It is a general feeling among small and medium-sized electrical dealers, consumer electronics retailers, IT Resellers and Telecom channel partners that companies who created distributors and thrived with them for the last three decades are now working to kill them in favour of e-marketplace and online mega-retailers.
The atmosphere at the majority of the electronics components distributor conferences and telecom reseller podcasts are extremely charged with missed expectations. They feel the global electronics distributors association has failed them and time has come to jointly develop a framework to protect their interest. A recent example being Amazon annual promotion event “SAMBHAV” (meaning possible) is vehemently opposed by small/medium-sized distributors and retailers with a movement named “ASAMBHAV” (meaning impossible) in India.
To dive deeper into the issue it is important to understand why companies created distributors, dealers and resellers channel network. In the early eighties when mass manufacturing started to pick up and factories started to produce electrical and electronic products in huge assembly plants. They were broadly looking for
1. Mechanism to stabilize production and feed assembly lines in a systematic manner (PPC- Production, Planning & Control).
2. Reach to End User: End-users were fragmented and required a small amount to be purchased on a need basis.
3. Customer relationship, brand loyalty and building user communities (for e.g. OEMs/ contractors/ maintenance, integrators etc.) through customer experiences.
4. Stable cash flow forecast with minimum risk.
Appointing an anchor distributor was the ideal way to satisfy most of the above requirements. Manufacturers were able to fulfil all four requirements by creating a network of distributors, sub-distributors and retailers as they were able to provide all the above by working out the stable forecast, reach customers & offer technical advice and service support and mitigate customer credit risk.
Most of the manufacturers argue that they wanted dealerships to align with new realities and are ready to help them upgrade to stay relevant in the digital era. So let’s understand what they mean by relevance? What has changed? Why they require distributors to change?
In the last decade although the basis of requirements as discussed above has remained the same however tools & processes to meet those requirements have evolved.
1. Mechanism to stabilize production: Now with the new science of data analytics the online marketplaces are able to track, analyze and influence the buying behavior to aid more realistic forecasts for production and inventory planning.
2. Reach to end-user: The new delivery mechanisms through 3PL Logistics solutions/drop shippers and automated warehousing the material can be delivered directly to users in manageable lead times.
3. Customer Relationships: The new thought process is “Digital First”, Virtual Support” as needed and finally on-site visit of an “Expert”. This is an arguable point as social scientists are of opinion that human preference and physical interaction for e.g. through IT resellers, consumer electronics retailers generate more confidence and lasting relationships.
4. Cash Flow forecast: With new digital payment gateways & fintech manufacturers can now easily forecast cash flow and are able to provide risk-free credit terms. Upcoming technologies like Blockchain may completely revolutionize the way LCs/ CODs or Document negotiation happens today.
It’s a fact Online marketplace has just started and they are not going to go away. The rises of Amazon.com, Alibaba.com are certainly a force to reckon with and here to stay. Being in the B2C segment IT accessories resellers and consumer electronics distributors need to have a digital drive and strategy in place if they want to be relevant, else not only the manufacturers even their own employees will start to question meaning in their jobs.
As regards Electrical dealers (for e.g. switchgear, industrial controls) and process instrumentation distributors or industrial electronics components suppliers more on the B2B side may need to rebuild customer interaction models with digital being an integral part of the whole process. Selloverseas.com team is of the firm opinion that manufacturers are certainly going to need distributors as they are their extended arms, eyes and ears in the market. selloverseas.com has started to counsel distributors who are willing to invest & flexible to relearn & manage this generational shift.
