How to choose your distributor

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."