The distribution dilemma

Traditionally, the term “value-add” denoted support, service, help with technical questions, integration, installation and trouble shooting. But even that is not always enough.

Dovetail Distribution tries to take off some of the resellers’ sales and marketing load, says the company’s general manager Max Fredericks.

“We help people doing evaluations, pilots, help generate leads and keep our eye on the market looking for opportunities for them. This saves them spending time doing that sort of research themselves when their main business should be being out there delivering to their customers. We’re getting good feedback from them for doing that,” he says.

New Zealand memory specialist Duo International markets its brand direct to the corporate market but only sells via the reseller channel. “We take away a lot of the grunt work,” says Duo’s director Renee De Luca.

Duo, now setting up in Australia, has applied some unique promotions and team building in NZ with great success. “We try to do these things a little differently. In New Zealand we brought out the first Porsche promotion in 2003. That was really successful for us and we’ve seen others follow our lead since,” De Luca says.

In that promo, Duo bought a Porsche and for every unit of a specific product purchased, the reseller went in the draw to win the Porsche for a month.

Another memory specialist, Legend, finds its core differentiator in being a manufacturer for its own branded products.

“We manufacture memory modules and fl ash modules that we sell with complementary lines such as motherboards, CPUs and hard drives,” says Rob Kester, Legend’s sales director.

“Another thing our resellers say is our strong point is RMA (return materials authorisation). We’re under an average of four days from when we receive a product to when we turn it around. Compare our four-day turnaround to some of our competitors’, which are as late as 30 days and I’ve even heard horror stories of 60 days,” he says.

Hitech Distribution has a service division that provides a wholesale service for its resellers.

“For some of the resellers who are not sized-up enough to hire their own sets of technicians and qualified repairers, we contract out to them at wholesale rates. Also, our helpdesk offers phone answering services on behalf of the reseller’s customer,” says Hitech’s Hein.

Resellers continue to be price and time obsessed and the pulling power of economies of scale like Ingram has is hard to beat.

Gartner’s Woo says brand loyalty and partner loyalty will continue to dilute as pricing margin pressure continues to eat into a lot of businesses.

“The bottom line is, things are tough. There’s not a lot of loyalty out there to be honest,” he says. “There’s always new players coming into the market and the incumbents have to work very, very hard to maintain their position and loyalty.”

Woo says pricing will continue to be a critical component of the overall strategy, and distributors also have to work on other value-added components.

“You have to restructure your cost base to match competitors. Not only do you have to try to match prices, but then be able to show what you can go above and beyond matching that price.”

“It’s a very tall order, but disties can counter some of that by back-to-basics strategies such as guaranteeing inventories, guaranteeing the amount of margins and guaranteeing an efficient supply chain.”