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Distributors Push Past Margins

The wholesale distribution channel essentially serves as a frontline in the dynamic electronic security industry. Executives from leading distributors discuss market conditions and their role in providing value-add services to their integrator partners.



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[IMAGE]12046[/IMAGE]The Web, Beneficial but Disruptive

When asked about the use of the Web as a convenient tool for ordering products, sources interviewed for this story shared a common viewpoint. While the channel can certainly expect surging growth in online sales activity, the types of products will largely be for those that require limited support and training. Hence, distributors will continue to stress their role in providing intensive training, education and design support for networked and more sophisticated solutions.

“Online product ordering becomes more and more important every day, but we feel that human interaction through our branches in concert with e-commerce is a winning combination,” Rothstein says.

Maintaining a close connection to the integrator is a clear objective; however, Web-based ordering is forcing distributors to meet integrator expectations for doing business at the counter and online on their terms.

“Our goal is to do business with our customers in the way they want to do business, whether it’s making purchases online and seeing real-time inventory or working with a knowledgeable sales rep,” Sorrentino says.

“Overall, the centralized distribution model on which we have based our business is changing the channel, as resellers see the benefits of that model versus having to drive to a branch for their products.”

As online ordering and account management becomes essential across the channel, many distributors have been ramping up the infrastructure necessary to support new online e-commerce capabilities. For example, PSA Security, which only offers online purchasing, recently deployed a database powered by a custom Web-based business software suite. And ADI has formed a dedicated e-commerce team that is working to launch a new and more robust customer Web site. The platform will offer a user interface that addresses customer needs and enhances the company’s online shopping experience.

Can a mobile app to make product purchases be far off? It’s in the works at ADI and Tri-Ed/Northern Video. Other organizations continue to evaluate client expectations for on-the-go ordering and other functionality with mobile devices.

“There has been little demand for that service; however, we are continuously adding new ways of doing business based on the needs of our customers,” Sorrentino says.

Convenience is only one way the Internet has altered the distribution sales channel. The proliferation of online product resellers during the past several years has proven to be highly disruptive for distributors, integrators and end users alike.

“On certain commodity products the margin is so low we cannot make a profit after overhead is allocated,” Bozeman says. “It is that tough out there. The non-commodity space is the place to be for integrators and distributors.”

The Internet is credited for helping end users become more much more tech savvy and learned about marketplace dynamics (i.e., increased access to product information, specs and pricing). The result is users are expecting a higher return on their investment.

However, the Internet can also provide end users with uneducated and misleading information, as it is opinion driven, and anyone can post information even if they are not an industry expert.

“The Internet has also opened up the door for unauthorized dealers. Users who are purchasing through them lose out because they are only getting a product and not the support and benefits that go along with the full solution,” Flink says.

Moreover, the Internet has caused manufacturers to evaluate their channel programs to ensure they are protecting the dealers who are adding value to the solution sale, Sorrentino says. Likewise, it has caused dealers to focus on selling everything that surrounds the product, including design services, installation, training, support, monitoring and more.

“It’s our job to help maintain the integrity of the manufacturer’s channel program, as well as provide the needed education and training to the dealer as they sell their value-added offerings,” Sorrentino says.

Infringing on Integrator Turf

The din caused by the encroachment of distributors and manufacturers into the traditional dealer/integrator channel seems only to be increasing in magnitude.

Suppliers maintain working directly with end users is necessary to gain a keen understanding of customer needs and expectations, which ultimately can only help drive product development and sales. What is more, suppliers suggest, an increasingly price-competitive and crowded marketplace affords end users more choices for products and solutions, oftentimes creating bid challenges for traditional dealers and integrators. The gist: razor-thin margins on a project for a large end user don’t pose a competitive threat for dealers and integrators anyhow.

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Article Topics
Systems Integration · ADI · Distributors · Features · PSA Security Network · ScanSource Security · Tri-EdNorthern Video Distribution · All Topics

About the Author
Rodney Bosch
Although Bosch’s name is quite familiar to those in the security industry, his previous experience has been in daily newspaper journalism. Prior to joining SECURITY SALES & INTEGRATION in 2006, he spent 15 years with the Los Angeles Times, where he performed a wide assortment of editorial responsibilities, including feature and metro department assignments as well as content producing for latimes.com. Bosch is a graduate of California State University, Fresno with a degree in Mass Communication & Journalism. In 2007, he successfully completed the National Burglar and Fire Alarm Association’s National Training School coursework to become a Certified Level I Alarm Technician.
Contact Rodney Bosch: rbosch@ehpub.com
View More by Rodney Bosch
ADI, Distributors, Features, PSA Security Network, ScanSource Security, Tri-EdNorthern Video Distribution


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