Canon’s direct/indirect route littered with pitfalls

Though some multinational corporations seem to view Canada as an extension of the U.S., being successful here means taking a different approach to doing business. Distributors, for their part, can play a role in helping these companies understand how to most effectively reach customers in different

regions of Canada.

The direct model has never worked well here. Even Dell struggled with its direct sales approach and was forced to turn to the channel. Why? The Canadian landscape is dotted with small towns, spread across a vast piece of land, with regions as different as apples and oranges. Doing business in St. John’s, Newfoundland is going to be different than doing business in Saint Jean Port Joli, Quebec or Flin Flon, Manitoba.

For companies that want to expand beyond Canada’s few major urban centres, taking a direct approach is going to be difficult and probably not worthwhile, financially speaking. Can a single company provide all of the resources needed to run a business efficiently, such as shipping, delivery, installation and technical services, to all parts of Canada? Even if they could, it wouldn’t be profitable – they wouldn’t make any money-servicing customers in small, out-of-the-way towns.

Many multinational corporations have tried the direct approach to servicing customers across the country. NEC’s PC division tried and failed. HP, IBM and Dell all recognized the need to use the channel to reach new markets in Canada.

Does it make sense for these companies to open up a sales office in a town of 20,000 or less? And what about French-speaking Quebec? Can they get away with having a single rep working from a home office? Possibly, but then quality of service becomes an issue.

And large multinational firms need to ensure a certain level of quality – after all, their reputation is on the line. So rather than put resources into sales offices or sales reps in smaller centres, they’re simply better off going through the channel. Instead, they can put their money into training, education and certification of VARs, system integrators and solution providers to ensure they are able to offer a certain level of service to their customers.

Canadian distributors who understand this landscape can help to educate large multinational firms that Canada needs to be approached differently than the U.S. – or any other country, for that matter. Here, the only route that works well for servicing the entire country is the channel.

Canon Canada Inc. recently announced the launch of its Business Solutions Division that merges its current direct sales division with its channel business. (Its direct sales model primarily served Central and Eastern Canada.) Canon says this will provide customers with a choice of working directly with Canon sales and service nationwide or through the company’s existing dealer network. While Canon says it will not compete with the channel, it’s unclear how this arrangement will play out. Instead, Canon could use its resources to expand its dealer network, particularly outside of Central Ontario.

Often, a combined direct/indirect approach can work, so long as vendors don’t compete directly with their dealers. However, the channel is an essential component for reaching customers nationwide – without it, success can’t be guaranteed.

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