Editorial: Say it how it is

Editorial: Say it how it is

While his assessment of retail distribution is likely to be as welcome as a fart in a space suit, you have to give Christoph Schell credit for saying what he thinks (see page 1 of the October 18 edition of ARN Magazine). The channel always prefers dealing with straight shooters.

The local boss of HP printing has decided he needs greater efficiency in the retail market and will take business away from distributors in order to make it happen.

Of the current HP line-up, Ingram Micro is likely to have most to lose from the decision because it has the highest retail volumes and is the only distributor in Australia that has access to the vendor's entire retail range. Although Schell is head of the HP printer business, his decision will also apply to its PCs, notebooks and PDAs sold through retail.

His claims that local distributors are operating in a closed market that lacks the threat of new competition will also be a bit near the knuckle for some but it is nevertheless true to a degree. Whispers have been circulating for a number of years now that US-based Tech Data will enter the Australian market as a forerunner to challenging Ingram Micro in Asia and becoming a truly global player.

The reality is that the cost of entry in a mature technology market like Australia is too high, and the total spend too small, to be an attractive proposition. There are very few businesses that could be acquired in order to give a major international player a significant presence and they would not come cheap. Much more likely is a reduction in the number of local distributors. Existing players are scrambling to increase the scale of their operations in an attempt to stay competitive with Ingram Micro.

One company very much in that frame of mind at the moment is Cellnet. Managing director, Adam Davenport, has closed the first of several acquisitions currently in the pipeline with the purchase of flash memory specialist, VME Systems (see page 1 of the October 18 edition of ARN Magazine).

So how good a fit is VME into the Cellnet business? Well, it should be very simple to integrate from a vendor perspective given that it is essentially a SanDisk shop. Cellnet already carries some flash memory from Transcend but it never hurts to add a market leader to your line-up when you are trying to promote your company as a one-stop shop.

The VME buyout also justifies the recent announcement that Cellnet had decided to close its Melbourne warehouse. At a time when distributors are desperate to strip any additional costs out of their business, two warehouses in one city is not a good idea.

The fact that its Sydney warehouse has also been shelved suggests a NSW acquisition could also be on the cards. Having said that, Ingram closed its Brisbane warehouse a year ago because it could ship from Sydney overnight. Cellnet closing in Sydney could simply be a mirror image of that policy by its Queensland-based competitor. Watch this space for more Cellnet action in the weeks ahead.

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