Distribution: The middleman's middleman

Distribution: The middleman's middleman

With vendors unwilling to deal with most resellers, it is distributors that are relied on to provide logistics, quality service and product fulfilment in the channel. In the second instalment of ARN's Channel Verdict series, Philip Sim takes a look at the current state of play and gives a round-up of the major distributors from a reseller's point of view.

IIn this day and age, unless you're a big-gun integrator, it's almost certain that you source product from one of the many distributors who act as the middlemen between vendors and reseller. Vendors en masse have moved away from dealing directly with all but the biggest resellers. Take as an example, Compaq's decision earlier this year to slash the number of resellers with which it has a direct relationship.

Other vendors like Acer have done exactly the same thing this year as well. Suddenly, it seems vendors in Australia have decided to stick to their knitting and are concentrating on sales and marketing while letting distributors focus on logistics, warehousing, order fulfilment and even areas like technical support, credit and warranties.

"Vendor operations in Australia are nothing more than sales and marketing shop fronts," says John O'Meara, managing director of reseller IT Facilitators. "In terms of technical or logistical support they are the absolute pits. You're almost always forced to wait 30 minutes on the phone to get support and that's just a joke."

As a result, resellers are more than ever reliant on their relationship with distributors in order to ensure that they get products on time as well as the technical support and backup required to ensure they can properly service customers.

In this special feature, Australian Reseller News asks resellers what they want from their distributors and whether distributors are delivering on those needs.

We examine how resellers can get the best out of their relationship with a distribution partner and we look at what many of the leading distributors in Australia claim they have to offer.

Stepping up to the plate

Fortunately, it seems many distributors are responding to the increasing demand being placed on them with improved service, better Web sites and more value-add.

According to Inform's Channel Trends 99 survey, 41 per cent of resellers thought that the overall service they received from their distributors had improved.

However, it's worth noting that this leaves plenty of room for improvement with 53 per cent saying their distributor's service had stayed the same and 6 per cent saying it had worsened.

So what do resellers want from distributors?

While price will always be a consideration, it is not nearly as critical as the quality of service the reseller receives, according to Inform and resellers interviewed by ARN.

"Price really isn't a huge issue," said Gary Simmons, technical director of reseller Australian Retail Technology (Artech).

"I'm certainly prepared to pay more if the quality of service is worth it."

O'Meara agrees. "I think most distributors are still focused on competing on price, when they should be competing on service and value-add."

According to Inform's research, the number one rated attribute that a distributor needed to concentrate on was technical support.

More than half rated it as being of very high importance and a further 33 per cent rated it as being of high importance.

According to Inform's David Hancock, retailers place most importance on technical support. "The larger the channel partner [in terms of revenue], the less important technical support is because many will already employ technical skills in-house or will be served directly by vendors."

"You often run across a distributor who has taken on a product that they just know nothing about," said Simmons.

Poor product knowledge

"It gets extremely frustrating when you're after support and then you realise that you know more about the product than the technical support person at the other end of the phone," he said.

"Getting the right pre- and post-technical support is very important," said O'Meara, "but I don't think many of the distributors do a very good job of it at all. From my experience, Express Data does well and it charges a little bit extra for its products but I'm prepared to pay for that."

The second most important attribute, according to Inform, was the ease of warranty handling. Only 12 per cent of resellers did not agree that this was either a high or very important attribute.

"The companies who particularly rate this attribute as being very important are the ones with their highest revenues coming from hardware and LAN/WAN hardware," said Hancock.

"Timely returns are absolutely critical," said O'Meara. "If I have a product that's faulty I absolu-tely need to be able to return it and have it back the next day or even the same day if possible."

Next-day delivery was of very high or high importance to two thirds of resellers and, not surprisingly, it was most important to resellers in states outside of NSW and Victoria like QLD, WA and Tasmania. "The distributor has to have the stock. If it doesn't, that's when you're going to go to another distributor, not when the price is lower," O'Meara said.

"I prefer to stick with one distributor but you probably need to deal with two or even three for those occasions when you can't get stock."

If a reseller can trust a distributor to reliably supply it with stock quickly it means it can outsource its warehouse function.

"We try to minimise on stock and, where possible, order only as required," Simmons said. "So it's important my distributor carries the stock and has short delivery times."

Resellers in QLD, WA, SA and Tasmania were also were more demanding when it came to ordering and logistics processes. Far less resellers ranked this attribute as being of highest importance, though, and it was the fifth most important attribute behind product range.

Like next-day delivery, this was judged to be important by three quarters of the channel and it was particularly important to those resellers and integrators whose revenues came predominantly from LAN/WAN hardware sales.

Rated as less important by resellers, but still of high importance to more than 50 per cent of the channel, were quotation and configuration assistance, education and training, credit terms and end-user support.

Web attack

A recurring demand from resellers is for distributors to continue to improve and enhance their Web sites and Internet presence.

"We're in the IT industry, so why are we not all using the latest technologies to do our business?" asks O'Meara. "The distributors are doing it but they're not doing it quickly enough.

"I want to see simple things like my account history. When did I buy that NetGear hub? What is the order number and status? If it fails I want to be able to type in the condition of product, the reason for return and ship it off and have it all taken care of.

"This is all simple stuff, it's not rocket science, and in the scheme of things it doesn't cost a lot of money to implement."

O'Meara also wanted to see features like being able to gain access to technical support staff electronically via chat programs rather than having to wait on the phone.

Certainly resellers viewed distributors that were seen to be Web pioneers favourably. Internet presence and Web services easily ranked as the number one reason why resellers voted for a distributor as being innovative, according to Channel Trends 99.

Not surprisingly, then, it was again Tech Pacific who walloped its competitors as being easily the most innovative distributor.

It scored more than twice as many votes in this category as its nearest competitor Express Data.

Inform's Hancock largely puts the result down to Tech Pacific's Web strategy.

"Tech Pacific's impressive Internet strategy has positioned the company very highly in the mind of the channel. The progress it has made has been immense when one considers that they were not even mentioned in the top 15 two surveys ago."

It will be interesting to see the next round of Inform results, however, as major Internet developments have been introduced by a number of Tech Pacific's strongest competitors, particu-larly Express Data. Ingram Micro is also nearing the release date of its new Web site.

"Tech Pacific and Express Data both have good Web sites," said O'Meara. "Express Data's new site, for example, lets me download all of its pricing which is an incredible value-add for me, because it saves us having to input the whole thing ourselves in Ascii format."

The Internet was also rated as being very important when it came to marketing to resellers.

However, not all resellers feel comfortable using the Web to conduct business with distributors yet.

"I don't know if I think the Web has really come of age yet," said Artech's Simmons.

"I tend to send off e-mail queries and I only get replies on 50 per cent of the occasions so I have to pick up the phone.

"It's easier just to pick up the phone in the first instance."

Simmons was also critical of the timeliness of the information displayed on most distributors' Web sites.

"The products are changing so fast that the information you get from the Web is often obsolete anyway."

Most distributors indicated to ARN that they were preparing to more aggressively introduce and promote their value-added services, such as being able to configure machines before they are shipped.

If the resellers interviewed are any guide, this will be warmly accepted.

"Flexibility is very important," said Simmons. "I had to buy an Acer machine through one of the major distributors recently and I could only get a certain configuration.

"If you wanted any different one you had to buy predefined options and you end up with components you don't want.

"So that flexibility to have a machine configured exactly to your liking would be very nice."

O'Meara is an unabashed fan of the trend towards distributors pushing themselves into the services market with offerings like build-to-order and configuration. "If the distributor can offer these services cheaper than the reseller can provide them, why not have that headache taken off your hands?" argues O'Meara.

"Preconfiguration is certainly an arena where a distributor could assist me," he said.

"If they can take multiple vendors' products like a Compaq server and a Shiva router and a NetGear hub and configure it all to work together before it ships then that's terrific."

O'Meara is also happy to pay for such a service. "If I can charge my customer for a service, I'm willing to pay for," he said.

He is also keen to make use of capabilities like direct ship to customer, but said it is important that these facilities are well-tied to the distributor's Web site so that the status and progress of a delivery can be checked and followed.

Distributors are also beginning to add value by enabling resellers to enhance their Web sites by hooking into the distributor's site. This has prompted some debate in the channel over whether it's crossing the line for distributors to step into this territory.

Distributor strategies

However, again O'Meara favours anything that makes the reseller's life easier and doesn't see any problem with resellers' using distributors' Web sites to backend their own Internet operations.

"Resellers have to accept that any man and his dog can buy off a distributor. [Voice Trend Technologies] who were on ARN's front page [September 1 issue] said it was a 5 to 9 job, not a 9 to 5 job. Well I say good on them! It's going to happen, there's nothing you can do to stop it, so get with the program."

The one thing that both resellers and distributors seem to agree on is that it is vital for both parties to work together to form a business relationship rather than just conduct a series of transactions.

"I guess that's the one thing that I really look for - a relationship where the distributor has a level of understanding of your business and is someone you can trust to give you an honest answer," said Simmons.

"If a product isn't in stock, for example, be honest about it and I'll accept it.

"What I don't want is to be misled and be waiting for stock that's not there."

According to O'Meara, it's important to build relationships with the right people inside the company.

"My strategy for dealing with distributors is not to get close to the sales and marketing people but to get close to the technical people," said O'Meara.

"You need to know their names, their e-mail addresses, their direct telephone numbers, what skills they have and that's not something distributors publish or hand out willingly."

Simmons said he would like to receive more personalised service.

"For example, I'm constantly bombarded with faxes relating to stuff that I'm not interested in.

"I want to feel as if the distributor truly understands my business rather than just making up the sales numbers," he said.

"I guess, in a nutshell, I want to receive the level of service and understanding I give my own customers."

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