Whereas many distributors covet exclusive distributorships, Digiland director George Feher has little interest in what he sees as a dubious distinction. "Personally, I don't like the idea of handling products from multinationals where we are the only distributor. I think competition breeds business," he said.
"Every time one of our suppliers has gone out and appointed an additional distributor, our business has profited from it," Feher said. "I'd like to see a list of all of the "exclusive distributorships" in place for five years or more where the customers, distributors and suppliers are all happy. Maybe there are some out there, but I don't know of too many.
"I'd much rather handle a product that is distributed by two or three other skilful distributors, in an environment where we can compete against them. Having said that, you can go too far in the other direction and end up with a product that has 30 distributors," Feher said. "There are quite a number of suppliers whose channel strategies in Australia are a disaster - companies that have 30 distributors and 300 direct relationships. Now compare that sort of strategy to someone like Hewlett-Packard, who have three distributorships and 15 to 20 direct relationships - that's why they're the market leader. They have focus."
Partnerships and alliances
Feher's regard for HP is not surprising. Digiland is HP's biggest partner in consumables. "We sell the lion's share of HP's inkjet printers," he said. "Recently, we've been instrumental in launching HP's new Deskjet 690 C (RRP $559), which is a photo-capable inkjet colour printer that accepts, through a PC, input from a Kodak digital camera and outputs a photo-quality finished product. That means you can produce photo-quality images for an RRP of $559 - and you can probably buy it substantially cheaper if you go to the right place," he said.
"Using a Kodak digital camera allows you to do selective editing of portions of photos, to enhance colours and to be selective about which photos you print. To be able to print out the end product on an inexpensive colour printer is a phenomenal leap. We don't pretend everyone is going to abandon their 35mm camera, but the choice is now there."
Digiland's alliances don't end with HP. "According to IDC, we are the biggest distributor of printers in Australia, distributing close to 15 per cent of all printers in the country," he said. "We're also a distributor for NEC and, in addition to being NEC's reseller of the year, we are their biggest business partner. We're also a distributor for Digital printers."
New on the Digiland horizon is the TaskMaster from GES. "It's basically a combination card. It's a modem, it has fax capability, including fax forwarding. It can act as a hands-free telephone. It offers full telephony features including voice mail and message notification," Feher said. "And while you can get many of these features from other combination cards, what we think puts this product head and shoulders above the rest is that it has its own processor on the board and, thus, doesn't degrade from the processing capabilities of the PC. There's no loss of performance."
Horses for courses
Looking beyond Digiland's alliances, Feher says successful distribution is always a two-way street. "As a distributor, it's not just what you can do for resellers. What you can do for suppliers is equally important. You have to meet the expectations on both ends of the equation," he said. "I think a huge differentiator between us and many of our competitors is the way our sales force operates.
"We have an out-bound sales force: eight sales people in Sydney, eight in Melbourne and two in Brisbane. Our sales people don't have to split their loyalties over 250 or 300 different suppliers and 25,000Ð30,000 stock keeping units," he said.
"When that happens, your sales people end up as nothing more than order takers, ticking boxes on forms, and maybe answering the telephone if you're lucky. In contrast, our sales people are skilled account managers. The benefit to resellers is that our sales people have empathy for their needs and will help them sell the product into the marketplace. We help with marketing ideas, co-op marketing and developing prospects."
Despite declining margins and high levels of competition, Feher says the reseller channel is in reasonably good shape. "My personal opinion is that the reseller channel has become more stable over the last six months than it has been in a long time," he said.
"There's no question it is under enormous pressure and there is extreme competitiveness, but we haven't seen a spate of resellers coming and going, as has happened in the past. I think the reseller market has matured to some extent, but it has also polarised into lots of little factional areas. Right now, there is an element among dealers who concentrate on ripping off other dealers by engaging in tax avoidance."
From Feher's perspective, the issue of tax avoidance is, perhaps, the most crucial issue facing resellers and the computer industry as a whole. However, he sees a solution. "Reforming the tax laws in Australia is the only way to solve the problem. Right now, Australia has the same taxation system as only four other countries: Botswana, Jordan, Pakistan and The Solomon Islands," he said. "Australia and those four fine countries have a wholesale sales tax. The other 150-odd countries in the world have a goods and services tax, where tax is charged at the point of sale.
"I think it's an indictment of the Australian Government that it has allowed an open and flagrant abuse of tax responsibilities to exist. And in many ways, the responsibility of following up on tax is passed to wholesalers! What can wholesalers do that the 18,000 employees of the Taxation Department can't?" Feher said. "I don't think you can ever totally eliminate sales tax avoidance, but by bringing the payment of tax out from behind the curtain, where everyone can see it, you solve a lot of problems."
At press time, Feher said GES, Digiland's Singapore-based holding company, is about to be floated on the Australian Stock Exchange. "We think the added capital will allow us to take the company to new levels," he said.