At one point in the electrical sector, you had a tried and tested process. An experienced electrical contractor had good relationships with manufacturers and distributors, with strong relationships to their customers too. They would recommend and install quality products that they knew would hold up through warranty and all had repeat business. Now, customers buy equipment first and, sometimes it’s not up to standard. It is just one challenge that the sector faces; below, we look at those challenges, what they are and possibly how adaption to meeting them might help stake a continued claim in today’s market.
When an extensive report into the future for Canadian electrical contractors was carried out, some information jumped out straight away. Although the market had been buoyant for a long time and vital to the Canadian economy, new technology is one of the driving factors in bringing change, alongside others such as customer expectations, the economy, even age demographics. With customers able to access online stores in abundance, it sometimes means that electrical contractors are being tasked with a labour-only role in the transaction, cutting out the margin from providing the equipment too. Having a loss of control over what equipment is installed might be one thing but it also raises questions around the warranty and how much electrical contractors might be reliant on how reliable those manufacturers are – selling directly to customers.
It means that contractors are having to consider new business models for their own business; whether to specialize in core services or to offer a wider range to customers they are engaging with. And given the rise of new technology, how best to offer those services and reach customers through the channels they are most likely to interact with. As technology continues to evolve at a fast rate, manufacturers and distributors will also need to support electrical contractors better and create a more symbiotic way of working, to ensure that the market does not fragment more.
Challenges and Solutions
With technological advancements and customers having access to pre-purchasing equipment, it is important (as indicated in the last paragraph), that electrical contractors adapt. Millennials now make up the largest part of the workforce and their own life experiences lead them to question or look at traditional employment set-ups and business methods. That requires a lot more re-thinking and strategy to the business model and where that will be beyond 2020. Data from a couple of years ago showed electrical contractors making up 40% of electrical distributors’ customer access or base. This accounted for revenues of $2.9bn. Out of over 24,000 contracting companies, 11,106 were small independents. These figures and demographics show the need for a strong working relationship between the suppliers and contractors.
Another challenge as mentioned earlier is the proliferation of customers taking pre-purchase decisions to buy the equipment, ready for install. This obviously cuts out the electrical contractor to advise and source the equipment to their own specification and standard. It also increases the potential risk of having to work with the pre-purchased materials and warranty or liability might be a part of that concern too. If the equipment sourced is not certified to Canadian standards, the risk or concern might be higher. In fact, one-third of respondents (contractors) to a study by Electrical Safety Foundation International admitted to encountering a counterfeit product, sometimes multiple times a year.
With these increased customer expectations to either carry out the labour or a shorter tendering process creating pressure, many electrical contractors are looking to diversify or specify their business operation. New technology plays a big part in this, as does closer working relationships forged with distributors, to ensure they are part of or considered in the purchasing process. Every part of the process is also feeling the speed of technological advancements; lighting technology (OLED, LIFI, LED) is expected to have a greater impact on business going forward. Some other areas of technology to consider are Building Automation and Controls, along with Fire /Life Safety Systems. EV Charging Stations and Alternative Energy should also increase as areas of growth. One contractor put it into perspective by highlighting that 5 years earlier, new technology made up about 25% of their business whereas now, it accounts for 75% of the energy-saving projects they do.
Training and Development
With DC Power growing and IT specialists moving into this space more, staff need to be aware of wireless controls and other new technological advancements. Whilst this might be seen as a threat to traditional contractor roles, there is the opportunity train staff, adapt to the new technologies on offer and it is also important that suppliers help educate contractors directly too. Already, electrical contractors are looking at product research online, making themselves aware of what these products can do and might offer.
So, with customers pre-purchasing, traditional relationships with customers and suppliers less strong and new technologies being the biggest part of the industry, it is important that electrical contractors are supported and able to look at what direction they take. If big enough, they could diversify to offer more technology-based services, recruiting and training staff in more IT based roles too or they could specialize in certain areas and become expert in them. With pre-purchasing and technology here to stay, having the right strategic direction going forward might help turn the challenges into potential opportunities – and allow the skilled contractors out there, a chance at staking a bigger claim in the new marketplace.