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Guest Commentary: Strong Relationships Pay Dividends (3/9/2010)

By David Spiller, Structured Cable Products (SCP)

I've been in the electronics business for 30 years now, and have been manufacturing and importing for around 25 years. In the late 1990s, having been persuaded by friends and colleagues already involved in structured wiring that this would be an excellent opportunity for a niche business, I did some research and started SCP in 2001. From then up to 2007, there was a tremendous structured wiring boom, and SCP really took off. We now have 21 employees and three offices in the US and a distribution warehouse in The Netherlands.

Trends

Right now in the US, the market is down around 30% from three years ago. But while housing construction start-ups have dropped dramatically because of the recession, there are still plenty of opportunities for our business. Since 9/11, people are staying home more, and are investing more in their homes, especially in technology.

The industry in most of Europe lags behind the US by a few years, but with all of the new and retrofit technology available, more and more people are investing in structured wiring, especially in Northern Europe which hasn't been as severely affected by the global recession as the Southern European countries.

Concerns

The volatility of copper prices is causing large upswings to wire/cable manufacturing costs - dramatically narrowing margins for suppliers. Plus, the global recession has made everyone more price conscious. As such, we are seeing a concerning trend in both our European and USA markets: some cable brands, in an effort to reduce costs, are compromising the quality of their products in order to compete with the influx of new 'fly-by-night' companies that are dumping very-low quality products onto the market at below market prices.

This is why it is so important than ever, to make sure that you deal with reputable suppliers that are committed to producing products that are consistent in quality.

While we may be in a commodity-based business, all wire and cable is not the same. At SCP we will not compromise our brand and reputation in order to be the 'cheapest'. Instead, our focus is on providing the best value. There are several other very good suppliers out there too, and that is why end users should not assume that the lowest-priced product is always the right product to use. This can be challenging to communicate.

Opportunities in Europe

I see a tremendous amount of growth potential for the SCP brand in Europe, both this year and in the coming years. Only a small proportion of European homes have structured wiring, so the opportunities are going to be there for many years. In addition, the cost of consumer electronics such as Blu-ray players and flatscreen TVs is falling all the time, which is opening up the idea of home theatre to more people, and allowing custom installers to provide solutions at many more price points than just a few years ago. This is reflected by the fact that when we started doing business in Europe, it was mainly for the high-end market, but now the trend is much more towards the middle market, especially in those countries where the economic situation is not too bad.

Strategy

As a US-based company, it was important for us to take our time to better understand the European market and its regional complexities. As such, SCP primarily sells through distribution partners in Europe instead of direct to dealers. Our distributor relationships are very important to us, and we are very deliberate in identifying the right distributors to represent our brand, and in developing a strong relationship with them. We want to understand their business in their market so that we can create a strong foundation to do profitable business together.

Having a distribution centre in Holland allows us to be very responsive to our EU distributors. Logistically, we can turn around orders very quickly, processing them the same or next day, and we can offer very competitive prices in US dollars, which, with the exchange rate differential, gives a tremendous buying advantage to our distributors.

Advice to the industry

My advice to the industry is that it is even more important today to develop relationships with your vendors and to stay with vendors who are established, have a good track record, and will not compromise their brand for short term profits. It's not all about price if you want to be in it for the long haul. Making buying decisions based on who is the cheapest is only going to cost you more in the end, and puts your business reputation at risk. This industry is about relationships, quality products and good support. With the right partner, you can grow profitably and be in great shape for when the economy turns around.

David Spiller is President and International Sales Manager of SCP, manufacturer of structured wiring, security, HDMI, fire, direct burial, CCTV, specialised control, audio, HDTV, coaxial and LAN cables and accessories.

www.scpcat5e.com