More distributors predicted to leave the market

More distributors predicted to leave the market

Distributors predict more players will exit the channel as the global economic downturn takes its toll on local businesses. The claims come on the back of an announcement last week by Cellnet that it would leave PC and notebook distribution to solely focus on server and printer segments.

Express Data managing director, Ross Cochrane, said businesses needed to look at where they could be successful in turbulent times and argued most would find it hard justifying investments not providing a return.

“I think stronger partnerships will stand the turbulent challenges, rather than smaller and weaker partnerships,” he said. “Whether you’re a reseller, distributor or vendor, you need to focus on partnerships that are working well.

“Cellnet has looked at things that have worked well for them and are putting focus there, and things that are not delivering a return, they’re exiting. I think everyone will do that.”

Synnex CEO, Kee Ong, said he wouldn’t be surprised to see businesses pulling out of the distribution game.

“Consolidation among channel players is happening. Those people that think they can’t make it and don’t have enough return will certainly pull out, but it doesn’t mean they’ll come back into the market if the economic situation improves,” he said.

Ong said the market would polarise as big distributors continued to grow, and advised smaller players to focus on niche markets.

Bluechip Infotech managing director, Johnson Hsiung, said the slow economy would take its toll on the local market and predicted more businesses would follow Cellnet’s path in the next six months.

“Cellnet is probably the first one to have had enough. The broader distribution market is overcrowded,” he said. “It never really made much money from the IT distribution side of the business. It doesn’t come as a surprise, as the global credit crunch impacts here locally – we’re expecting in the next 12 months that IT spending will drop as consumer confidence lowers.”

Outgoing Ingram Micro managing director, Guy Freeland, said the low margin notebook and PC business required heavy working capital investment.

“Without scale it’s very hard to run a profitable business in that space,” he said. “It was probably the right decision for Cellnet.”

Following a strategic business review, Cellnet plans to retain relationships with IBM, Asus and Acer for servers and storage, but has given notice to Toshiba, Lenovo, Asus and Acer in the PC and notebook areas. It will continue to work with several printing vendors including Samsung, Canon, Lexmark and Brother.

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