Crunch time for the channel

Crunch time for the channel

The end of the financial year presents some important challenges and opportunities for the channel. Distributors struggle to meet rebate targets, resellers look for price promotions and last-minute sales opportunities and many channel companies check the books to see whether it is worth struggling on for another 12 months.

While the end of June is not necessarily the deadline for all rebate targets or financial reporting periods for taxation reasons - if not even just to simplify accounting procedures - it is a time of high activity in the channel.

According to Rick Phelps, current team leader at Volante Online and former Prion sales and marketing manager, the end of financial year is a big balancing act for resellers and distributors alike.

"A lot of targeted rebate schemes deadline on June 30, so some distributors need to make sure they hit those numbers or they miss the rebates," Phelps said. "A lot of [distributors] buy extra product at this time of year to make those numbers."

This rush to buy is balanced by the need to make sure inventory is minimal for stocktake. This can have positive price implications for the channel.

"Some distributors tend to take in a lot of stock at this time of year and sell it out at minimal margin," Phelps said.

Fiona Stewart, marketing manager for Tech Pacific, said that although business is soft at present, the end of the financial year is a boom time for reseller sales because many businesses have some money remaining in their budgets. "They generally tend to spend it now while it is still there," she said.

Lorenzo Coppa, managing director of Melbourne retailer City Software, said sales are so good at present that he has had a fall-out with one of his major distributors over their capacity to deliver on large orders. "We're seeing a very strong upturn at the moment," he said. "It has been substantially stronger, up at least 40 per cent on last month."

Similarly, Ingram Micro's Steve Rust said June has been a much stronger month than the previous two months, with the distributor having its largest day of sales in three months. But it is not enough of a spike to warrant the return to happier times in the channel. "Demand is suppressed at the moment," he said. "So although sales are strengthening, it's in the context of a suppressed market."

Niels Kofahl, director of distributor Tecksel, said that at this time of year, the main concerns for distributors are to check that both their stock and their invoicing is up to date. Volante's Phelps said the other challenges for channel companies at this time of year included tidying up debtors' accounts, business planning of budgets and forecasts, as well as chasing down outstanding marketing funds from suppliers.

At the same time, when reviewing figures many channel companies will be assessing whether to sell out of the game. Christopher Hale, general manager for distributor Alstom IT, says that while Alstom's end of the financial year falls in March, he is aware of some companies finding it difficult to meet expectations due to current economic conditions.

"There is a strong feeling that a few people are going to struggle to make their numbers," Hale said. "Right now we're just trying to help some of our [partners] get across the line."

"A lot of resellers and distributors will be looking at some raw numbers this month and the relative strength of their businesses will be staring them in the face," Volante's Phelps said. "I think there will be a few wondering whether they can continue."

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