Distribution in IT hasn't changed much. In today's local business environment, with more specialised markets and tighter budgets, having the correct technology in place seems to outweigh its cost. However, it is still a distributor's responsibility to have the right product, in the right place and at the right price.
In recent years, the local market has seen higher barriers of entry into distribution, which has challenged working capital. Also, consolidation in the market has taken place quite quickly over the past few years. There are now a number of larger distributors with diverse silo offerings. And though most major brands have already consolidated, it is likely that consolidation will continue for some years to come.
However, even with these slight changes, the role of distribution remains the same. There is an age-old debate about who will survive. But the reality is that each type of company, whether distributor or reseller, has a defined and viable role to play in the channel.
There are basic things that a distributor always has and always will be responsible for, such as acting as an extension of its vendors, obtaining stock as cost-effectively as possible and getting it to the local market, plus supplying credit to the reseller base.
All of the above responsibilities form part of the core package of a distributor, and is what such a company should be doing one way or another. New enterprise resource planning and picking systems, walk-in stores, finance packages, warehouse security and fleet management refine this core role. However, the only difference these advanced systems make is to enable players in the channel to accomplish their regular business better and take products to market quicker. It is debatable whether such actions are true value add to the reseller. Does it really contribute to the growth of the reseller's business? It certainly contributes towards the growth of the distributor.
But, is making your core business slicker, enough? In a commoditised environment, yes. In a more specialised market, such as converged communications, no.
Box-dropping is typically another way of saying commoditising, and a commoditised market requires little more than this core function of a distributor. However, there are other opportunities for distributors in South Africa, which abound due to the fact that this country is relatively far away from any global economic hub. This distance changes the demographics of what services can be offered by a distributor to satisfy the needs of resellers and end-users.
In more specialised markets, the perceived value add of a distributor changes. Here, distributors need to utilise products as a basis to offer more scarce resources to resellers and add value in terms of skills, support and backup stock.
Five years ago there was very little demand for such resources, however, resellers now acknowledge these activities as true value add. Providing resources such as a skilled colleague to assist in winning business for a reseller that does not have the means to finance that individual, or keeping spares on behalf of a reseller that does not have the economies of scale to do so, truly adds value.
Such activity contributes to the bottom line of that reseller, ensuring their future business is stronger than it is today. It puts that reseller in a position to grow its business and move up faster in the value chain, perhaps to a point where that company can afford that skilled individual or a supply of spare parts.
Accomplished on a regular basis, such activity contributes to the growth of the channel. Therefore, the future viability of a distributor definitely lies in providing true value add services to its reseller base.
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