Resellers: how to choose a distributor

By Sholto Macpherson, Negar Salek on Aug 4, 2009 11:20 AM
Filed under Strategy
Page 1 of 2 | Single page

One of the most important decisions a reseller makes is picking his suppliers.

Distributors can play as little or as large a role in your business as you require, from warehousing to installation and call-centre support.

The number of distributors and their selection of vendors, skills and philosophies confuses fresh resellers or experienced hands changing supplier.

But the more thought that goes into choosing a distribution partner, the greater the benefits to a reseller through standardisation of processes, sharing resources and lead generation.

Some resellers don't know the extent of their distributors' services. Upcoming reseller eNerds said it had "no idea" that its distributor Express Data handed out marketing dollars to its partners for their campaigns.

The worst move is to leave the choice of suppliers to staff within the business. It should be a strategic decision because a bad choice costs money and time to source products.

A sound approach is to look at your business's needs to find the best match. Look at their services, talk to their resellers and walk through their warehouses.

CRN assembled this guide to help you make the right decisions to grow your business fast.

Keeping control over supply

With so many distributors, reseller might be tempted to shop around for the best deals. But the more suppliers with which a business deals the more expensive it is to buy products and services. Costs of business accumulate through paying multiple freight charges, configurations and returns.

Too many distributors wastes time managing non-essential relationships.

"Trying to manage a large number of relationships is time-consuming and frustrating," says John Walters, head of the commercial sales and solutions group at Ingram Micro Australia. Using a big distributor means fewer people contact the reseller on a daily or weekly basis. And it lets a reseller focus on a relationship with his account manager and improve his buying power, he says.

"And when I mean buying power it's not just volume pricing, it's a case of relationships, too. The more resellers purchase from us the more they understand us, the more people they know, the more they can draw on the services of Ingram Micro."

For these reasons, most people are trying to rationalise the number of suppliers they have, says Express Data chief executive officer Ross Cochrane.

"The worst scenario is that you don't actually consciously pick your suppliers. In this kind of environment management need to make sure they are making the decisions on their supply lines," Cochrane says.

"The days of allowing sales to buy from someone you never trade with and you're going to set up an account because there is a small incentive program running and they want to get a small reward, it might be a good idea for the sales guy but not for the business. Having a strategy is absolutely important."

Less choice, more action

If your expertise is in rolling-out Windows networks for small businesses and customers want to get into VoIP and unified communications, how do you choose a vendor?

Investing in a technology and brand ties up staff in training, money in stock and clouds your focus. Selecting a vendor means rejecting competitors and their products and technology roadmaps and, of course, your customers trust you to make the right call for their benefit, too.

Larger distributors make those hard decisions for you because they ask similar questions. And they are looking for a vendor that has invested in the Australian market, has a robust technology with a promising future, whose technology integrates easily with the products of complementary vendors and whose business model allows for the channel to sell a product profitably.

Distributors' pre-sales and technical staff have valuable advice for the first few projects with a new vendor on installation, integration and support. Distributors save you time and money by picking vendors for you.

Express Data's Cochrane says he spends much time looking at analyst reports and attending trade shows to understand emerging technologies.

"We spend a lot of time not just on the technology aspect - there are always hot technologies - but around the commercial aspects. Is there going to be a significant volume in the market for that vendor technology?

"Is there sufficient investment by that vendor in this market to generate end user awareness and demand? There's no point saying it's a great technology if they're not prepared to invest in the market and grow it."

An area that it scrutinises is support. The distributor's resellers are very wary of selling a hot solution that isn't backed up by a system of spare parts, support desks, patching and locals to drive the business.

Sometimes even big vendors stumble. Years ago, Intel was in networking and made a major push into routing and switching. Express Data had carried its network management product but, after researching Intel's plans, declined to carry its network infrastructure products because "we just didn't believe that it would be viable and that they would keep focused on it", Cochrane says.

Another case was Nortel, which Express Data dumped from its line-up years ago because it didn't believe the company had a channel-centric model and was not prepared to invest.

"I'm not saying we can get it right every time, no one can can't predict the future," he says. "We had no awareness whatsoever that Oracle was going to buy Sun. At this stage Sun has a strong position in the market, they are locally highly engaged in the channel with the right support structure for the end-user and I don't think it will change under Oracle."

Selling the right product is important, too. Some distributors pick only those that need a service to make it work for the customer to ensure that there is more margin for their resellers in each sale than the points from the hardware alone.

Finding distributors that discuss the long-term trend away from the box-drop sales to work on more profitable services guarantees the profitability of your own business. Deploying services means greater investment in staff and skills, which again underlines the value of a quality distributor that picks the services in which to invest.

A distributor that has thought about its resellers' profitability is more likely to have guaranteed its own making both better placed to survive.

Ask prospective partners to explain how their products and services support healthy business models for resellers.

 The right kind of support

Many distributors say they provide specialist support for their vendors but quality varies.

Support is expensive. It requires experts trained in products, technologies, vendor portfolios and industry verticals. And it takes staff if a distributor has many lines or resellers.

The number of support staff a distributor employs for each vendor gives a rough idea of its commitment to its resellers.

More niche distributors and some larger ones have specialists with accreditations and experience in the market. A focused distributor with vendors in complementary categories generally has better support.

Specialist pre-sales teams at distributors with larger lines can look at solutions combined from many vendors to choose the best one for your customers and - importantly - guarantee that the bill of materials works as stated. For instance, Sydney's 24/7 Distribution pays for errors in a bill of materials.

Some have business managers that specialise in a vendor to provide expert sales assistance, such as in data centre power. Other specialist teams focus on big vendors such as a Cisco team to handle the networking giant's configurations and quotations.

 
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Resellers: how to choose a distributor
 
This article appeared in the August, 2009 issue of CRN.

 
 
 
 
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Issue: 332 | October 2014

CRN Magazine looks in-depth at the emerging issues and developments for the channel, and provides insight, analysis and strategic information to help resellers better run their businesses.