Market Survey: Resellers – Thinking beyond the box

In the beginning there were av dealers. They sold overhead projectors and slide projectors. Then along came video dealers, who sold corporate video kit. Systems design and integration companies were a different and highly technical breed.

Then IT got involved and everyone started becoming resellers or VARs (value added resellers). Just to confuse things, trade distributors also started calling themselves VARs.

So now, most of the professional av companies selling to end users are calling themselves systems integrators.

This reflects the fact that, over the past decade, the bulk of their businesses have shifted away from selling straight product – box sales – to more service-oriented work such as systems design and installation, maintenance and the provision of av facilities management (AVFM). As products such as projectors and flat screens have become commoditised, both prices and margins have been eroded, making volume sales markets less attractive to the kind of companies active in professional av provision.

Volume sales vs systems

Today, a very small proportion of pro av resellers’ turnover comes from box sales – but they are still maintaining a high proportion of the professional display product turnover.

‘A total of 60 per cent of the projector sales in the UK are still going through the av distribution channel,’ says Futuresource Consulting analyst Mike Fisher. That’s much higher than in Germany (35 per cent) or France (45 per cent), where the lack of specialist av distribution has meant that more and more sales have gone through domestic retailers or IT.’

‘We now describe ourselves principally as a systems integrator with a strong conference and live events business,’ says Saville Audio Visual sales and marketing director Ed Everard. ‘Boxed product sales now account for about 12 per cent of turnover – proportionally much less than they used to.’

Saville AV is one of the few companies still active in the provision of purchasing catalogues for clients such as the Ministry of Defence (MoD), so its box sales quotient has been buoyed. Another MoD supplier, Impact, does 20 per cent of its turnover in box sales. ‘But we are rapidly moving away from that model to systems integration and digital media service provision,’ says managing director Julian Phillips.

Others have almost entirely abandoned box sales. Reflex managing director Roland Dreesden says 87 per cent of the company’s business is now in installation. ‘We do some box shift to existing customers; very little to someone who just comes in and wants the best price,’ he says. ‘Until 2006, we were a box shifter into the MoD and we had an e-commerce site. But life changed and so did our business model.’

‘Impact had its own e-tailer for four years, but it was canned a year ago. We didn’t want to perpetuate the box-selling model,’ concurs Phillips. Partly, that’s because it is such a crowded, and hence low-margin, market.

E-tail competition

‘Although there has been a massive expansion in demand for commoditised av products, the number of new competitors trading online has grown exponentially,’ says Saville’s Everard. ‘The IT and office sectors jumped on the av bandwagon. We have reacted in two ways – first by competing with the e-tailers by developing and improving our own online store and telesales operations and, secondly, by growing our systems integration business.’

As Dreesden points out: ‘E-tail is all about having a big warehouse, lots of stock and a high fulfilment level. It is a relevant way of purchasing for a certain style of customer, such as small companies. It is not so relevant to large organisations with intelligent procurement processes who know what they are doing,’ he comments.

The move away from box sales is also self-fulfilling. ‘We get less enquiries than we used to for consumables and box sales,’ says Primary Presentations managing director Graham Cording. ‘We seek profitable relationships, and it must be remembered that not all customers are good customers for our business model. Sometimes it’s a good thing to filter out the low profit, high-risk companies, and focus on long-term “lifetime value” ones.’

Doing that means that av companies have had to change the way they work and sell in order to function in a very different marketplace to the technology and new product-led world of the late 1990s.

‘The main markets for the av channel are quite deeply penetrated, so the companies have to make sure it is not just a product sell,’ says Futuresouce’s Fisher. ‘It is about more effective communications and linking communications together.

‘A lot of the growth areas, such as video-conferencing or telepresence, are long-term investment sectors where the sellers have to argue the ROI case, and it is a very different sales process (from just selling a projector). At the same time, people are not replacing old products that are still usable, so the service model is changing.’

For Dreesden, the ‘journey that has moved from box sales to systems and integration is now going towards service and maintenance’.

Growth prospects

The av resellers-cum-systems integrators know they will have to continue changing their businesses if they are to survive and prosper.

‘Our future growth will come in areas such as maintenance, network asset management and control system integration,’ says Cording. Impact, too, sees the future of its business in managed services, while Saville anticipates its growth potential in intellectual solutions such as telecoms, integrated IT and telepresence systems – plus other complex meeting-room environments, such as control rooms and high-tech boardrooms.

According to Impact’s Phillips and Saville’s Everard, it is in these areas that the professional av companies have most to offer compared with IT resellers or online sales operations.

‘We can offer genuine expertise, technical knowledge and experience,’ argues Everard. ‘Even basic advice on simple issues such as screen sizes and light output requirements – stuff taken for granted by Infocomm-trained av resellers – is not forthcoming from online retailers. It’s the av resellers who offer a more personal service, looking to build relationships with clients.’

Cording adds: ‘We can offer knowledge beyond boxes. It is a value proposition rather than a volume/price deal. We position our company brand and the av marketplace, where IT resellers generally seem to talk manufacturer brands, bits and bytes.’

However, there are more business challenges ahead. ‘We need to avoid being in just one market and counter the desperation of others, which is driving down margins,’ says Dreesden.

‘We have to grow our private-sector business enough to compensate for the inevitable reduction in public spending on education and other areas in the current financial conditions,’ adds Everard. ‘It’s also about being profitable while juggling the three corners of the critical business triangle – delivering quality solutions plus reliable service and value for money.’

There’s also a wider challenge involved in the marketing of av and helping clients understand what it can do for them.

‘Clients are now bombarded with so much marketing material that real differentiators from great suppliers may get ignored as marketing spin, because claims are made so often that they are no longer believable,’ says Cording. ‘So it all comes down to trust and referrals as we all compete for attention.’

It is also going to come down to business positioning. ‘The old adage of get big or get niche, don’t sit in the middle, still applies,’ says Fisher. ‘We are now seeing manufacturers come up with products that are tightly aimed at vertical markets.’

That market focus also helps foster the one thing that many systems integrators agree on – the need for partnerships with both clients and manufacturers. As Dreesden concludes: ‘There has to be two-way traffic through the whole supply chain.’

AV RESELLER SURVEY: TOP COMPANIES

So who are the top av equipment resellers, and how are they defined? In the absence of reliable financial information, we asked six leading distributors to nominate their top 10 av reseller clients and analysed the results to see how many mentions each company received. The results are below, with the star ratings indicating the number of times each company appeared on a list:

Rating Company
****** AV Machines/Matrix Displays
****** Saville Group
***** Computacenter
***** Impact
***** GV Multimedia
**** Electrosonic
**** Roche AV
*** Misco/Systemax
*** Reflex AV
*** Research Machines
** Asysco
** DABs
** PC World Business
** SCC
* ACS Northampton
* Business Insight
* CCS Media
* CDEC
* City IS
* DSGI
* eBuyer
* Egan Reid
* Focus 21
* Fujitsu Services
* IDNS
* Insight
* Insite
* Kelway
* Lanway
* Probrand
* SSUK
* Stone Computers

HANDLING THE CHANNEL

Most UK professional av sales companies still buy the majority of their products via specialist av distributors, who have a clear place in the market because of their ability to offer what Impact’s Julian Phillips describes as ‘unbiased advice, quick turnaround and flexible delivery arrangements’. But most pro av resellers still want to work with the manufacturers direct on core brands.

As the av systems and services market becomes more complex, and some manufacturers try to move towards the sale of niche, higher-end products, the av channel should come into its own.

‘We use the av channel for things such as videowall, signage and command/control,’ says NEC channel director Neil Hartigan. ‘We select resellers who can sell and install that kind of system, then help train them to specify and install the systems correctly.

‘Over the past 12 months we have put more of our focus into the av channel and we are reaping the benefits from partners who can supply content, control systems and manage additional technologies.’

Like the resellers, some manufacturers – such as NEC – are intent on building relationships. ‘A lot of the people we work with are now working on large projects and installations and they are very different from the pro av resellers of five years ago,’ says Hartigan. ‘We need to bring more solutions to the market from a partner perspective, not just a manufacturer perspective.’