Three-Prong Strategy Development & Execution

Reelcraft is the market leader in industrial hose, cord, and cable reels in North America.

$15 Million

For more information on this story, contact
Scott Cassidy, President, Reelcraft: [email protected]

For more information on this story, contact
Senior Director of Sales and Channel Development, Multisorb: [email protected]

Reelcraft estimates its market share to be 25%+ of the industrial market, with an exceptionally high share (40%+) of the spring-retractable segment (as opposed to hand-crank or motorized). Independent brand surveys reveal that Reelcraft’s brand is easily the strongest in the market, emphasizing product durability. Reelcraft is the price leader and sets market expectations for product design in the spring-driven category.

Strategic Deployment
Reelcraft developed three business strategies to win market share in distinct segments. These strategies were developed by sorting customers by two factors: complexity to service and annual purchase volume.

Shift To Segments
The segments that were developed from this process include:

Strategy 1: Key OEM Segment
Strategy 2: Distribution Segment
Strategy 3: Self-Service E-Commerce Segment

Summary Of Results
Reelcraft is growing by 100%+ with “launch” customers of each segment since starting these strategies in January 2020.

Strategy 1: Key OEM Segment
Reelcraft previously had success (10% of 2019 sales) with OEM customers, primarily through standard product sales (red reels bolted to work-truck chassis). However, this business was always at risk to a competitor with matching bolt patterns.

The company assigned a small team to target this business in late 2019. It only had ten accounts and was dedicated to overserving them. The Key OEM Segment strove to win high-volume, custom business through engineer-to-engineer relationships, dedicated customer service, and operational prioritization. There was previously no strong player in this niche market. They responded quickly to add value to OEM engineering, sales, and operational requests. As a result, Reelcraft started supplying work-truck reels like boom reels that control hydraulics and signal cables on Altec digger derricks. This created a significant moat for any competitor because these sales could take years of testing and verification.

Reelcraft believes OEM sales will rise from $8M in 2021 to $11M in 2022 and $15M in 2023. This is a $40M long-term segment. Also, product enhancements derived from OEM designs were incorporated into standard red reels moving forward.

Strategy 2: Distribution Segment
Until 2020, Reelcraft sold primarily through 27 third-party sales rep agencies throughout North America and leveraged buy-groups extensively.

Reelcraft had few stocking distributors. Instead, it was beholden to a few dominant national distributors like Grainger and MSC that held stock and significant price power. As a result, Reelcraft had to set up new distributors for weekly small high-margin orders to counteract low-margin sales at national accounts. After COVID began, Reelcraft recognized an opportunity to switch to a direct sales model and target larger stocking regional distributors as loyal partners.

Reelcraft ended all sales representation agreements, saving $2.8M in commission payments for 2022 (compared to 2019). It also ended all buy-group contracts for an annual rebate savings of more than $200K (compared to 2019). Finally, the company reduced national account sales rebates and co-op marketing contracts by $200K (compared to 2019).

Through channel and product simplification, Reelcraft converted two inside sales positions to external sales manager positions in 2021. It moved to a direct sales model (and saved more than $2M) by adding just three new positions. These sales manager positions were filled externally and brought extensive market experience.

Reelcraft built a network of loyal stocking partner distributors throughout North America. Early success with the partner distribution program and confidence in the direct sales model allowed the company to execute a relationship-altering negotiation with Grainger. Grainger took a 30%+ off-cycle price increase (including 90% increases on highest-running models), allowing for regional distribution growth. The regional distributors, by agreement, did not carry Reelcraft’s competition and were incentivized to gain share on large projects and with local OEMs. Reelcraft partner distributors were up 100%+ from 2020 to 2022.

Reelcraft expects this segment to remain flat as market share increases with partner distributors (+15%) will be offset by the general market shift to e-commerce (-15%).

Strategy 3: Self-Serve E-Commerce Segment
Previously, Reelcraft thought e-commerce sales were limited to known e-commerce distributors and represented less than $2M and 3% of revenue. However, in 2020, it realized that national accounts (Grainger/Zoro, MSC, Uline, and Global) primarily sold online. In fact, Reelcraft’s Amazon sales were primarily driven by Grainger resellers. The best estimate was that more than $25M of Reelcraft’s revenue (30%+) was ultimately sold to end-users online, and that trend was accelerating.

This realization led to a complete shift in marketing resources towards e-commerce. For example, Reelcraft decreased its trade-show presence from 30 to five. It reassigned a product manager to focus only on this transition. Reelcraft.com was reorganized around just 12 “fast lane” products with better packaging, end-user instructions, and digital marketing tools. A digital content position was created late in 2021, and a content creation room was funded and built in early 2022. These tools were deployed to national accounts.

Instead of building an internal team, Reelcraft sought an e-commerce partner distributor in late 2020. After meetings and presentations to six potential partners, the company signed a mutual agreement with Fastool for 2021. Reelcraft added a “where to buy” tool in 2021 that allowed two-click purchasing from Reelcraft.com to distribution partner product pages. It was designed to drive business to Fastool and succeeded quickly. Fastool grew from $200K in 2020 to $1.7M in 2021.

It expected to grow another 35% in 2022. Fastool was adding warehouse space to support the growing partnership. Its pricing from Reelcraft was 15% higher than the national accounts competing for share, but its market pricing to end-users was typically 10% less. Fastool also provided discount codes to small distributors that Reelcraft would no longer set up directly.

Fastool’s focus, deep knowledge, and market insights encouraged Reelcraft to take confident pricing actions with other national accounts (Grainger/Zoro, Uline, MSC, Global, and Northern Tool). It saw significant margin improvement across this segment through pricing and share shift. End-users saw minimal pricing compared to Reelcraft’s price realizations. Market prices increased by 9%, while the company’s average selling price was 21%. Reelcraft expects this segment to grow by 25% year-over-year through market share gains from marketing, share shift and pricing (10%), and the general shift to e-commerce (15%) from legacy distribution.

Results
Without the focus of segmentation, resources would have been spread across the three distinct business lines that now exist and execution would have been spotty as a result. Because of the added focus and the formalization of segments, Reelcraft is growing by 100%+ with “launch” customers of each segment since starting these strategies in January 2020.