In our latest survey we asked manufacturers, distributors and their clients to define their preferred distribution model and explain the advantages of the various approaches in a multi-faceted supply chain.
The route to market
Some manufacturers sell directly to end-users, while others sell to distributors, integrators and resellers. This is largely defined by manufacturer preference. Some operate a multi-level approach: selling direct to ‘key accounts’ whilst leaving distributors to sweep up smaller resellers and system integrators, who then sell to end users. Manufacturers may also engage directly with the top resellers of their products and arrange special pricing with them, but leave fulfilment and financial transactions to proceed through the distributor.
The distribution channel helps manufacturers
The route to market through a distribution channel provides benefit to manufacturers. “For manufacturers, and particularly those who have yet to establish themselves, distribution offers a local route to market leveraging existing reseller relationships to the end customer,” points out Gordon Innocent, chairman of RGB Comms. “The relationship also provides feedback for future product development. From a manufacturer’s perspective there is just one customer to support and manage, making their life easier.”
Graham Pow, PSCo sales manager adds a further advantage. “Distributors provide a vital role within the supply chain, often expanding the market by enabling vendors to enter new sectors and competing with other technology platforms.”
Manufacturers have the option to sell directly to resellers, which Stuart Lockhart, director at Vision believes is a viable option: “If a manufacturer has a large, complex range which needs a lot of support then they should sell direct to integrators,” he says.
“But beware the vendor who thinks they can undertake logistics cheaper, and better, than a distributor. However, manufacturers can’t scale without distribution. Warehousing, logistics, account management, support, and selling are completely different disciplines.”
Whilst manufacturers may prefer to deal with just a few key distributors, the situation is not rigidly defined. “Resellers will ultimately buy from whoever they choose,” says Keith Dutch, managing director, EMEA, for Peerless-AV. “We do not think it should be the vendor’s responsibility to direct traffic. When distributor and manufacturer work in partnership the reseller will get best value. We find many resellers want a one-stop shop solution rather than having to source a range of products from multiple manufacturers.”
Responses to the survey indicate that the majority of ‘commodity’ products like LCD displays are purchased through distributors: because they are not available to small volume purchasers directly from the manufacturer. Similarly, more complex items such as video and audio conferencing systems go through the same route, whilst control systems and AV switches are more likely to be purchased directly from the manufacturer than a distributor.
With increasing AV and IT convergence, resellers are having to cope with a wider range of technologies and must be able to integrate different technologies. Consequently they need to deal with mainstream IT distributors as well as those supplying AV equipment. Ali Hayward, head of UKI & ANZ Markets, Promethean: “As AV and IT continue to converge, it will become even more important for end users to partner with a reputable and experienced reseller who understands the complexities of collaboration solutions and is able to advise on the best fit for a specific application.”
The value of the distributor in the supply chain
“Distribution bridges a gap between a manufacturer and the market by offering complementary services to assist both channel customers and vendors,” Pow believes. “Distributors generally hold stock and can hugely reduce lead times, which is particularly important for a new technology platform so that it can be as close to an off the shelf solution as possible. This can open up new markets, particularly in the retail sector where the luxury of a 12-week window isn’t often available.”
A further, and appreciated benefit to resellers, lies in the ability to negotiate their own supply terms, rather than impose those of a major manufacturer. “Distributors are keener than manufacturers to negotiate on commercial terms such as credit limits and payment schedules.” However, to get the really large discounts, direct negotiation with the manufacturer is necessary. This is recognised by manufacturers. “Buying from a manufacturer can generally result in a better price for the end user as there’s no middle man,” says Alan Garratt, senior account manager at Casio.
Another advantage of manufacturer-end user interaction is with global roll-outs. Nil Processer, director systems marketing, EMEA at QSC summarise their role: “We look at ourselves more as a consultant: helping clients with strategic investment decisions and supporting them with global project rollouts as well as identifying and matching our end user customers with the best local partners. QSC is looking to become a partner with end user clients, to develop a relationship that can help streamline their AV&C technology investment.”
Good and bad distributors and resellers
The distribution model is designed to complement and support both the manufacturer and the integrator. A distributor can have an unbiased consultative approach to finding the best solution from a wide breadth of products. However, the model only works if the manufacturer recognises and values the services that a distributor has to offer.
A distributor can enhance lead times, service levels and provide full technical assistance and pre- and post-sales support. They can also dispense detailed information and provide early demonstrations of new products and systems when manufacturers cannot spread that information widely and quickly.
Their ability to assist integrators with technical problems and find alternative solutions in situations in which individual products do not quite meet end user requirements was also seen as valuable and an element worth paying a little more for. Also rated highly are the joint sales calls and demonstrations to end users, allowing integrators to demonstrate products more deeply then they can alone. Distributors’ advanced specialist product knowledge and manufacturer training enables them to address end user concerns and aid in securing contracts.
Despite those benefits some resellers expressed frustration at being forced to buy products through distributors, citing the sentiment that they felt they gained little or no additional benefit, are unwilling to pay for it and are awaiting the day when they were able to purchase directly from manufacturers. As in most industries there is a wide range of competencies across the various participants in the supply chain.
Tom Dorman-Matthews, IT officer at Ashornehill, has experience of their benefits and responded accordingly. “We may buy basic products from the web but for anything that needs support or configuration we’ll go through an integrator. They are able to assist with immediate swap-out or loan units in the case of faulty or DOA (dead-on-arrival) devices, which saves our time in not having to liaise with manufacturers and ship back, as well as helping us out with missing kit.” The upshot, and general impression, was summed up by one respondent as: “If things are going right, what am I paying for? But if things are going wrong, the supply chain is invaluable.”
Connnectivity and support
Most of the manufacturers responding to the survey felt, and demonstrated, that it was extremely important for them to connect directly with both distributors and end users.
“The level of engagement between manufacturers and their channel partners is really important. Essentially, if we don’t engage with our partners the volume of product sold would be lower,” said Garratt. “Manufacturers can offer support to the channel and provide demo kits. There’s also service and aftercare to take into consideration. The warranty policy offers added value to the end user and if you are well positioned in that sector, the manufacturer can provide a loan kit to reduce downtime as and when appropriate.”
Manufacturers also have access to applications that add functionality or increase integrations of systems overall, which is a real value add for end users. In fact this level of technical support provided by manufacturers offers real value to both the channel and end user. Much of this communication with end users is achieved through attendance at major industry trade shows.
Garratt continues: “Distributors are perfectly positioned to deal with levels of high demand, but it is down to manufacturers to generate that demand in the first place. We attend trade shows which are a great opportunity to connect directly with end users. It gives us an opportunity to demonstrate the product directly to the customer and assess their requirements before moving it on to an appropriate channel partner. This contact with end users is important as it allows us to understand the needs of the market. Dutch agrees: “We see the role of the manufacturer as one of educating end users and resellers on the best solutions and advising the route to market that suits them best. Pricing, product availability, credit and access to new technologies are all factors but there will never be a one-solution-fits-all. It all depends on the sophistication of the reseller.”
The best route?
In a complex industry with intricate multi-layered relationships there is unlikely to be a clear-cut, straightforward path to procurement nirvana. Rather than a dilemma, it appears that the message coming from all members of the community; from manufacturer, dealer and distributors, resellers, integrators and the end user, is take the route that suits you best. Depending on the project in hand, this may require multiple types of interaction. In Nora Ephron’s words: “When you meet a fork in the road, take both paths.”