Distributors make the move to services

Distributors have it tough: Resellers want a good price, but expect a high level of service. Meanwhile some vendors are reducing the number of distributors they use so their products aren’t flooding the marketplace.

At the same time more specialized distributors – focused on areas

such as networking, storage and security – are popping up to compete. As in the reseller world, box-selling is passe. So broadline distributors need to look at how they can provide value and differentiate themselves from the pack.

That’s why John Paget, Synnex’s recently appointed corporate COO and president of North American operations, plans to increase services to provide value to both resellers and vendors.

As the former president of GE Access, Paget’s experience is in enterprise distribution, not broadline distribution. While he plans to continue Synnex’s existing business, he’ll also expand its value-added solutions such as support and integration services.

He clearly recognizes the need for value, and more complex offerings, in a changing distribution world. While the core strengths of a broadline distributor – logistics, inventory and availability – are still desired by resellers, value-add is becoming increasingly important.

The major distributors recognize this. Ingram Micro’s flexible Choice Advantage program, in which solution providers can choose their level of product pricing and services, is one result. In a recent pilot of the program with 700 VARs, half chose the Active Choice level, which offers middle-tier pricing and access to some value-added services. About 40 per cent chose Professional Choice – which offers the highest pricing but the most services – while only 10 per cent chose Independent Choice, with the lowest pricing and least services.

The results clearly indicate that value-added services are considered more valuable than rock-bottom pricing by resellers. We’ll see if other broadline distributors follow suit.

To compete with smaller, more specialized distributors, some broadline distributors have created business units to deal with specific technologies or vertical markets.

There is increasing demand, for example, for networking solutions, such as wireless networks, SANs and telephony. So Tech Data recently created a specialized division for high-end networking, storage and telephony. It also expanded its whitebook offerings with an online configurator tool allowing resellers to customize notebooks for their customers – and better compete in the whitebook space.

As margins continue to erode, broadline distributors will have to decide whether they should get bigger or become more specialized. The channel could evolve to include a few large broadline distributors and a number of smaller, more specialized distributors.

The key to survival is recognizing the distribution model is changing – and adapting.

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Jim Love, Chief Content Officer, IT World Canada

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Vawn Himmelsbach
Vawn Himmelsbach
Is a Toronto-based journalist and regular contributor to IT World Canada's publications.

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