Editorial: Distribution on the march

Editorial: Distribution on the march

Picking up from a comment in last week's (July 26 Issue fo ARN) column about the channel being in vogue, it seems distribution is faring particularly well.

I caught up with the global CEO of Ingram Micro, Greg Spierkel, when he was in Sydney recently for the launch of its local Solutions Division. Aside from running the world's largest IT distributor, Spierkel is chairman of the Global Technology Distribution Council - a trade association made up of the world's top 15 IT wholesalers.

This organisation has been tracking the growth of its members in North America during the past two years and comparing those numbers against the performance of the top 20 vendors in the same region. According to its figures, distribution is growing 3-4 per cent faster than the leading brands and Spierkel has some compelling reasons.

Firstly, rapidly declining average selling prices across a wide range of categories is making it increasingly difficult for vendors to sell lower cost products.

This idea was given weight by Dell's recent announcement that it is looking to push end-user demand into its higher value boxes instead of relying on budget pricing as its key differentiator. When Dell is struggling to make a low-cost, high-volume model work, you can take it as read that other vendors are in the same boat.

Spierkel also pointed to multi-vendor user strategies as another reason why vendors were realising the increased importance of the channel. Vendors make products available for direct purchase through their websites, which is fine for discreet purchases, but many users are buying multiple technologies at the same time that span a number of different vendors.

Rather than purchasing equipment from several separate sites, it is usually more convenient to source them from a single location. Spierkel said the average Ingram Micro sale contained products from four vendors on about eight SKUs. Any vendor without an effective channel strategy would have great difficulty winning its fair share of those sales.

Finally, Spierkel suggested the channel had been doing a very efficient job, particularly in the SMB space that vendors have found it most difficult to reach. Globally, distribution accounts for 20-25 per cent of IT sales - a number Spierkel said was rising at the expense of single tier sales, where larger resellers such as Dimension Data or Commander bought direct from the vendor.

That is not to say these companies are seeing their share of the market fall. Rather, even resellers that have direct access to product are realising the value distribution brings to the table.

Logistics, stock holding and credit facilities are a given but increased involvement in areas like configuration has greatly improved the standing of leading wholesalers with all level of resellers.

On a separate note, several companies - including broad-based distributor, Synnex, and third-party credit provider, Moneytech - contacted ARN following last week's story about Ingram Micro weeding its database (Distributor to close inactive accounts, ARN, July 26, page 1). While Ingram commercial and sales director, John Walters, said most of the accounts to be closed were either no longer trading or could not be considered bona fide resellers, it seems many are interested in picking up the business.

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