“Distributors need to transform”
“Distributors are just box shifters”
“Distributors just fulfill orders for 15% margin”
“Distributors earn money just for being a middleman”
All of these phrases we hear on a regular basis. Where are these sayings coming from?
They are coming from the US market as well as people who only know the US distributors.
I’m not at all surprised that US vendors look negatively on distribution when all they know is the traditional distributors who do offer no value.
What does the US distributor do to have these negative impressions cast upon them?
The answer is not what they do, it’s what they don’t do.
We’ve sat in with many distributors in Europe and APAC when working with vendors from outside of their region and they always become experts in the product and processes of the vendors that they work with.
The distributors in Europe can not only support the products but can also implement solutions, recruit partners, train partners, support partners and act as a true extension of the vendor in their own territory.
We’ve worked with US distributors before and to get anywhere close to the levels of service of the European and APAC distributors it required funded heads on business development and a huge bill for campaigns run by the distributor towards their partners when that was their original role in the first place.
We’ve seen it happen in Europe too where a distributor will charge to send emails to their own database of partners but should that be happening?
We know many distributors who have that as part of their service. They make the money on margin and the more partners they recruit, the more revenue they make. It’s a no brainer but having access to resellers often clouds the bigger picture with pound signs from doing activities that get to that point.
The true value added distributor is the one that can be left alone to do the same level job as the vendor for increasing the footprint for the solutions and generating awareness in a market.
The transformation needs to come from not being lazy and instead doing what they are supposed to do in the first place without billing every activity that they have to do to achieve that.
“You want us to email our own database about your products? – That will be £6,000 please.”
Isn’t the idea of getting a margin from the vendor supposed to support the activities of the distributor?
It’s an investment for everyone during the early stages of the partnership and granted, there needs to be something there for the efforts, but if the product isn’t ready for a market, the distributor shouldn’t take it on in the first place if they don’t think they can sell it.
We have gone through many line cards of distributors across the world and have come across distributors with 1000’s of products in their portfolios. It’s not only the ones you have heard of too but also distributors from regions outside of the US that are trying to copy the US model. Why they would do that, I have no idea. With 1000’s of products in their portfolio, it’s hard to imagine how they are supporting those 1000’s of vendors with dedicated support and true dedication to the advancement of the vendor. What this screams out to me is that they will take any product that comes their way and put it to the bottom of the pile unless the vendor pays them x amount of money to do any little thing with it.
Let’s take a look at the other side of the coin
We have worked with distributors for a long time. The ones where we have gained the most traction is with distributors who carry a select number of vendors and have the time to focus on those vendors. It won’t always be a full time effort but instead a dedicated amount of time to developing a vendor in the region. They don’t bill for doing campaigns towards their own databases and they are willing to invest into the products with the vendor for the mutual benefit of awareness. If a marketing activity has a cost associated with it, it should be planned in unison because if one part of the relationship isn’t willing to invest, then it’s all for nothing anyway.
If a distributor is not willing to send out an awareness email about your products when they are your distributor without charging you for the privilege then there is an ulterior motive to what they are doing.
We work closely with several distributors who see it as a standard practice to build awareness as part of their role and not as an added extra that costs money for every activity.
What is the value add?
The value add comes from the self sufficiency of the distributor without requiring the vendor to do everything and them just being door openers to other partners. This is not distribution let alone value add.
Distributors should be handling everything below their own layer which includes partner support, sales support, partner marketing, awareness creation in the market via direct touch and business development in their territory without billing every little activity. The support from the vendor is there to the distributor so they are not completely alone but the idea of having distribution in place is to be able to scale. Scaling requires self sufficiency, which comes with time.
The investment needs to come from the vendor in terms of time and efforts to train and enable the distributor. Joint marketing activities need to be planned because it’s a joint effort at the end of the day.
It’s not “We’ll sign this distributor, give them a bit of training and let them crack on”. Everything is done in unison but not one sided as it currently stands with a lot of the “big” distributors.
The eventuality is that the distributor becomes self sufficient and the support requests towards the vendor become less and less.
The team at the distributor should mirror the team at the vendor there or there about. They should have someone that can take care of sales, marketing, channel development, support and renewals.
Gone are the days where a distributor can just get away with signing a vendor, taking orders and fulfilling those orders. The value add needs to come into play or they are going to disappear (and I hope they do).
We are big fans of distribution at Channelyze but when the traditional distributors are still not doing what they are supposed to do, it gives all of the good guys a bad name when it’s just not the case.
Distributors do need to transform, but not all of them! The distributors that need to transform are the ones that think they can get away with signing every vendor that comes their way and just putting them on a shopping list of 1000’s of other vendors.
The European and APAC VAD’s have been doing a fantastic job for years because they have had to! They work in regions that require additional language to be able to perform and thus had to be a true extension of the vendor by default.
The global distributors are not going to exist soon in their current model as it’s not sustainable for a vendor to be paying them margin for very little added value. When a marketplace takes less of a cut than a distributor does and they are aimed towards English speaking markets, they are going to have to do something different.
The European and APAC mid scale distributors are going nowhere because they are the ones that build the market for new vendors with their relationships in country.
The US need to follow the European way, not the other way around.