Distribution has been around since warehousing became a thing in the early 1900’s. The model has stayed the same consistently for a lot of that time with the only key differences being the types of products that are distributed.

Traditionally an industry for hardware where big warehouses that stocked computer equipment would be run as distribution centers, the model shifted and evolved in the 90’s to incorporate software too. This gave rise to the major software distribution companies that we know today.

What is the role of the distributor?

The distributor is there to recruit and sell solutions into the supply chain that ultimately end up with end users of the products in question.

How does this add value to the supply chain?

Traditionally, when distribution was hardware focused, the distributor would store and move hardware components in their respective territory. This provided a quicker delivery time than having to send from abroad and ensured local support and response times in the fulfillment of the orders to retail.

Nowadays, with the world of software taking over as opposed to hardware components, the traditional style distributors are struggling to give value in the chain. When software products can be supplied by the manufacturer / vendor directly to the end user without the need for distribution, it renders the distributor useless. Or does it?

The distributors that are struggling to add value are the ones that are still seeing this as a “box shifting exercise”. They want to just sell the solutions when orders come into the vendor for the product and make money on simply transacting. This is not the role of the modern distributor and this is a sure fire way to be cut out of the chain completely.

This is what all the talk of distributors needing to transform in order to survive is all about. The distributors that are struggling to move away from the old hardware way of doing things.

The introduction of marketplaces

There is a lot of talk of marketplaces cropping up to make life easier on the partner to be able to transact and obtain the products that they require in a self service style. This is essentially killing the distributors.

Is this going to work globally though?

This is essentially a US idea where the distributors on the ground over there struggle to add value because they just fulfill orders. In Europe, APAC, Middle East, CIS and Africa, we work with many different languages and multiple different cultures so that distribution layer is generally required to be able to support the business in the territory.

Marketplaces could be the answer to the low ticket items that are sold through the channel, or even direct because the returns are so low that it doesn’t make sense for the distributor to be working with these products.

Take a product that requires advanced technical knowledge and implementation skills though and it becomes a logistical nightmare to sell this through only a marketplace.

Case in point, a customer from Taiwan wants to by a next generation firewall from a US vendor, the end user doesn’t speak English and no documentation is available in the local language. How is the partner on the ground supposed to fulfill this order without the support of a distributor on the ground that is a true extension of the vendor? Very difficult.

Even more difficult is if the marketplace tries to cut out of the channel partner full stop. Now that becomes impossible to fulfill.

Let’s say there is a partner on the ground who buys this from a marketplace directly and requires support from the vendor for implementation without being able to speak the language and without the vendor understanding the market properly. This presents a problem right?

Marketplaces are going to work for the markets that don’t require an extension of support in country by a 3rd party company. Namely US, Canada, UK, Australia, NZ. The rest of the world is a huge place where distribution is a required factor in the support and implementation of technical products as well as partner support and recruitment.

Cut the distributors out in the emerging markets and non English speaking markets and you lose a revenue stream that you wouldn’t normally be able to obtain by yourself.

Now imagine a world where the marketplaces are owned by the distributors for the partners to obtain the products that they require. This keeps the support and supply chain intact with the value coming from the distributor of being able to fulfill, support and maintain in country partners on the products that they are providing.

It’s not standalone companies that need to become marketplaces, it’s the distributors and themselves!

Let’s go one step further and say, What if the resellers themselves became marketplaces where they provided a store front for their specialist products that they work with for their customers?

The customer visits the resellers marketplace, they choose the product they want (or think they want), they select that product which in turn sends notification to the partner which then informs the distributor so the support chain is intact. The distributor then registers this with the vendor and you have the distribution chain intact with the marketplace methodology. The vendors essentially have 100’s of marketplaces around the world in different languages that are owned by their resellers but fulfilled and supported by the distributor in country.

This is the aim of Channelyze.io. We turn the distributors into a platform for their resellers to be able to buy they products that they need for their customers in one place and via the distributor!

If these marketplaces continue to try to kill the distribution channels, they are going to kill not only the distributor but also markets that require a distributor to serve it and these emerging markets are going to fall behind due to lack of support in local language.

Over automating and taking away the human aspect is good if you can communicate directly with the vendor but if you can’t, it’s the end of the road for the non English speaking markets.

One thought on “The secret plan to slaughter the distributors and the channel through the introduction of marketplaces

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