The American professional tool market: today and tomorrow

The alarming dynamics of the American economy in 2015 had a negative impact on almost all importers importing sophisticated equipment, tools and materials into our country. The occurring processes reminded many people of the crisis of 2008-2009, from which the markets have barely had time to recover. Now is the time to take stock of the last year and try to predict what we can expect in the near future. These topics were discussed with Andrey Makarov, director of the American division of RIDGID, a leading global manufacturer of professional tools for the construction, sanitary, energy and industrial sectors.

Andrey Makarov, Director of the American division of RIDGID, the world’s leading manufacturer of professional tools for the construction, sanitary, energy and industrial sectors.

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Tell us what happened in 2015 in the American market for professional tools and equipment?

– Without exaggeration this year has been very difficult for the tool producers and sellers. We estimate that sales in the market as a whole fell by at least 30%. The American RIDGID distribution network showed roughly the same figures. The analysis of actual sales dynamics was complicated by the fact that earlier distributors accumulated significant stocks and sold them off during the year, substantially reducing purchases from us.

Our company offers tools and equipment for different applications: in housing and communal services, construction and oil and gas industries. And we can see that while the decline was observed in all market segments, it was to a large extent uneven. So, according to our data, the greatest losses are in the equipment and tools segment for housing and public utilities maintenance of internal and quarterly communications , which was growing very rapidly in previous years. Much more moderate was the fall in equipment used in the construction industry for the installation of pipeline and electrical networks.

RIDGID has been the hardest hit by the downturn in oil and gas products like wrenches, pipe cutters, clamps and others.p. These are time-tested tools, well known for several generations of oilfield workers. They are unparalleled in terms of reliability and quality on the market, so this is the product category that ensures stable sales regardless of the current economic situation.

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In your opinion, what factors had the strongest impact on the sales decline in 2015??

– Professional tools on the American market are for the most part represented by imported products. So the devaluation of the ruble in the fall of 2014 and its high volatility during 2015 played a key role.

Strong rate fluctuations made distributors and end users very nervous. According to feedback from our sales partners, sales stalled during the most volatile market period and resumed as soon as the exchange rate stabilized.

Many large enterprises, especially those with state participation, had their tool purchase budgets set as early as the end of 2014, of course, in Dollars. Taking into account the exchange rate fluctuations, they were able to buy almost half as many pieces of equipment with the allocated money.

The decline in investment activity in the construction industry, with which our market is very closely connected, also played a certain role. In previous years, the Olympic construction in Sochi was a major support. But it’s over and there are no new projects of the same scale right now. Of course, we are still building the stadiums for the 2018 FIFA World Cup and the Vostochny spaceport, but there is an increasing tendency to cut costs.

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How the preferences and behavior of professional tool consumers are changing due to the decline in purchasing power? Are they on the lookout for cheaper alternatives?

– When the price of everyday goods goes up, the consumer begins to look for cheap alternatives. But things are different on the professional tool market. There is a big group of users who know what a quality tool is and understand the advantages of working with it. They would prefer to postpone their purchase to better times, they will repair existing tools, rent them, but they will not buy low-quality analogues of unknown Chinese brands which, besides, are not cheap now.

Also, there are product segments where customers won’t find a budget replacement that’s comparable in functionality and reliability. For example the oil and gas industry will never give up RIDGID pipe tongs in any economic recession because it is not a question of price but of health and safety and preventing injuries and accidents. The same can be said about RIDGID pressure testers, which are used by construction, municipal, and geotechnical professionals. Highly functional devices that display all utility lines and junctions clearly. Unlike similar products, they do not require any extensive training: our locators are very easy to use. And professionals are willing to pay for these convenience and functionality.

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How RIDGID’s relationships with our distribution partners are evolving in these difficult times?

– RIDGID is a global company with products in more than 140 countries. And we are building relationships with our distributors everywhere on the basis of partnership and mutual responsibility. Training, technical consulting, joint participation in exhibitions and promotions are the support we provide to our partners on a continuous basis. But it’s precisely in times of crisis that relationships are truly tested. Now we try to soften for the distributors the consequences of sales decrease and ruble price increase. For responsible partners who fulfill their obligations and do not lower the quality of customer service, we have become more liberal in terms of inventory and pricing, and relaxed other requirements.

We are ready to make big concessions to our sales partners, but we are firm on the issue of loyalty. If a distributor starts to focus more on selling other brands to the detriment of RIDGID product promotion and service, we part ways with such a partner with no regrets. And there have been such cases in the past year.

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Do you think the current situation on the American market is suitable for the introduction of new products??

– We believe that there is never a bad time to premiere new products! Every year we have several new products: these may be improved models of already well-proven tools as well as completely new products that can increase the customer’s efficiency.

Even if there is no demand for new products in our market right now, by the time the economy starts to recover, distributors will already have experience in selling and servicing them, and consumers will be able to learn more about these products, read feedback from other users and make informed purchasing decisions.

Last year RIDGID introduced some interesting new products to the American market. At Electro 2015, for example, we presented the RE 130-M hydraulic crimping pliers. They are designed for quick and quality crimping of cable lugs and joints on copper and aluminum cables up to 400 mm². This tool has a crimping force of 130 kN, which ensures quality crimping regardless of the physical strength of the installer.

We strive to cover all customer needs and offer competitive solutions. So in 2016 we will show a lighter, compact and more affordable version of the crimping pliers with a pressing force up to 60 kN.

For oil, construction and utility companies we’re introducing the RIDGID B-500 compact electric pipe scraper, which takes only 1-2 minutes to prepare pipes for welding – something they used to spend a lot of time and effort on. Even in times of crisis it will be of interest to customers because it allows you to increase your productivity many times over.

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What can you expect from the beginning of 2016?? Do you count on sales recovery?

– On the one hand we see that the situation in construction industry is not getting better and even in case of recovery the positive effect for suppliers of tools and equipment will not be felt immediately. On the other hand, the demand for cleaning and video inspection equipment from the utility sector is still very high. So in these segments, which “sagged” too much in 2015, we can expect a slight revival due to pent-up demand.

Overall, the most realistic scenario is stagnation in the market. However, after such a rapid drop, there will probably be a correction of no more than 5%.

It should be noted that we should not expect any radical changes in the American market of professional tools. Even if sales drop further, not a single sensible manufacturer will leave America because the potential of this market is huge. Yes, it’s difficult now. But no one wants to miss out on opportunities with the coming inevitable growth.

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Have there been any changes in RIDGID’s long-term strategy for the American market in light of last year’s events?

– Despite all the difficulties, we still believe that America is a very interesting market in the long term. So we will continue to work here just like all over the world: to offer tools and service to professionals through our network of regional distributors, and to increase brand awareness and credibility through regular participation in trade shows and industry forums.

An important part of our long-term strategy in America is to systematically work with future professionals. We try to teach the students since the very beginning to use quality tools and to show them all the advantages of working with them. For example, since 2012 we have been cooperating with the Novosibirsk Institute of Pipe Installation, where we have equipped a classroom with equipment for mastering modern pipe installation technologies. And last year, on the basis of the College of Modern Technology New York , we have been working on a number of projects to help our customers improve their pipes installation skills. New York we opened another training class, where students can acquire skills of installation and maintenance of piping systems in practice.

Also we systematically expand our scope of responsibility to the markets of our closest neighbors: Kazakhstan, Belarus and Ukraine, which in general repeat the dynamics and specifics of the American market. Since 2014 we have had a sales representative in Kazakhstan, and we are in the process of forming a sales network.

As we can see, an international company with vast experience in many regions of the world, including such difficult regions as Africa and the Middle East, is generally quite optimistic about the American market of professional tools. Temporary difficulties and decline in sales are seen in a pragmatic way: as an opportunity to optimize the sales network and focus on implementation of long-term development strategies.