"As the local distribution sector approaches maturity phase, it is vital for the big players to re-focus their energies on the sub-distribution model." This is the view of Mohammad Denath, co-founder of World Computer Systems (WCS).
For a while now, the wholesale or sub-distribution model has been neglected by most big distributors in SA in preference for a model that engages directly with solution providers and smaller dealers.
While this model is not bad, a trend of engaging sub-distributors is evident in most developed European markets where it brings diversity and benefits to the way the general reseller community and end-users are served.
Yet, despite the success this model has enjoyed in the more mature IT markets in Europe and North American regions, the South African distribution sector continues to turn a blind eye to the sub-distribution channel.
When I talk to executives at most local distribution companies, I always hear how their start-up operations were based purely on a sub-distribution model and that, as their business grew, these companies started to receive recognition from the multinational vendors which led to full distributorship contracts.
From these chats, I gather that most of the big distribution companies of yester-years used to nurture the sub-distribution channel in much the same way as they do the solution provider, system integrator or reseller community. So, what killed this spirit of nurturing? Have sub-distributors been misrepresenting the brands from the big distributors or is just that competition has become so tough that the whole wholesale model poses a threat to the existence of the big guys?
Well, several factors come to mind, but one of the main reasons that I believe has led to the demise of the wholesale model is the fact that the big distributors feel threatened by the wholesalers, especially when the wholesalers are meeting their sales targets. It is because of this paranoia, that the big distributors have tended to ignore the wholesale model.
Also, because most IT wholesalers represent just a few brands, they are able to maintain a focus not found at the big players because of their diversity, sheer size of their businesses and the number of brands in their stables.
It would seem that competition, at the end of the day, is what the big distribution power houses would like to avoid, but there is nothing wrong with competition - especially in an open and liberalised economy.
I believe that a division of labour where the role of each player in the supply chain is defined is vital.
In this regard, I suggest that the big distributors focus their attention on procurement of products from the vendors, arrange the logistics of those products - how these products are delivered, plan how they will roll-out sales and technical training to wholesalers, channel partners and, at times, end-users.
This model not only ensures that the big distributors pay attention to managing the supply chain, but will lessen the impact of grey importing, as most wholesalers will then buy products from the big guys.
So what needs to happen? I would like to see vendors involved in making sure the wholesale model is taken care of and exploited to the fullest. One may argue that the size of the South African IT market does not require a fully-fledged wholesale model. Fair enough. However, if I look at the size of SA, not all distributors have inventory or delivery mechanisms that reach all the corners of the country. This is where sub-distributors come in - a big distributor can just appoint well-trained and technically astute sub-distribution companies in those regions of the country where they know it is costly for them to do business, or where deals happen on an ad hoc basis.
Looking at the manner in which our industry has evolved over the years, I realise that the IT industry has enjoyed its share of both excellent and bogus IT companies. It is against this background that when vendors and distributors are looking at rejuvenating the wholesale model, they should set stringent measures that ensure the products are represented holistically. By holistic representation, I mean sub-distributors should be able to sell a solution and support that solution to a reseller and customer - not just push boxes.
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