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While updating the EW Electrical Pyramid for 2017, EW's editors quickly saw two glaring changes in the key channels for distribution of electrical products - first, the constantly evolving "bricks versus clicks" battle between established wholesalers servicing the market more or less traditionally with local branches stocked with inventory and local delivery versus the kaleidoscope of online new competitors, and second, some radically new channels for LEDs and related lighting systems.
A fascination with clicks. On the online front, folks are still flxated on the 800-pound gorilla of the Internet, Amazon Business, and its billion-dollar business in distributing products to business customers that includes but is not limited to electrical contractors and other end users in the electrical market. While there's no doubt Amazon is chomping away at some market share of traditional full-line electrical distributors, the actual sales dollars in play is anyone's guess. Right now, in addition to what seems to be a taste for LED replacement lamps, Amazon Business seems to be focusing on higher profit, easy to stock and ship electrical products like test equipment, and not on low-profit commodities like fittings and connectors or tough-to-handle products like conduit and wire and cable. Of course, Amazon could easily afford to buy a distributor or distributors of any size it wants (witness its recent $13.7 billion acquisition of Whole Foods) and change the distribution game completely.
Relearning the lighting channel. As EW's editors thought about the most dynamic channels depicted in this year's Electrical Pyramid, we saw the channels to distribute lighting products are changing the fastest. Lighting products are a big deal in the electrical wholesaling industry, and they can easily account for 25% or more of the traditional electrical distributor's business. Where full-line distributors invest their lighting inventory dollars is changing fast. According to a 2016 survey of the Top 200 distributors, LEDs now account for more than half of the lamps stocked and sold by Top 200 electrical distributors. And if you consider that more than 100 of the Top 200 distributors said LEDs account for 3.3% of all their product sales, the sales of LEDs flowing through full-line distributors channel are more than $3 billion.
There were always many different channels for lighting products when you consider full-line...