Debate: Manufacturers Should Only Sell Through Authorized Dealers

There are two fundamental approaches for manufacturers to sell their products:

  • Develop a network of approved dealers who are trained and authorized to resell their products. Restrict anyone else, including online retailers from doing do.
  • Allow products to be widely resold through various channels to any buyer as well as for sale on the Internet.

Many manufacturers would argue about there being a hybrid approach, where authorized dealers get preferred pricing but the product is still available broadly online and through broad line distributors. Nonetheless, even in this approach, 'anyone' can access the product even if it is at a modestly higher markup.

What do you think?

Forgive my anonymous post but this is a VERY touchy subject... The problem with the hybrid approach is that manufacturer greed usually overcomes common sense.

Obviously I favor the "approved dealer" approach.

You "can" have multiple "dealers" (I hate that word, puts Integrators in the same class as used car "dealers") in the same territory but that usually results in favoritism, bad feelings, and unnecessary competition. Why give your competitor access to your product line?

Besides the cost of holding a marginal amount of stock, what benefit does a "distributor" actually offer? Some offer tech support but none at the level of an Integrator. Again, why give your competitor access to your product line?

If the Integrator always works to create a spec that locks in the equipment and software, why should the Distributor get the lions share of the profit on project and aftermarket sales? None of these sales even exist without the efforts of the Integrator.

Conversely, if the Manufacturer is not getting enough effort from their Integrator, then they always have the opportunity for change.

Distributors are always negotiating for better pricing every time they buy anything and usually can blow enough smoke to get better pricing from the Manufacturer than the guy who is doing the hard work, getting the product specified.

Many manufacturers state that they do not authorize online retailers. Those "retailers" are usually Distributors (or associated with them) and the mere fact that one can Google a net price for a camera has ruined profitability for most in the industry.

It's as simple as this, pick a good horse and stick with it. If you are fickle, greedy, ignorant or lack patience then this is not the right business to be in.

Humm. I do think there is yet another alternative. I am speaking of my own experience as the CEO and founder of a small manufacturer, which is to segment the product an bypass the conventional channel altogether. I have to assume my attitude will piss off a lot of integrators.

We manufacture and sell high-end VMS to large (think Fortune 100) companies and government entities. Our project size usually run into high six figure and above. Being outsiders of the industry as well as being ethnic minorities, we were never able to tap into the good old boy club of integrators and distributors, and it certainly wasn't for lack of effort. We were told over and over again in so many words that larger competitors such as Pelco and Honeywell have the inside track of any large sales opportunities. To make matters worse, in instances of having to go through integrators due to end customer mandate, we ran into incompetence, arrogance and worse yet, sabotage in our dealings with the integrators. This despite the fact we offer integrators mark ups of 25-50% on our products.

Having had one too many "thrown under the bus" incidents a few years ago, we decided to bypass integrators whenever we can and sell direct to enterprise customers. This has forced us to be responsible for service, installation and support, which was difficult in the early days. But it has since strengthened our relationship with our customers, and we have seen revenue growth rate of well over 100% every year in the past 3 years. Of course, we now have large integrators knocking on our doors wanting to "sell" our products, but we rather stick to what has worked well for us, being that one throat to chock for our customers.

Our next product will be a simplified version of our current product line, and it will be sold directly to end users as well, it will all be sold online.

BTW, we never considered distributors, They offer no value add as far as we are concerned.

Thanks to both of you, two insightful and nearly opposite approaches.

Relative to both of your approaches, I think the big issue is obtaining scale. I believe that any manufacturer who wants huge global scale (hundreds of millions in revenue) almost needs to open the channel to most anyone.

For instance, if you only have integrator per territory, that integrator might be great and very loyal but there is only so much business they can generate for you.

On the other hand, if you are a manufacturer and you do everything yourself (including installation and service), it restricts how big and how far you can go.

I am not saying that either is 'wrong' but I do not think they will support global businesses which is what most of the big ambitious manufacturers most desire.

John, you are assuming just because doing everything yourself won't scale, which is incorrect. We have intentionally designed and built our product to be open and using as much off the shelf IT components as possible, we also tap into existing IT service and support network to accomplish much of the installation and service that is needed. This has enable us to be more responsive and scale far better than the big boys. Which is precisely the reason large enterprises are paying attention to us and making us their standard.

We currently manage well over 20,000 cameras and have deployed over 1,000 servers for one large Fortune 100 company all using our enterprise management platform. This allows us to keep tabs on performance and service related issues, it enable us to dispatch service tech via IT support networks to take care of the problem even before the customer complains about it. We I am talking about is bring standard IT practices to the backwater of security surveillance. This saves our customers money and headaches and vastly improves their user experience.

There is no doubt in my mind we can and will grow into hundreds of millions in revenue with our approach. We view security surveillance nothing more than just another IT application. In the IT space, companies routinely scale and grow into 9, 10 figure companies.

The real question for integrators out there is this, how do you provide value add in an increasingly IT centric world?


Different vertical, but doesn't DTT do all their own installs and break/fix for all the (primarily) restaurants they do? They may not be manufacturers, per se, but they act in a similar manner because of their biz model. Of course, they had to open up numerous regional offices, geographically spaced to be able to cover their entire US footprint, but it allowed them to overcome the scale issues you mentioned.

I've also seen integrator partnerships with Dell and Blackbox for onsite break/fix while the integrator sends road teams of their own to do just installs (primarily in big box retail).

Undisclosed, This isn't IT. Most specifically, the problem is the overall size of the video surveillance market. It's a fraction of general IT. HP does $120 Billion, Axis does $0.75 Billion, etc. It's far harder to hit huge numbers in surveillance because of the overall size of the market.

To the extent that a vertically integrated company in surveillance can generate high revenue levels, it will need to do your approach of a small number of relatively large customers / end users (i.e., dozens of customers but each one averaging millions of dollars). However, if you want to go mass market and serve tens of thousands of customers (like Axis or most mid tier surveillance companies), open distribution with numerous partners seems to be logistically essential.

Marty, DTT does that and they have 'scaled' but just to one country in one vertical :)

As much as it pains integrators, I think the reality is almost all the big camera manufacturers have a wide open channel because that is the best model for them to maximize revenue / total profits.

Again, I beg to differ. The overall size of video surveillance market is actually far larger than we previously realized. Video is eating the world. More and more what we ran into are requests of video integration with business process. Yes, if you want a strictly defined "surveillance" market, it has more or less unchanged. But what we are seeing is a big jump in use of video everywhere in everyday business. We are even being asked by one giant US government entity to essentially recreate "Youtube" for government use. Much of the architecture and back end are exactly IT/data center type approach for these kinds of projects. Do they also use the very same cameras for surveillance use? Of course.

On the low end, cheap computing devices like smart phone and Raspberry Pi are simply begging for open distribution with the cloud as the back end. We as a company are not so much embracing but being asked to accept this new world order by our customers.

This is getting off topic and into the specifics of your company. Also, you're admittedly not at $100 million yet so it's just conjecture until you get there. Let's return to the general discussion of whether or not manufacturers should only sell through authorized dealers.

Yes, because customers do not know much/enough about surveillance products to buy the right system for their needs.

To buy the right system, a customer will need to know:

1. optics

2. sensor size/pixel count/low light picture quality tradeoffs

3. how to run cable legally

4. how to waterproof exterior components

5. al the headbanging quirks and network related intricacies of the how system

The amount of time required to get the above would cost the customer many times more then to just trust an integrator the offers a proper 3 year warranty on parts and services and handle all matters from start to finish. its almost like purchasing insurance - you must have it.

To me integrators are a type of engineer - they optimize systems based on theory and experience to achieve the best outcome with whats available.

The IT industry is actually the same - except that at least in Australia - the consumer/SMB IT industry has been almost completely destroyed by careless cross-selling to "box-shifter" resellers with no knowledge whatsoever. Every week I get called over to a friend's place to fix up their brand new notebook because its is packed full of bloated adware, or a brand new router the crashes once a day, or a NAS that does not work with Windows Backup dues to a lack of sparse file support, or a PC that is too loud or displays the poor picture because they used a VGA cable insitead of the DVI one...

I fully believe that just like a company or government has different departments that each understand there own work, normal humans only understand there own niche - you cannot be great at everything and without being great you will end up being burned by unreliability and under performance unless you get an expert in the field (a CCTV integrator in this case) to assist.

Yes there are poor integrators out there, but they come and go (hopefully they will find there actual area of strength in another profession) but the majority are proper hybrid security/optical/electronic engineers.

I face a problem in everyday life where I work into a store to buy something and the staff in the shop know just about nothing about the products - and I always think - IF only the vendors chose their resellers more wisely - so much wasted time can be save, and so many less crappy products will end up being produced (because a real integrator will reject crappy products)

I just love selling to knowledgable integrators - they scrutinise our products to the extreme and forces us to weed out underperforming lines, automate procedures that should be automated, and ultimately ensure our long term competitiveness.

"Yes, because customers do not know much/enough about surveillance products to buy the right system for their needs."

- Hah! That is a most unfortunate generalization. And often wrong.

Carl, while it was an overstatement, it is mostly true. There are very few end users who know (or even care to know) much of anything about surveillance. They can appreciate the "nicer picture" that megapixel brings, but start trying to explain PPF, WDR, Lux ratings, etc - and the majority quickly become disinterested in "all that technical stuff".

End users with your job responsibilities are an obvious exception. You live and breath this stuff. It is just not so for the average small business owner who has tons of other more important things on their plate.

I wish I could like this comment. James is absolutely right from my experience, once I say WDR or PPF or anything buried in a camera datasheet the vast majority of end users will be disinterested.

Small business owners just want to make sure their employees arent stealing from them and that employees arent coming in saying they worked x hours when they left 2 hours early. It's a means to an end for them, that end being increased control over their business and accountability. Most successful business owners are too concerned with the core activities of their business to dedicate their time and energy to understanding IP video surveillance. Really, the only thing I find end users competent at doing is googling the part numbers on their proposals to try and beat people up on price. My 2 cents.

I believe I disagree with most of my fellow Integrators in that I favor open access to product. A restrictive distribution model hurts the end user, and that is who we are all supposed to be serving. I certainly appreciate manufacturers offering an added discount to integrators in recognition of our expertise, but it is by no means a requirement for us to sell your product. Good end users don't google part numbers, because they understand a working system requires far more than material procurement. Good end users seek competitive bids from other integrators as that is the only reasonable way to evaluate a bid for a complete system. I do run into plenty of end users who complain. I try to make them understand the value we add, and encourage them to seek bids from other quality integrators. If they do not come to the conclusion that my time and expertise are worth paying for, then I walk away knowing I have avoided what was probably a nightmare relationship anyways. It may not drive revenue as high as possible, but it means we stay profitable, can afford to do quality work we are proud of, and offer our customers the service they deserve.

"a PC that ... displays the poor picture because they used a VGA cable insitead of the DVI one..."

Why is that a problem? In my experience, DVI-I is no better than VGA in terms of video quality and DVI-D is no better than HDMI unless you want to exceed 1080p. And DVI itself is a dying interconnect technology (with good reason) - fewer and fewer monitors and video cards have that capability.

Carl, if you want to discuss DVI-I vs VGA, please start a new thread.

This one is focused on the big picture of whether or not to sell only through authorized dealers.


Back to the subject, a comparison can be made with consumer electronics gear, especially high-end audio brands like B&W, Rega, Magnepan, Audio Research and others in the audio world and a very few "high-end" companies in the video world.

The audiophile high-end companies restrict or outright ban internet sales and sales for less than MSRP. They often drop authorized vendors who sell out the back of the store and even go as far as to void warranties on so-called "grey market" goods. This guarantees that legitimate vendors make a certain profit percentage and have some exclusivity in their offerings (often only one license is granted per city) and even helps the manufacturer retain the aura of exclusivity but this can come at the expense of limited sales and lack of brand recognition.

The interesting thing is that there are many "specialty high-end" stores catering to audiophiles but very few catering to videophiles and basically zero catering to video surveillance but the motive for limiting sales to "authorized dealers" can, at least in some ways, have the same effect. By such limitation, the manufacturer theoretically guarantees that the authorized dealer will not see excessive price competition. That encourages dealer loyalty but can come at the expense of sales volume.

We have been "shopped' for camera and DVR/NVR pricing by some less trusting customers. Most of the video surveilliance equipment manufacturers will say they don't authorize retail or internet sales but why can you google up to date pricing at or darn close to our net price. Not List or MSRP but "dealer" price.....seems fishy to me.

Michael, I completely agree with your evaluation however, in a competitive bid situation, the low bidder on bid day should get the award at the price they quoted to customer, not some BS price they "think is fair".

They should NOT be able to "beat people up on price" just because some idiot put pricing on the internet. We no longer give part numbers but provide descriptions instead for that very reason.

Sell price is NOT just the cost of materials, labor, overhead and profit; it's everything else you have to deal with.

How about the CAF or "Customer Aggravation Factor" (You know what I mean) and retrofit jobs with no drawings, specs or other info to work from.

What has been the customers payment history? Do they expect you to be their bank? That costs extra.

If you come up short because of their shoddy engineering or description, you eat it. Do they pay you for those issues in all cases? Some do, most won't.

If we had to live on the margins that some of my customers think are fair, we would be out of business.

We had a Hybrid model to market - distributors and select direct partners (S.I.'s). it wasn't ideal but it worked and the direct partners were "product champions" . The distributors had a better discount structure as they had to sell to other smaller S.I.'s and mostly moved boxes while the partners had a discount structure less than the distributors due to buying for projects. This ticked along nicely for a number of years.

Then 2 years ago we changed the structure and moved the partners to buy from the distributors. It was a disaster and suddenly we had no visibility of projects as the S.I.'s managed this aspect of the market and our product range was not the primary product - pushed by the distributors.

So is a hybrid model better than distributors/manufactures reps only? If your distributors and reps only sold your product range - and all of that range then that model may work very well but if the distributors sell other products you need a hybrid model to get better visibility of projects.

Undisclosed manufacturer, I don't think the issue for many integrators is the use of reps or distributors but authorizing them to do business with anyone. What do you think of tightly controlling who your products are resold to?

Yes this is always an excellent idea and you are correct but in a small market you want to be partnered with the bigger - well structured distributors who have a bigger footprint coverage. The second and third tier distributors in the market are very weak and that makes it challenging - do you partner with them? This is a challenging position to be in and you then need excellent (S.I.) partners only. If you have comodity items in your range that customers pick from out of your portfolio you need distributors. Finally then if your product range is challenging and your not as strong as the big boys say like Axis and Milestone or Genetec you probably need a mixed model going forward in the world of IP.

To all those manufacturers out there that prefer a direct sale model, you are clearly one of the reasons the US economy is slow to bounce back. Cutting out the dealer or integrator does mean an easier, cheaper sale, but also kills the small business owners that will be responsible for the nations growth. Take your money and run, while the rest of the US scrapes by. I hope someone steals your Bentley and urinates on your stearing wheel. Sorry John- trust me I cleaned up my language for this one.

First of all, that's funny! "I hope someone steals your Bentley and urinates on your steering wheel." That said, manufacturers probably drive Mercedes. The Bentleys are still mostly reserved for ASIS execs :)

There's definitely a great increase in cutting out the dealer/integrator in the last decade. I do think some of it is overall beneficial. When I first started working, I was stunned about how critical uninformed salespeople and their relationships were. They add little real benefit when it came to designing or deploying the right solutions but controlled the process because it was so hard to find the right information (i.e., matching up buyers with the right providers). I think the shift over the last decade has disproportionately hurt this group, which I think is a good thing for techs and users. Agree/disagree?

This type of model causes dealers to live, breathe, and die by the vendors they support. When you open up your sales channel to simply anyone and everyone, you end up burning bridges without knowing that you are doing it. There are very large companies that do it right. Surveillance and security is tough though. Everyone is in competition with one another. There is a company called Crestron that sells enterprise building automation hardware and software. These guys do it right. They have a restricted sales channel- dealers only. And to become an authorized dealer you have to jump through 4 or 5 hoops that are on fire. This requires the dealer be interested and gung ho about selling their product. When you go the other direction, you end up just being another camera that anyone can get. Nothing special, but worse, anyone can buy it and give your camera a bad name. Not everyone knows how to properly set up an analog camera- forget an IP camera. So when large jobs are botched becuase an online purchaser thought they knew what they were doing, well, now that camera company is dealing with bad PR... To me, it makes the company look and act more elite and professional to only sell through approved dealer channels and nothing else. When you open up your sales force to ebay, google, and every other online sales wizard, you end up making yourself look needy and spineless, in my opinion. Just trying to make every single sale possible. We'll deal with the bad PR later. Personally, I've never gotten anything for free for any of our clients. And some of them have had some BAD issues with very large vendors. Bad firmware, cameras not recording when they have to by law, etc. I personally can't believe the approach for some of these beheamoths. Or their tact. It's simply, oops, sorry, we'll do what we can to fix it. The larger the company gets, the more problems are sure to fall out of their back pocket.

Ryan, thanks for the thoughtful feedback. To play devil's advocate, if this model has so many problems, why do the biggest manufacturer overwhelmingly allow their products to be sold on google, ebay, etc.? Are they simply irrational or do they see some greater benefit?

Because they have so much competition. If they don't, someone else will. The critical difference between Crestron and Axis is that there is maybe 1 other company that can truly compete with Crestron- AMX. Automation isn't as cookie cutter as surveillance products are. If Axis didn't sell online, their market share would probably be dominated by someone else.

Ryan, I agree with you. Manufacturers, like Axis, allow online sales because it maximizes their sales, despite the downsides cited here. Given that harsh reality, what can you expect them to do? Why would they change even if integrators/dealers protested?

Well, as more options come to market that aren't cornered by Axis, more and more integrators will start to shop around. We had a discussion this am that as soon as Sony Gen6 stuff hits the shelves, all cameras are going through Sony (for the most part). We've just been waiting on domes with SD cards, instead of huge box cams with compact flash.

Ryan, but you can buy Sony cameras from almost as many online stores as Axis? Do a google shopping search for just about any Sony camera and you get 50+ options.


The Crestron example doesn't work. Home automation is a much smaller market than video surveillance, and Crestron targets the high end of that tiny market. Home/building automation can be a lot more complex to setup and configure than video surveillance, so it makes sense to restrict purchasers to those who know what they are doing.

I'm fine with manufacturers setting up a few hoops to jump through, but many of those hoops are just mechanisms to try and twist my arm into pushing their product once I am signed up. I am fine being asked to demonstrate competence, undergo training, buy a demo unit, and demonstrate an ability to offer a certain level of end user support. However, granting dealership to only a few players in a region or demanding dealers meet quotas is gaming the system. I can't tell you how many times the sales rep tells me they "just want to make sure we are going to lead with their product". The implication is that I am supposed to shoehorn their product into every project possible. That is total BS. I want to use the best product in a given situation, not have my hands tied by some dealership agreement. If manufacturers want me to push their product then they need to stand out somehow: be it price, quality, ease of use, reliability, etc.

I agree with the 'gaming the system'. As for the Crestron approach, I said that it didn't work like surveillance did. Crestron is not for high end residential. It is for high end automation- commercial, residential- even industrial. Their model works because the market is so small and the sales channel is restricted. I don't think that surveillance will work in a restricted sales model. There will always be dealers trying to sign up just so they can push the product online. Policing dealers is a whole other job completely. So it turns out to be a vicious cycle, when the end game is just to sell more and more cameras.

As for the Sony approach, they, in my opinion, are sooner to reduce the price of a camera to help the dealer meet their margin than Axis is. Axis is one large policy driven machine. If it doesn't line up with policy, they dismiss it. There isn't one clear and concise answer because as you start to move to camera companies that want to work with the integrator, you are sacrificing quality. The only company that stands out is March Networks, but they are ridiculously overpriced- for everything.

The Axis project pricing is a joke too. I was told by an undisclosed employee of Axis that on big jobs that are out to bid, like say City of LA or something large like this, that the larger integrator gets the best price, thus cutting out the small business owners.

If you want to find a restricted IP camera sales model, check out SnapAV. They announced their D grade IP camera lineup today. Some innovations, but mostly China garbage

There are quite a number of restricted IP camera lines out there, especially via Asia. Many dealers negotiate to rebrand or get territorial exclusives for unknown Asian products.

While I understand the financial motivation for the reseller, the risk to the customer is high. Who knows how well those cameras work? How well they will be supported in the future? What reliability issues they might have? etc.

I remember a few years ago when I was selling Arecont cameras, supported by the regional rep. He got paid when I bought through a regional distributor. The cameras were available by another non-supported distributor at lower unsupported prices (Northern Video). He would not get paid if I bought for a lower price. I think as an integrator you have to also think of your area rep and the support they give. Shame on the manufactures to push their regional reps out of their hard earned commision.

We did sign as certified partners with Axis a few years back (whatever that means). In writing, I believe it stated we had to sell products at minimum MSRP. If I remember correctly, a 241Q encoder was $625 through ADI and a google search turned up the device for $629. We had to sell for $799.

I think manufacturer with single approved system integrator will work fine for both of them, BUT when we see from client's side, they may charge extra 20% (even more) because of monopoly method and sometimes they will become arrgent...

Few reality in monopoly market....

System integrator/approved dealer secure the high-rise building's fire alaram system in very low margin rate. But when tenant approach for few detectors they will charge 5 times higher than the actual price, because they get more advantages being monopoly....

Here when we ask for particular model of Axis cameras, we always get different pricing from each system integrator not in minimal differance (it varies from 50$ to 150$). This difference is not only because of more margin by sytem integrator, its because of un-even pricing standards from manufacturer... here in gulf countries almost all the system integrators will supply the AXIS cameras but price varies....

During planing and installation a good system integrator can give value added service to their client.

Maintenance Period:

Access control system requires maintenance from system integrator

As of IP CCTV system concern, system integrator role is very minimal. Being IP based if client has IT department they can easily maintain the system with-out any system integrator support. Even manufacturer can look in to the VMS/SMS remotely if required....