Distributors Dealing Direct to End Users

Author: John Honovich, Published on Feb 22, 2011

While the typical role of security distributors is facilitating sales of products between manufacturers and integrators, significant evidence points to a number of distributors dealing direct to end users.

Among industry people, this is a controversial practice. The traditional business structure is for only integrators to sell to end users. Manufacturers, their reps and distributors, help integrators by providing them products and information. Ultimately, the integrator is the direct connection and seller of products to end users.

By contrast, when distributors deal direct to end users, they generally have a crucial advantage. Since distributors usually buy from manufacturers and with very high volume, distributors typically get the best pricing for products. Normally, distributors apply a modest mark up and re-sell those products to integrators. Integrators then mark up the product again, bundle integration services and sell to the end user. When distributors sell direct to end users, they can sell for a significantly lower price (while maintaining their profit margins).

Two opposing schools of thought exist on this practice:

  • Cut Out the Middle Man: The minority view in the industry is that this increases efficiency by cutting out the middleman, aka disintermediation
  • Violate their Duties: The majority view inside the industry is that distributors have an obligation to support their manufacturer and integrator partners. Selling direct to end users violates that obligation and hurts the whole industry.

What Do You Think?

However, debate exists if this practices even exists. To that end, we conducted an investigative study to find evidence of this practice. We found over 30 online citations of bid results and contracts where leading distributors regularly sell direct to end users.

Inside the Pro section, we examine these cases, the activities of ADI, Anixter and NAV and analyze the impact and issues involved.

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  • Cut *** *** ****** ***: The minority view in the industry is that this increases efficiency by cutting out the middleman, aka *****************
  • Violate ***** ******: The majority view inside the industry is that distributors have an obligation to support their manufacturer and integrator partners. Selling direct to end users violates that obligation and hurts the whole industry.

What ** *** *****?

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Key ********

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The *** **** **********

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The *********** **********

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The ************ ********

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The ********** ********

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Distributor ******

** **** ***** *******, ** ******* ** ******** ** **** of *** * ********* *** ***** ** **********. ***** * companies *** *** **** ***** ***** ************ **** ** ** discussions **** *********** ** **** ** *** *** ******* *** contracts ** ********. *** ***** ** ******** ********* ** ******** people ** *** ******* ********** ** ** **********. *******, ***** evidence ****** ** **** ****** *** **** ** * *********** but * **** ********** *** ** ****.

*** ******

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** *** ********, ** ***** ******* ********* ** **** ****** company ********* ******* ******** ** **** (********* ***** ******** ********* Division ** ** *** ********* ************* ** **) *******, *** also ******* ** ** ******** *** ***********/********** **** ** ******* directly **********.

********:

******* ******

******* ** * ********* *** ******-***** ********** ******* *** ******** into ******** ********* ************. ****** ***, ******* **** *** ******* retail ****** *** ******* ************.

** ******** ***** **** ** * *******, ****, ********* *** other *****, ***-****** ********** ***********, ******* ******* *** ******** ****** ** ****.  *** *********** ********* **** **** **** **** *********** ****** houses ** ******* *** ******** ***** **** ** ***** ****** supply ***** *** ******** ********** ************.  **** ********* *** ***** presence ** *** ****** ****** ** *********, *******'* ******* ** move ***** *** *********** **** ****** **** ******* ************ ******** products.  *** ***** '*********' **** *** *** *****. 

******* **** ******* ** **-***** ****** ******** **** (***** ****) to ************ ****** *********** ************* ******** **** *** ***** ** the ****** ****, *********, ********** *** ******* *** *********.  ***** verticals ******** *** '********* ****' *********** ********* ******* ** ******* suppliers ***** *********** ** ***** (*********).  ** ******* *** ***** a *********** ****** ** ************ ********* **** ******** ************* (********* at ******** ***** *** ** ***** ***** ************ *********), **** were **** **** ** *** ***** ***** ***** ** *** exclusive ****** ****** (********* *****-****) *** ******** ************* ********. 

********:

***** ******** ***** ******

***** ******** ***** (***) ** * ******** ********** ******* *** providing ********* ** *** ****** *** ***** ****** ******* *******.  However, *** **** ********** **** **** * ***********, ******* ********* only ** ********* ****** ***** *******. ******, ** *** *****, NAV *** *** **** **** ***** ** ******** ****** ** being ** ********** ********** ** ******* ********* **** ** **** low ******.

***** ******** ***** (********* ********* ***** ***'******* ********'****) *** *** ** (*** ***) ******** '*********-****' **** **** state *** ***** **********, *********, *** *** *********** ******** ** much *** **** *** **** ******** ****** ************ ************* ******* (no ***********).  ** ********** ***** ******* ********** **** **** ************* based ** ****** ********* **** ***** ****** ********, *** *** been **** ** **** *********** ******* **** *** ******** ************ space.

********:

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