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EDITORIAL: Sell and save

EDITORIAL: Sell and save

Talking to distributors for our special supplement this week was an enlightening experience. Sure, the market is not delivering the same opportunities it did 12 months ago, but the current downturn is viewed by most as part of the natural pattern of economic cycles and not channel Armageddon.

Economists may need a few more pieces in the statistical jigsaw puzzle before they will officially tag it as a recession, but talk to any of those distributors and resellers at the coalface and they will tell you the market is depressed.

Clearly times are tough. There are going to be some losers from the tightening of credit lines by suppliers and the slump in demand. Naturally, the trick is to make sure that you are not one of them.

Many pundits would say the IT industry has become fat and lazy after a sustained "boom" period, and this is clearly the case in some instances. High demand has allowed many operators to do very nicely by being order-takers as opposed to order-makers.

Business models that are based on high demand, shaving minute margins off volume sales or living off vendor rebates are under threat. If you are not operating a proactive sales program at the moment, radical action may be required because clearly buyers need a little coercion to part with their money.

When demand slows and the phones stop ringing, sales people who forget the ancient art of getting on the blower to drum up business will struggle.

Additionally, companies that have been able to supply any number of services as a value-add to the boxes they are moving are quickly realising they can no longer afford to be offering them unless the buyer is prepared to pay. Adding value is all very good, so long as there is some return. Unfortunately, the good times and good margins once available have made customers expect a lot from their suppliers. The challenge is to migrate them to a user-pays mentality. Easier said than done.

In tough times it is the companies which are best able to stimulate sales and drive down the costs of doing business that will be able to emerge at the other end leaner and meaner. When the economy does start to turn around, the sales-driven and cost-efficient players will be the ones in pole position for rapid growth.

As one distributor succinctly stated in the distribution feature: "It's like setting your sails into a storm - there is a way to do it and survive, but if you get it wrong it could be all over very quickly".

The other thing apparent after discussions with a wide range of distributors is that vendors will have to be more supportive of their channels. The channel is still the primary way to get to Australian end users. If vendors think they can just continue to shave margins, compete with or bypass channels, they are hopelessly misinformed.

The Internet is rapidly proving to be not quite the route to market it was cracked up to be - certainly in Australia - while the enormity of Australia's SME market means very few vendors will have the resources to reach them all.

The biggest opportunity for growth in Australia is in enabling SME businesses with mainstream technologies. Vendors that nurture and support their channel partners best will be the ones to obtain the bigger share of SME markets.

Reaching Australia's SME market is a logistical nightmare that most vendors are just not in a position to tackle, so they have to make it financially worthwhile for channel partners or they will just walk away and find a supply partner who does.

Your opinions count. Feel free to drop me an e-mail and tell me how you're weathering the storm.Gerard Norsa is the editor of Australian Reseller News. Reach him at gerard_norsa@idg.com.au


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