH
0.4
3 MA
2.1
4 RI
0.3
5 CT
6 NJ
3.2
7 DE
0.2
8 MD
1.3
9 DC
0.1
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Products & Markets
Business Locations
The Electrical Equipment Wholesaling industry is concentrated in the Southeast and, to a lesser extent, in the West, Great Lakes and Mid-Atlantic regions of the United States. Combined, these regions are expected to account for 72.3% of industry establishments in 2013. Industry concentration reflects the population, construction activity and industrial concentration spread in the United States. Establishments within the Electrical Equipment Wholesaling industry locate themselves close to downstream industries. For example, industry operators remain in close proximity to the Electrical Equipment Manufacturing industry (IBISWorld report 33531) with the same top four regions accounting for 72.8% of industry establishments. The Census Bureaus County Business Patterns publication suggests that the most densely concentrated US states in terms of industry establishments in 2013 (latest data available) were the following: California (accounting for 13.6% of industry
Establishments vs. population

30
20
%
10 0 Great Lakes Mid-Atlantic New England Rocky Mountains Southwest West Southeast Plains
Establishments Population
establishments); Texas (8.3%); Florida (6.9%); New York (5.5%); and Illinois (4.8%). These five states together account for 39.1% of establishments in the industry and a similar share of the US population.
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20
Competitive Landscape
Market Share Concentration
Level Concentration The Electrical Equipment Wholesaling industry is highly fragmented, with the four largest firms in the industry accounting for about 9.5% of industry revenue in 2013. While there are other reasonably sized players, several thousand independent wholesalers operating on a local, statewide or regional basis account for the balance of the market. About two-thirds of industry enterprises are expected to employ fewer than 10 people in 2013. According to the US Census Bureau, wholesaling industries are composed of establishments that are primarily engaged in wholesaling merchandise, generally without transformation, and rendering services incidental to the sale of merchandise. Three types of wholesalers fall within this definition: merchant wholesalers, vertically integrated wholesalers, and agents and brokers. Merchant wholesalers, often referred to as traditional wholesalers or distributors, buy and take title to the goods they sell. According to SEC filings published by major player Wesco International Inc., the top five distributors accounted for a smaller share
Market Share Concentration | Key Success Factors | Cost Structure Benchmarks Basis of Competition | Barriers to Entry | Industry Globalization
in this industry is L ow
of industry revenue in 2010 (latest data available) than they did in 2009. There are three reasons for the high number of merchant wholesalers in this industry: a broad product range, the absence of manufacturers that produce a broad range of industry products, and a trend toward sourcing-cost reduction by the industrys downstream users. A broad product range and the presence of specialized manufacturers make it costly for downstream users to source products directly from manufacturers themselves. The ability of merchant wholesalers to efficiently source a broad range of products from multiple suppliers is attractive to downstream users that require a variety of electrical products to be supplied on a timely basis. Due to wholesalers expanding product ranges, there is less of a need for niche suppliers. Some niche suppliers that do not expand their product range are forced out of business, perpetuating rising market share concentration. As an increasing number of wholesalers become one-stop shops, straggling firms will exit the industry, resulting in a forecast rise in market share concentration.
Key Success Factors IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are:
Ability to quickly adopt new technology Electrical products are constantly evolving due to technological innovation. It is important that firms within the industry stock products that reflect this innovation. Having links with suppliers In order to secure supply chains and offer products at competitive prices to downstream users, firms need to have strong relationships with suppliers.
Ability to control stock on hand Firms within the industry wholesale a diverse range of products that are constantly changing through technological innovation. To maximize profit, firms must keep stock holding costs to a minimum while having enough stock on hand to service customers. Establishment of brand names In an industry where product quality is highly valued, it is important that firms stock products with strong brand names recognized for quality.
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Cost Structure Benchmarks
Wholesalers represent a major distribution channel for manufacturers and tend to have relatively high inventory costs. In other words, most of the industrys revenue is spent on replenishing stock. Wholesalers also tend to operate with relatively low profit, which is influenced by demand for industry products, inventory turns and costs of goods acquired. Profit Industry profit, defined as earnings before interest and taxes, is estimated to be about 4.6% of revenue in 2013 (up from 4.2% in 2008). In 2009 and 2010, profit dipped further, reaching 3.3% and 2.5%, respectively. While demand for electrical equipment is steadily rising, increasing wholesale bypass (the practice of manufacturers selling straight to retailers and consumers) is forcing industry Sector vs. Industry Costs
Average Costs of all Industries in sector (2013) 100
participants to lower their prices to compete with prices manufacturers offer, limiting profit growth. Expected declines in the prices of semiconductors and electronic components are enough to keep industry profit rising in the next five years. Further, efficiencies captured through inventory control software will foster profit growth. As a result, IBISWorld estimates that profit will be 4.7% in 2018. Purchases This cost category consists of goods purchased from domestic and international vendors for resale to other corporations for either use or resale. In 2013, purchases are expected to account for about 70.1% of total industry revenue. Because the industry purchases already manufactured goods and only add value in terms of allowing customers to purchase a large volume and variety of
Industry Costs (2013)
3.8 5.1
4.6 8.2
80
Percentage of revenue
60
Profit Wages Purchases Depreciation Marketing Rent & Utilities Other
78.8
40
70.1
20
1.3
0
2.5 1.3 7.3
0.2 3.5 1.0 12.4

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Cost Structure Benchmarks continued
products, purchases tend to constitute a very large portion of wholesaler costs and revenue. As the industry continues to source cheaper manufactured products from abroad and as the price of semiconductors declines, purchases are forecast to make up a smaller portion of industry revenue in the five years to 2018. Furthermore, purchases have decreased as a share of revenue during the past five years due to the rent and utilities segment climbing higher. Wages Although electrical equipment wholesaling is becoming more automated, it still requires human labor. Labor is required to unload equipment from the manufacturers, ship orders to customers, provide customer service and perform management functions. In 2013, wages incurred by firms within the industry are expected to represent 8.2% of industry revenue, down from 9.2% in 2008. Labor costs are estimated to have fallen as a share of revenue in recent years due to productivity gains owing
largely to automation software that replaces some human jobs. Depreciation The cost of depreciation will invariably fluctuate between operators depending on their size and the number of assets involved. Depreciable assets include buildings, storage equipment, machinery used to move products and computer inventory systems. In 2013, depreciation expenses are estimated to account for 0.2% of average firm revenue. Rent and utilities Many industry operators rent rather than own their distribution facilities. In 2013, average rental costs are estimated to account for 3.5% of firm revenue. Other Product distribution costs primarily make up this segment. Transporting products worldwide can represent a significant portion of overall distribution costs. In 2013, other expenses are estimated to account for 12.4% of firm revenue.
Basis of Competition
Level & Trend ompetition C
in this industry is H ighand the trend is S teady
Internal There is a high level of competition within this industry. The presence of a large number of industry players and a fragmented market affects competition. Low barriers to entry can exacerbate this problem, with the threat of new entrants always looming. Little product differentiation between firms and a high level of resources expended to procure sales from the electrical contractor sector are also competitive factors industry participants must face. Industry operators compete mainly on price, distribution capability, product range and quality, and service. Price is a major basis of competition in this industry, and a wholesalers cost
structure can affect its ability to compete on price and to move stock (which encompasses holding costs). The marketplace is very competitive and price-conscious. As a result, wholesalers have differing pricing strategies. Some wholesalers may price specific products at cost, seeking to sell complementary high-margin items in the same purchase. Further, wholesalers pricing at cost seek to gain profit from repairs or other services provided. A companys distribution capability naturally assists in the ability to move product. It also can assist wholesalers in negotiating favorable agreements with suppliers. Ingram Micro, a player in the industry, states that its global market
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Basis of Competition continued
coverage provides it with a competitive advantage for suppliers looking for worldwide market penetration. Access to worldwide markets gives industry participants competitive advantage over operators who distribute on a local or regional level. Product range, availability and quality are important competitive factors. Some firms may stock a wide range of products to become a one-stop shop. Prompt delivery can be an important consideration for customers that wish to minimize purchasing costs and ensure that there are no stock-outs. Product quality impacts sales, product satisfaction and returns, and the general reputation of the wholesaler. Having the ability to gain and retain agreements with suppliers that offer quality, low-cost products can also be an important competitive factor. Smaller distributors have formed buying groups to increase purchasing power and provide some cooperative marketing capability. Service and support, including technical and information services, are also important. Some resellers are increasingly relying on distributors for back-office support services, such as product procurement, fulfillment, logistics and end-user financing. The
ability to tailor products and services for particular customers can be a good selling point. For example, some wholesalers may provide personalized shipping labels and packing documents with its resellers brand identities (e.g. logos), marketing messages and other specialized content. External Wholesalers can also compete with manufacturers. Direct marketers, retailers and corporate resellers may establish direct relationships with manufacturers and software publishers for their more popular products. This practice is referred to as wholesale bypass. However, downstream industries tend to use distributors as the primary source for other product requirements and the alternative source for products acquired directly. Manufacturers may also seek to sell directly to end users, through sales staff, internet and telephones sales, for example. Wholesalers able to extend a line of credit may have a competitive advantage; many electrical contractors engaged in project work are paid sporadically as the project is completed. The ability to access a line of credit for purchases improves their cash flow position.
Barriers to Entry
Level & Trend arriers to Entry B
in this industry are Lowand S teady
Overall, barriers to entry are considered to be low in this industry. There are a large number of firms operating in this industry, estimated to be 7,821 enterprises in 2013. A high number of enterprises indicate a fragmented market, which is characteristic of an industry with low barriers to entry. In addition, there are no licensing requirements, government regulations or resource constraints that are significant enough to prevent firms from entering the Electrical Equipment Wholesaling industry.
The costs of establishing distribution facilities, establishing relationships with suppliers, sourcing appropriately skilled labor and winning customers may (but generally do not) deter some firms from entering the industry. To help mitigate sizeable entry costs, firms can enter niche markets where they do not have to keep an expensive wide variety of products on hand and then expand product offerings if they so choose. In addition, smaller distributors have formed buying groups to increase purchasing power
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Barriers to Entry continued
and provide some cooperative marketing capability. Building a viable sales base depends largely upon brand recognition and the ability to forge relationships and supply contracts with customers. The cost of competing with other firms that are significantly entrenched in downstream markets may deter some firms from entering the industry.
Barriers to Entry checklist

Competition Concentration Life Cycle Stage Capital Intensity Technology Change Regulation & Policy Industry Assistance
Level High Low Mature Low Medium None Low

Industry Globalization
Level & Trend lobalization G
in this industry is Lowand the trend is I ncreasing
Most of the firms within this industry are traditional merchant wholesalers that are typically domestically domiciled. However, foreign ownership has increased in recent years due
mainly to acquisitions by French companies Rexel SA and Sonepar. These two companies are estimated to account for 4.0% of industry revenue in 2013.
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Major Companies
Major players
(Market share)
WESCO International Inc. | Graybar Electric Company Inc. | Other Companies
Graybar Electric Company Inc. 2.4%
94.5%
Other WESCO International Inc. 3.1%
Player Performance WESCO International Inc. Market share: 3.1%
Based in Pittsburgh, PA, Wesco International Inc. is a leading provider of electrical, industrial, communication maintenance, construction products, and repair and operating supplies in the United States. According to Wescos 2012 annual report (latest data available), the company has more than 9,000 employees, offers more than one million products from more than 18,000 suppliers and serves more than 65,000 customers worldwide. Wesco operates nine automated distributions centers and about 475 branches in selected international markets, including more than 300 in the United States. Additionally, the company generated $6.6 billion in revenue in 2012. Wescos product line can be divided into six operating segments, five of which are relevant to this industry. In order of largest to smallest by percentage of total sales the segments include: industrial
supplies; electrical supplies (such as wiring devices, cables and conduits); power distribution (such as circuit breakers, transformers and switchboards); lighting and controls (such as lamps, fixtures, ballasts and lighting controls); and control, automation and motors (such as motor control devices, drives, surge and power protection, timers, push buttons and operator interfaces). The data communications segment is excluded from this analysis because the product line is not relevant to this industry. The highly fragmented nature of the industry provides Wesco with significant potential to grow via acquisition. As such, Wesco acquired RS Electronics to bolster the companys wholesaling distribution network in 2012. RS Electronics distributes industrial electronic components, including electronic equipment, to industrial, commercial and government end-users.
Wesco International Inc. (US segment) financial performance*

Year 2008 2009 2010 2011 2012 2013
*Estimates
Revenue ($ million) 4,625.3 3,380.1 3,572.6 4,169.2 4,370.0 4,422.9
(% change) 1.8 -26.9 5.7 16.7 4.8 1.2
Operating Income ($ million) 261.6 131.6 148.8 226.6 245.1 246.6
(% change) -12.3 -49.7 13.1 52.3 8.2 0.6
SOURCE: ANNUAL REPORT AND IBISWORLD
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Player Performance continued
Financial performance In 2009, Wescos industry-relevant revenue decreased 26.9% to $3.4 billion, primarily as a result of decreased demand from the Great Recession. As fewer houses were being built and demand for industrial electric equipment declined, Wescos sales suffered. But in 2010, as the US economy began to recover, the company posted a 5.7% increase in industryrelevant revenue and subsequently, a gain of 16.7% in 2011. The rising price of copper can also be attributed to these gains as Wesco passed the material costs to its customers.
Thanks to increases in demand from manufacturing, industry-relevant company revenue is expected to modestly jump 1.2% in 2013. However, Wescos data communications segment is continually making up a larger share of overall revenue. This ultimately decreases the companys industry-relevant revenue because the segment is not included in the Electrical Equipment Wholesaling industry. As a result, Wescos market share is expected to decrease to 3.1%, down from 3.7% in 2008. IBISWorld estimates that industry-relevant revenue will fall at an annualized rate of during the five years to 2013, reaching $4.4 billion.
Player Performance Graybar Electric Company Inc. Market share: 2.4%
Based in St. Louis, MO, Graybar Electric Company Inc. was established in 1869 and is a major wholesaler of electric apparatus and equipment in the United States, with more than 116,000 customers in 2012 (latest data available). Graybar also provides related supply chain management and logistic services, primarily to contractors, industrial plants, telephone companies, power utilities, governments and commercial users in North America. Additionally, the company employs over 7,500 employees and has seven zone warehouses and 208 branch distribution facilities in the
United States. The zone warehouses replenish inventories carried at the distribution facilities and also make shipments directly to customers. Although Graybar is estimated to generate only 2.4% of industry revenue in 2013, it is still a major player due to its prominence and impact on this industry. Financial performance Graybars industry-relevant revenue is expected to reach prerecession levels in the five years to 2013. Although the recession decreased demand from manufacturers, adversely affecting
Graybar Electric Company Inc. (US segment) financial performance*

Year 2008 2009 2010 2011 2012 2013
*Estimates
Revenue ($ million) 3,457.7 2,682.5 2,803.2 3,390.1 3,465.4 3,623.5
(% change) 2.7 -22.4 4.5 20.9 2.2 4.6
Operating Income ($ million) 97.4 44.4 47.1 90.3 102.8 114.8
(% change) 4.8 -54.4 6.1 91.7 13.8 11.7
SOURCE: ANNUAL REPORT AND IBISWORLD
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Major Companies
Player Performance continued
demand for electrical equipment, demand has since recovered, benefiting company revenue. Graybars industryrelevant revenue is estimated to remain fairly stagnant in the five years to 2013, growing at an annualized rate
of 0.9% to $3.6 billion. While revenue appears to have been stable during the past five years, the company experienced a sharp 22.4% decline in 2009, followed by a strong 20.9% recovery in 2011.
Other Companies
Anixter International Inc.
Estimated market share: 2.2% Founded in 1957, Anixter International Inc. is a large wholesaler of specialty wire and cable products in the United States. The Illinois-based company, formally known as Itel Corporation, sells communications products, electrical wire products, coaxial, and control and instrumentation cables. Further, the company sells a wide variety of electrical and electronic wire and cable products, fasteners and other small components that original equipment manufacturers use in the manufacturing of various products. These products are sourced from over 7,000 suppliers to more than 100,000 active customers. Anixter has a network of warehouses in nearly 225 locations and operates in more than 50 countries with 8,200 employees. Like many of the other companies within this industry, acquiring competition is a common way to grow. Since 2008, Anixter has acquired six companies, most notably Gergen and Sofrasar in 2008, Clark Security Products in 2009 and Jorvex in 2012. These strategic acquisitions only strengthened Anixters market position and buying power over suppliers. In the five years to 2013, company revenue is expected to grow at an average annual rate of 2.0% (despite a significant decrease in net sales in fiscal 2009), bolstered by acquisitions. In 2013, industry-relevant revenue is estimated to increase 3.2% to $3.1 billion, giving the company a 2.2% share of industry revenue.
Rexel SA
Estimated market share: 1.8% French company Rexel SA distributes electrical supplies and operates in 37 countries with 2,300 branches, and it holds worldwide leading positions in its three core markets: industrial, commercial and residential. In 2012 (latest data available), its North American operations made up 32.0% of sales, of which 69.0% were in the United States. Rexel SA is one of the United States largest distributors of electrical parts and supplies, operating from more than 450 distribution locations in 45 states and the Bahamas. Its products include home electrical equipment; networking, communications and security products; and heating and lighting materials. Rexel SA has made some significant acquisitions that have promoted the companys presence in the United States. In 2008, Rexel acquired Hagemeyer (subsequently sold to Sonepar) and Beacon Electric Supply Company, an electric supplies distributor located in San Diego, CA. The company also recently acquired premier independent distributor Platt Electric Supply in July 2012. The company continues to expand its presence in the United States with strategic acquisitions that will only help increase its market share in the fragmented electronic equipment wholesaling industry. Demand from manufacturing has been strong in recent years, but it is expected to taper off through 2013. As a result, a weaker growth rate is forecast for 2013,
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Major Companies
Other Companies continued
with segment revenue expected to grow 3.5% to $3.1 billion, giving Rexel a 2.2% share of industry revenue. Rexel generated about $10.4 billion in revenue in 2012, of which about $4.4 billion was generated in North America. The North America zone consists of the United States and Canada, with the United States accounting for 69.0% of consolidated group sales in this zone, or $3.5 billion. Growth resulted from increased demand from manufacturers and mining companies that purchase industry products.
Marietta, GA. Equity is a full line stocking distributor and manufacturers agent offering products to electric utilities. In July 2008, Sonepar acquired Hagemeyers Professional Products & Services business in North America from Rexel SA. The PPS business focuses on value-added business-to-business distribution of electrical parts and supplies, safety and other maintenance, repair and operations products.
Consolidated Electrical
Distributors Inc.
Sonepar USA
Estimated market share: 1.6%
Estimated market share: 1.6% Sonepar USA is a subsidiary of the French company Sonepar, and it states that it is the fifth-largest electrical distributor in the United States while it also has a presence in Canada and Mexico. The company supplies commercial contractors, industrial and utility customers. Sonepar USA has 12 companies operating more than 253 branches in 35 states and employing 4,600 people. In 2013, industryrelevant revenue is estimated to increase to $2.3 billion as the company follows through with aggressive acquisition plans, giving Sonepar USA a 1.6% share of industry revenue. In May 2008, Sonepar USA acquired ESSCO Wholesale Electric, an electrical distributor in Arizona and California. During the same year, Stuart C. Irby Co., a subsidiary of Sonepar USA, acquired Equity Utility Service Company of
Consolidated Electrical Distributors Inc. (CED), established in 1957, is one of the largest electrical equipment wholesalers in the United States. The Californiabased company, operating from more than 500 locations nationwide, distributes load centers, circuit breakers, metering equipment, relay timers, panel boards, transformers and switches. CED services a range of markets, including residential construction, commercial and industrial construction and industrial automation. Since its inception, CED has continuously grown through acquisition. CED leaves the acquired business under its original name and management, and, as a result, the company now operates under about 80 separate business names. CED is privately owned and does not release detailed financial results, but is estimated to generate about $2.3 billion for the industry in 2013, giving it a 1.6% industry share.
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Operating Conditions
Capital Intensity
Level The level This industry has a low level of capital intensity, with $0.02 spent on depreciable assets for every dollar spent on wages. A wholesalers or distributors use of capital is largely to support the revenue base. Capital commitments for property, plant and equipment are often limited to information technology assets, warehouse equipment, office furniture and fixtures and leasehold improvements. Many wholesalers rent rather than own property, reducing short-term capital expenditures. Computerized inventory equipment is the highestvalue capital item on most firms balance sheets because it is pricey and frequently becomes obsolete.
Capital Intensity | Technology & Systems | Revenue Volatility Regulation & Policy | Industry Assistance
Capital units per labor unit 0.5 0.4 0.3 0.2 0.1 0.0 Economy Wholesale Trade Electrical Equipment Wholesaling
Capital intensity
of capital intensity is L ow
Dotted line shows a high level of capital intensity

The primary function of the wholesaling industry is to sell products into downstream markets as efficiently as
Tools of the Trade: Growth Strategies for Success

New Age Economy Recreation, Personal Services, Health and Education. Firms benefit from personal wealth so stable macroeconomic conditions are imperative. Brand awareness and niche labor skills are key to product differentiation. Investment Economy Information, Communications, Mining, Finance and Real Estate. To increase revenue firms need superior debt management, a stable macroeconomic environment and a sound investment plan.
Capital Intensive
Labor Intensive

Electricians
Electronic Part & Equipment Wholesale andRetail. Reliant Wholesaling

Traditional Service Economy on laborrather than capital to sell goods. Functions cannot be outsourced therefore firms must use new technology or improve staff training to increase revenue growth.
TV & Appliance Wholesaling Electric Lighting & Bulb Old Economy Power Manufacturing Transmission Agriculture and Manufacturing.
Traded goods can be produced using cheap labor abroad. To expand firms must merge or acquire others to exploit economies of scale, or specialize in niche, high-value products.
Change in Share of the Economy
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Capital Intensity continued
possible. This involves marketing products and taking, preparing, checking and shipping orders to customers. These roles are occupied by human labor. Increasingly, these functions are becoming automated, and as such, IBISWorld expects the ratio of capital to wages to increase in the five years to 2018. Even though labor costs are expected to decrease as a share of revenue in the next five years, the industry is labor-intensive relative to other industries. Technological developments in the wholesaling industry have largely centered on the computerized automation of inventory control. A fully automated inventory control system records inventories, picks products, determines minimum order quantities, assesses customer credit ratings, generates invoices and payment advice and can produce real time reports. Implementation of wireless and paperless distribution management systems can considerably increase productivity and profitability. There has been an increase in the use of electronic ordering and information delivery systems, including the ability to transact business over the internet. This has a significant impact on the cost efficiency of the wholesale distribution model. For example, some distributors
Unlike many other wholesaling industries, a large share of the industrys downstream users is service providers that require a knowledgeable staff. This results in a more developed sales role for electrical equipment distributors. Service providers need more technical information than retailers, giving rise to a labor force with a higher technical skill set (and resulting higher price tag) within this industry. that sell to resellers have established a more seamless supply chain in which end-user orders flow immediately from reseller web sites directly to distributor logistics centers closest to the order destination, reducing labor costs in the process. It is important to note that, while the expansion of internet commerce provides an alternative cost effective method for wholesalers to provide services to customers, this technology can also provide manufacturers with an avenue for bypassing wholesalers and retailers. There is considerable technological innovation in products this industry sells. Wholesalers should keep up to date with these changes to obtain new dealerships, and to provide customers with state-ofthe-art products. Rapid technological and product changes necessitate regular training of sales and technical staff.
Technology & Systems

Level The level
of Technology Change is M edium
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Revenue Volatility
Level The level
Revenue volatility* (%)
of Volatility is H igh
A higher level of revenue volatility implies greater industry risk. Volatility can negatively affect long-term strategic decisions, such as the time frame for capital investment. When a firm makes poor investment decisions it may face underutilized capacity if demand suddenly falls, or capacity constraints if it rises quickly.
Volatility vs Growth
1,000 100 10 1 0.1
Hazardous
Rollercoaster

Stagnant
30 10 10 30 50
Blue Chip
70
Five year annualized revenue growth (%)

* Axis is in logarithmic scale
The Electrical Equipment Wholesaling industry is subject to a cyclical pattern and is expected to exhibit high revenue volatility in the five years to 2013. The industrys high volatility is mainly the result of an 11.9% revenue decrease in 2009 and a subsequent 12.8% gain in 2010. The industry wholesales a range of products that serve varying industries,
and this diversification can act to dampen revenue volatility. However, volatility can be very high in individual product segments. Factors that can impact demand for industry products include construction activity, capital spending and general economic performance, which have all been volatile in the United States in the five years to 2013.
Regulation & Policy

Level & Trend he level of T
Regulation is Noneand the trend is S teady
There are no significant regulatory requirements that are specific to this industry. Companies in this industry focus on sourcing and supplying goods, so they should ensure that they comply with regulations covering the storage and
transport of goods and occupational health and safety. Vendors generally warrant the products distributed by wholesalers and allow wholesalers to return defective products, including those customers have returned to the wholesaler.
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Industry Assistance
Level & Trend he level of T
Industry Assistance is L owand the trend is S teady
Direct assistance The National Association of Electrical Distributors (NAED) is a not-for-profit trade association serving the electrical wholesalers industry. NAED provides services to members such as networking opportunities, training and research, an industry magazine, and acts as an industry advocate. Indirect assistance On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act (ARRA). ARRA contains a number of tax and appropriations provisions that directly benefit the electric power industry and provide significant investment in energy
efficiency, generation, and infrastructure development. ARRA also includes several appropriations provisions to fund energy research and development, plug-in hybrid electric vehicles, and smart grids, among others. In February 2008, the US Congress passed the Economic Stimulus Act of 2008, which contained a 50.0% bonus depreciation provision for new capital equipment placed in service in 2008. The electric power industry succeeded in achieving an extension of the placed-inservice date (until December 31, 2009) for certain long-lived property, including most traditional electric generation, transmission and distribution property that takes more than a year to construct.
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Key Statistics
Industry Data
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Sector Rank Economy Rank Revenue ($m) 113,841.5 118,351.7 126,145.6 134,849.5 134,311.2 118,330.4 133,467.1 140,316.9 138,413.9 143,722.2 151,183.2 156,858.8 165,979.0 170,109.8 179,624.1 13/74 59/1287 Industry Value Added ($m) 12,236.5 14,236.1 15,932.3 16,916.0 18,356.6 15,499.6 14,951.1 16,695.8 17,833.2 18,691.4 19,326.2 20,141.5 20,687.0 21,391.4 23,256.7 10/74 142/1287 Establishments 12,169 12,273 12,282 12,784 13,403 13,042 12,936 13,080 13,116 13,305 13,695 13,897 14,287 14,544 14,941 7/74 295/1286 Enterprises Employment 7,861 156,692 7,715 161,568 7,626 170,594 7,857 160,759 7,948 184,366 7,759 176,851 7,683 163,665 7,722 168,335 7,725 168,497 7,821 172,073 7,986 179,284 7,963 183,958 7,871 191,019 7,698 195,524 7,732 204,210 14/74 9/74 328/1286 219/1287 Exports ---------------N/A N/A Imports ---------------N/A N/A Wages ($m) 9,731.9 10,685.5 11,265.0 10,713.0 12,312.6 11,239.7 11,080.6 11,504.1 11,466.1 11,792.7 12,371.8 12,769.1 13,384.0 13,736.4 14,455.1 8/74 140/1287 Domestic Demand N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Unit Sales (million kilowatt hours) 3.7 3.8 3.8 3.9 3.9 3.7 3.9 3.9 4.0 4.0 4.1 4.3 4.3 4.4 4.4 N/A N/A
Annual Change
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Sector Rank Economy Rank Revenue (%) 4.0 6.6 6.9 -0.4 -11.9 12.8 5.1 -1.4 3.8 5.2 3.8 5.8 2.5 5.6 23/74 465/1287
Industry Value Added (%) 16.3 11.9 6.2 8.5 -15.6 -3.5 11.7 6.8 4.8 3.4 4.2 2.7 3.4 8.7 21/74 396/1287
Establishments (%) 0.9 0.1 4.1 4.8 -2.7 -0.8 1.1 0.3 1.4 2.9 1.5 2.8 1.8 2.7 20/74 578/1286
Enterprises Employment (%) (%) -1.9 3.1 -1.2 5.6 3.0 -5.8 1.2 14.7 -2.4 -4.1 -1.0 -7.5 0.5 2.9 0.0 0.1 1.2 2.1 2.1 4.2 -0.3 2.6 -1.2 3.8 -2.2 2.4 0.4 4.4 16/74 13/74 537/1286 486/1287
Exports (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Imports (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Wages (%) 9.8 5.4 -4.9 14.9 -8.7 -1.4 3.8 -0.3 2.8 4.9 3.2 4.8 2.6 5.2 12/74 511/1287
Domestic Demand (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Unit Sales (%) 2.7 0.0 2.6 0.0 -5.1 5.4 0.0 2.6 0.0 2.5 4.9 0.0 2.3 0.0 N/A N/A
Key Ratios
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Sector Rank Economy Rank IVA/Revenue (%) 10.75 12.03 12.63 12.54 13.67 13.10 11.20 11.90 12.88 13.01 12.78 12.84 12.46 12.58 12.95 40/74 1189/1287
Imports/ Demand (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Exports/Revenue (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Revenue per Employee ($000) 726.53 732.52 739.45 838.83 728.50 669.10 815.49 833.56 821.46 835.24 843.26 852.69 868.91 870.02 879.60 32/74 156/1287
Wages/Revenue (%) 8.55 9.03 8.93 7.94 9.17 9.50 8.30 8.20 8.28 8.21 8.18 8.14 8.06 8.08 8.05 28/74 1073/1287
Employees per Est. 12.88 13.16 13.89 12.58 13.76 13.56 12.65 12.87 12.85 12.93 13.09 13.24 13.37 13.44 13.67 40/74 683/1286
Average Wage ($) 62,108.47 66,136.24 66,033.98 66,640.13 66,783.46 63,554.63 67,702.93 68,340.51 68,049.28 68,533.12 69,006.72 69,413.13 70,066.33 70,254.29 70,785.47 12/74 273/1287
Share of the Economy (%) 0.10 0.11 0.12 0.13 0.14 0.12 0.11 0.13 0.13 0.14 0.14 0.14 0.14 0.14 0.14 10/74 142/1287
Figures are inflation-adjusted 2013 dollars. Rank refers to 2013 data.
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Jargon & Glossary
Industry Jargon
E-COMMERCEThe buying and selling of products or services over electronic systems, such as the internet and other computer networks. Businesses engaged in e-commerce are often called e-tailers. INDUSTRIAL CONTROLSystems that control industrial production and distribution RELAYAn electromechanical or solid-state device operated by variations in the input which in turn operate or control other devices connected to the output.
SWITCHBOARDA panel containing buttons for connecting and disconnecting telephone or electrical circuits. SWITCHGEARThe aggregate of switching devices for a power or transforming station, or for an electric motor. TRANSFORMERAn electrical device by which alternating current of one voltage is changed to another voltage. WHOLESALE BYPASSA popular trend within retail and manufacturing industries where producers supply goods directly to stores, eliminating the middleman.
IBISWorld Glossary
BARRIERS TO ENTRYHigh barriers to entry mean that new companies struggle to enter an industry, while low barriers mean it is easy for new companies to enter an industry. CAPITAL INTENSITYCompares the amount of money spent on capital (plant, machinery and equipment) with that spent on labor. IBISWorld uses the ratio of depreciation to wages as a proxy for capital intensity. High capital intensity is more than $0.333 of capital to $1 of labor; medium is $0.125 to $0.333 of capital to $1 of labor; low is less than $0.125 of capital for every $1 of labor. CONSTANT PRICESThe dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation using the current year (i.e. year published) as the base year. This removes the impact of changes in the purchasing power of the dollar, leaving only the real growth or decline in industry metrics. The inflation adjustments in IBISWorlds reports are made using the US Bureau of Economic Analysis implicit GDP price deflator. DOMESTIC DEMANDSpending on industry goods and services within the United States, regardless of their country of origin. It is derived by adding imports to industry revenue, and then subtracting exports. EMPLOYMENTThe number of permanent, part-time, temporary and seasonal employees, working proprietors, partners, managers and executives within the industry. ENTERPRISEA division that is separately managed and keeps management accounts. Each enterprise consists of one or more establishments that are under common ownership or control. ESTABLISHMENTThe smallest type of accounting unit within an enterprise, an establishment is a single physical location where business is conducted or where services or industrial operations are performed. Multiple establishments under common control make up an enterprise. EXPORTSTotal value of industry goods and services sold by US companies to customers abroad.
IMPORTSTotal value of industry goods and services brought in from foreign countries to be sold in the United States. INDUSTRY CONCENTRATIONAn indicator of the dominance of the top four players in an industry. Concentration is considered high if the top players account for more than 70% of industry revenue. Medium is 40% to 70% of industry revenue. Low is less than 40%. INDUSTRY REVENUEThe total sales of industry goods and services (exclusive of excise and sales tax); subsidies on production; all other operating income from outside the firm (such as commission income, repair and service income, and rent, leasing and hiring income); and capital work done by rental or lease. Receipts from interest royalties, dividends and the sale of fixed tangible assets are excluded. INDUSTRY VALUE ADDED (IVA)The market value of goods and services produced by the industry minus the cost of goods and services used in production. IVA is also described as the industrys contribution to GDP, or profit plus wages and depreciation. INTERNATIONAL TRADEThe level of international trade is determined by ratios of exports to revenue and imports to domestic demand. For exports/revenue: low is less than 5%, medium is 5% to 20%, and high is more than 20%. Imports/domestic demand: low is less than 5%, medium is 5% to 35%, and high is more than 35%. LIFE CYCLEAll industries go through periods of growth, maturity and decline. IBISWorld determines an industrys life cycle by considering its growth rate (measured by IVA) compared with GDP; the growth rate of the number of establishments; the amount of change the industrys products are undergoing; the rate of technological change; and the level of customer acceptance of industry products and services. NONEMPLOYING ESTABLISHMENTBusinesses with no paid employment or payroll, also known as nonemployers. These are mostly set up by self-employed individuals.
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Jargon & Glossary
IBISWorld Glossary continued
PROFITIBISWorld uses earnings before interest and tax (EBIT) as an indicator of a companys profitability. It is calculated as revenue minus expenses, excluding interest and tax. VOLATILITYThe level of volatility is determined by averaging the absolute change in revenue in each of the past five years. Volatility levels: very high is more than 20%; high volatility is 10% to 20%; moderate volatility is 3% to 10%; and low volatility is less than 3%.
WAGESThe gross total wages and salaries of all employees in the industry. The cost of benefits is also included in this figure.
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Electrical Equipment Wholesaling in The US Industry Report

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Electrical Equipment Wholesaling in the USAugust 2013 1

IBISWorld Industry Report 42361

Electrical Equipment Wholesaling in the US

33 Key Statistics 20 Competitive Landscape

4 Industry at a Glance 5 Industry Performance

34 Jargon & Glossary

23 Barriers to Entry 24 Industry Globalization

11 Industry Life Cycle

13 Products & Markets

www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com

Electrical Equipment Wholesaling in the USAugust 2013 2

About this Industry

Electrical Equipment Wholesaling in the USAugust 2013 3

About this Industry

Electrical Equipment Wholesaling in the US August 2013

Annual Growth 08-13

4.6% $11.8bn 7,821

Annual Growth 13-18

WESCO International Inc. 3.1%

Demand from building, developing and general contracting

Graybar Electric Company Inc. 2.4%

Products and services segmentation (2013)

Key External Drivers

Relay and industrial controls

Power and distribution transformers

Mature High Low Low Low

None Medium Low Low High

Electrical Equipment Wholesaling in the USAugust 2013 5

manufacturing and construction activity will propel industry demand

Key External Drivers

Electrical Equipment Wholesaling in the USAugust 2013 6

Key External Drivers continued

Billion kilowatt hours

4,100 4,000 3,900 3,800 3,700

Electrical Equipment Wholesaling in the USAugust 2013 7

Current Performance continued

initiatives promoted spending on electrical equipment despite the recession

Key influences on demand

Electrical Equipment Wholesaling in the USAugust 2013 8

Industry consolidation continued

Energy efficiency promotes growth

Electrical Equipment Wholesaling in the USAugust 2013 9

Energy efficiency promotes growth continued

Construction and industrial demand surges

Other future trends

Electrical Equipment Wholesaling in the USAugust 2013 10

Other future trends continued

Electrical Equipment Wholesaling in the USAugust 2013 11

% Growth in share of economy

Company consolidation; level of economic importance stable

TV & Appliance Wholesaling

Electrical Equipment Wholesaling

Electric Power Transmission Electronic Part & Equipment Wholesaling

Lighting & Bulb Manufacturing

Shrinking economic importance

% Growth in number of establishments

Electrical Equipment Wholesaling in the USAugust 2013 12

Industry Life Cycle This industry is M ature

Electrical Equipment Wholesaling in the USAugust 2013 13

Products & Markets

KEY SELLING INDUSTRIES

33591 33592 33593 33599