The relationship between resellers and distributors can be fraught with tensions and conflicts. The key is to turn the distributor into a partner. Will your distributors treat you the way you treat your customers? Will you treat them like that? If the answer is yes, it becomes the beginning of a true partnership.
The big myth of entrepreneurs is that they are there on their own struggling against an uncaring world and a brutal reality. But the reality is business no longer works that way. File sharing, email and even blogs are making businesses more collaborative than ever.
For resellers, the key to developing strong bonds with distributors lies in the relationship. More to the point, resellers need to treat the relationship with distributors as important as their relationship with customers. It's all about connection and creating a real partnership. The idea of a partnership is particularly important for the entrepreneur reseller who might be long on ideas and energy but short on the necessary infrastructure.
There are several key questions. The first is how focused will your company be on mine. That is a crucial question to ask when setting up shop and building a relationship with a distributor. The next question: who specifically do I have to deal with? Who will be working with me, and for me? Is it one person, or is it a team? Most resellers would say they prefer dealing with one person.
As a rule, there are two types of distributors. There are some, always the bigger ones, who have no time or interest in establishing a solid relationship with the small reseller. These distributors have one focus only: volume. Unless the reseller can provide them with that, they are not interested.
These are the distributors who will dictate terms to the reseller. They set up the rules and they do not really care about the kind of resellers they have, as long as they are pushing through the volume. This does not mean they will dismiss the small reseller altogether. When a small reseller needs help, they are sent to a team. But when the reseller starts buying more, they get an account manager.
Then there are the smaller distributors who are interested in relationships. These are the ones that resellers need to target. The smaller distributors are more flexible and creative. More to the point, they are more likely to understand what you're going through because they're going through it too. And because they are smaller, it is easier for them to form partnerships.
Most importantly, the small distributors are the ones who actually need your business. They have a vested interest in ensuring your business thrives.
There is, however, a trade off. Larger distributors as a rule have more products. They can have hundreds of different types of products. Smaller distributors, by way of contrast, tend only to have 20 to 30 products but may have a deeper knowledge of those products. At the same time, however, many smaller distributors might not have the systems in place to provide comprehensive service.
This gets to one of the key criticisms that many smaller resellers have about distributors: the lack of clear lines of communication. Many say that when they are dealing with a large distributor they will be dealing with a different person every time. Or they could go to two different teams with a large distributor and get three different answers.
The key again is that special relationship. It is about creating a conversation with one person from that distributor, an account manager, and having them on hand to answer all questions when they arise, and to help sort out any difficulties. Getting a clear and consistent line of communication is the biggest challenge facing many resellers and it is one of the flashpoints in any relationship between the reseller and distributor. Nine times out of 10, that communication is done by email or over the phone. Face to face communication can happen but that usually only happens at special training events put on by the distributor.
Talking to a person instead of being sent to a web site or a team is the critical point here. More often than not, it's the smaller distributors that can offer that single point of contact for the reseller.
Another critical issue that makes many resellers nervous is the quality and security of the customer relationships. Many vendors want information about customers that they can put on their database and, many times, that information is passed on to the vendors through the distributors.
That can create conflicts, particularly when boundaries are crossed. The reseller is required to pass on that information.; if the problems arise, they can only be sorted out when there is a close relationship. Creating that relationship requires the reseller to treat the distributor like a customer. It means getting to know the person at the other end, right down to personal details, even what football team they are following. The same as you would do for any customer.
In the end, success or failure of the partnership will come down to the quality of the relationship.
Next page: The value of the personal touch
Reseller MegaBuy (CRN Fast50 No.14) deals with many resellers, large and small. And because it does a lot of business, it can strike close relationships with all of them, regardless of their size.
MegaBuy's technical director Nick Shelomanov says the company needs to deal with many because it covers so many different areas of demand. The company has 20 to 30 distributors on its list.
"We deal with both big and small,'' Shelomanov says.
"We deal with everyone in the first tier, like Ingram Micro Australia and Synnex Australia and then all the way down to the smaller second tier distributors who import anything themselves.
"There are also the specialist distributors, who provide specialist niche products."
It wasn't always like that. Shelomanov says it was a lot more difficult getting the attention from the big end of town when the company was starting out but as the business and number of orders grew, the large distributors started paying attention.
Ingram, for example, now provides MegaBuy with a dedicated account manager. For Ingram, Megabuy is a valued customer. The other advantage of being such a large customer is that it creates some price competition.
In the end, Shelomanov says the success of the relationship really boils down to the distributor's organisational structure. "It really depends on the person you deal with, it depends on who you have as your account manager," he says.
"Some distributors don't have account managers and we have problems with that. They don't have a dedicated contact person. So when we get large quotes that we need to do for customers and we pass it on through to them, there is no one there to reply to us. What we do then is send it through to a Synnex or an Ingram who do have a dedicated account manager.
"From the reseller end, it's important for us to have a dedicated person who we can speak to. We don't know the rest of the organisation, we don't know how the organisation is structured. We just want to deal with one person as a reseller.
"We want to have one person who will look out for our interests and ultimately their own interests too because they're getting a commission on it.
"So when we get quotes for 50 laptops, we know there is someone there who is interested in chasing it rather than us having to go in and try to find out who can help us."
Shelomanov says he prefers dealing with the larger distributors simply because they are better equipped to help his company. But he acknowledges that much of it has to do with the size of the business.
"If your $1000 account is being spread among these guys, you are neither here nor there. You might be buying it off Ingram, but you are not getting the benefit of the better price through competition.
"We actually find we get better service from the big guys, but then we do hundreds of thousands of dollars a month.
"Some of the smaller guys are quite good but the problem with a lot of the smaller guys is that they don't have systems to support it. Even though they would like to do more business, they are not always able to because they have limitations within their business."
This is where MegaBuy is starting to change its own business model. Knowing that MegaBuy has a special relationship with the big distributors, many small resellers are now coming to the company to get equipment at a good price. In effect, MegaBuy is evolving and slowly transforming itself into a proxy distributor.
"What we find now is that a lot of those smaller resellers are coming to us to buy the stuff,'' Shelomanov says.
"They know what they need, they know what they want and they want a good price. And they can get it from us for a better price," he says.
"The reason is that they might only be buying a couple of thousand dollars a month from Ingram whereas we buy hundreds of thousands of dollars, and so have better prices.
"If you have a one man band dealing with Ingram, there is a size differential which means you will be a very small fish in a big pond, whereas if you are a one-man band dealing with a small distributor or second tier specialist reseller like us, you will find the differential is a lot smaller and you are getting better service because you are a valued customer.
"We tend to get a lot of one, two or three-man bands buying from us but when they get up to perhaps five or 10 people and they get a bit of volume, they deal directly with the distributor. It's a natural progression."
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