Manufacturers Sound Off On Distributors

Author: John Honovich, Published on Aug 12, 2015

Wow.

Integrators, you think you are upset with distributors? 

That's nothing compared to manufacturers.

Here is a representative quote of their feedback to IPVM:

"Overall, they are all a disappointment. They talk about adding value, being solution-driven, but in reality, they are merely box movers and ambulance chasers. Always have their hand out after they hear a deal is won, and want to know how we are going to cut them into the deal. Yet, they love charging for marketing programs, roadshows, etc. as marketing is a profit center for them." 

In this note, we share survey results from 50 manufacturers about their experiences and problems working with distributors. We conclude with their choice on worst and best distributor.

***.

***********, *** ***** *** *** ***** **** ************? 

****'* ******* ******** ** *************.

**** ** * ************** ***** ** ***** ******** ** ****:

"*******, **** *** *** * **************. **** **** ***** ****** value, ***** ********-******, *** ** *******, **** *** ****** *** movers *** ********* *******. ****** **** ***** **** *** ***** they **** * **** ** ***, *** **** ** **** how ** *** ***** ** *** **** **** *** ****. Yet, **** **** ******** *** ********* ********, *********, ***. ** marketing ** * ****** ****** *** ****." 

** **** ****, ** ***** ****** ******* **** ** ************* about ***** *********** *** ******** ******* **** ************. ** ******** with ***** ****** ** ***** *** **** ***********.

[***************]

Poor ******* *********

*** **** ****** ********* *** **** ** *********, ******* *** burden **** ** *** ************ ** **** ****** *** *******:

  • "*** ******* ***** ** ***** **** ** ******** ******* *********. They *** ***** ** *** ****** *** ******* ** ****."
  • "**** ** ******* ********* (********). **** ** *** ***** **** support. ** *** *** ** *** *** ** * **** to ****** *** ***, *** ** * **** * *********?"
  • "*** ***** ************* ** *** ******* ***** **** *****"
  • "************ **** ** *** **** *** ******* **** *** ****** causing ********* *** *** ******* **** **** ****** ** *** run ** ********."
  • "******* *** ***** ******* *** *** *********** *** ** * variety ** ******* **** ** **** ** ******** ** ******** design ** ******* ** ****..."
  • "**** ***'* ********** ********** *** **** ** **** ***, **** don't/won't **** *** **** ** ******* ** ** ******** ** purchasing *** *******."
  • "******** ******** ************: *** **** ** ****** ******* *** *** IP ***** (** **** ** ** ** *** ****** ***** guy ** *** ***** *****)."
  • "********** ** *** **** **** * ************ ****** ** * branch, *** ******* ******** (*** **** ** ** **** ***** and ************* ** *****, *** ***** ***** ************ **** ********* and **********)******* ****** ** *** *********** ************* ** **** *********** you *** ********** ** **** ********** ** ** ***** ** a ******* ** ****. **** *** *** *** ********* **** getting **** ** ***** ****, *** *** **** ***** ** eat **** **** ******!"

*** ************ *** ** *********** ******* ******** - ************* ****** need ** ***** ***** ************:

"** *** ******* **** *********/******/********* *** ***** ******** *** ******** beyond **** ** * ***** **** ***'** ******** ** ** disappointed. ** ** **** ****** ********** *** ****** ******** *** as **** *** ******* ** ****** ** **** ****** ***** parameters. *** *********** ** ************* **** ************ ****** **** ***** product ******** *** ********* ** *********** ***** *** ****** ** SKUs, *** ***** *** ******** **** **** *** ******* ** each ******* ****."

** *** ***** ****, ***** **** ************ ****** ***** *********, many *** *** ****** ** ** ***** *** *******.

No ***** *** / *** ******

************* ********** ******** ************ '*** ******' *** ** *** *** value:

  • "************ ***'* **** ** ** ****** *** ******, **** ****** stop ****** **** **** ** *** **** **** ** **. They **** ** ******* *** **** ******* *** *** **** little ***** ** **** ******* ** **** *********."
  • "** ** ********* ** **** **** ***** **** *** ****** if **** *** **** *** ******** *** *** ********* ******** or ********* *******"
  • "**** ****** *** *** ****** **** ***** ****** ***** ****** local ***** *** ***** *** **** *** *******. *** *** post **** ******* *** ********* *******, ***** ****** ************* ** do *** ***** *******"
  • "**** ** **** *** **** *** ****** *** ** *** provide ******** ******* **** ***** **** ** *******. **** ** them ****** **** ** ************ ****"
  • "**** **** **** **** ************* ******** *** ***'* *** ***** to *** *****."
  • "**** *** *** ******. * *** * ****** * ***** ago ** *** ***** ****** ******** *** - ** ** surprise - **** **% ** **** **** ******* ** *** distributor *** *** ****** **** ****."

Worst - *******

******* ********** ****** ******* ** ************, ******* *** *** *****. *******, *** ***** ** ******** experiences *** ************* *** **** ******* **** **** ** ***********:

  • "*****: ******* - ********, **** ** **** ****, ********* ******* operate **** ***********"
  • "******* ** ** *** *** **** ***********. **** ****** ***** margins, **** ******** ******** *********** ** **** ***** ******* ***** margin, *** **** ************ ** ***** *****, *** ********** ********** on ********** **** *****."
  • "*** ** ********** ******* ** ******** *** ***** *** *** best. **** **** *** **** *********, ***** ** ***** **** it **** ****, *** **** **** ** ** *** *******."
  • "*** & ******* ***** **** ********** ** ******* *********, ********."
  • "***** *** ******** *** ******** *** **** *******. ********** *** worst ** *******."
  • "*** ***** * ***** **** ** ***, *************, ** *******. Their ***** ****** *** *************, *** ********* **** ********** ** taking ******, *** *** **** ***** ** ***** *** ************ under *** *** *** ***** **** ** ****** ********* **********."
  • "******* ***** *** *** ** **** ****'* ***** ** **** any ***** **** ** *******."

***-**, ********** ******** **** ****, *** ******* ****** **** ***** ****** *******, ** *** manufacturer *****:

"** ***, ** ** ********** ** ** *********, *** **** is ***-**. ***-****** ***-** ************. **** **** * **** ******** sales ***** **** ** ******* ** **** **** ***. *** worst * ***** **** ** ***, *************, ** *******."

ADI ******

*** **** ** *** ******, **** **** ******, **** **:

  • "**** - *** ******* ********** ***** *** **** ******* **** management ****."
  • "*** - **** *** ***** ****** ** ******** **** ******** stock"
  • "*** ***** ** ** *** **** ***** ***** ********* ********** and ****** *** *********."

*******, **** * ******* ****** ** **********:

  • "*** - ***** - ** ****** ** ***** ***** ************* or ***** ********"
  • "*** *** *** ***** ****** *** ***********. **** ****** ***** added ** * *******."
  • "*** *****: *** ******* *** ******* ***** **** ******* ********* in *** ******"

Best - **********

**** ************* ****** *******, ********** ***, *** *** ****, *** **** ***** ** manufacturers ********:

  • "********** - **** ********** **** ***** * ******* ********** ****** and **** *** **** *** *** *****"
  • "****: ********** - ********* **** ** **** ****, ***** ******** systems"
  • "********** *** ***** *** *** **** ** ****** ** *** ******* they ******* *** ********* **** **** **."
  • "********** ** *** ****, **** **** *********** ******* *** **** are **** ** **** **** ** ********."
  • "********** ** *** **** ******* **** ***** ********** *** ***** ordering ******* ** ****/*********. * ***** ***** ********* ******** ***** scansource."
  • "*** ****: ***-** *** **** ******. ***** ****** *** ************* about *** ********. *** **** ****** ******* *** *** ********"
  • "**** *** *********** *** ******** ********** ** ***** ** ***** efficiency *** *********** ***** *** ******** **** **** *******."

Smaller ************ ********* *******

****** *** ***** ** *** **** ******** ************, ******* ************ generally **** **** ******* ****** ***** ****** ************. *** ****** theme *** **** ******* ************ **** **** ***** ******** ***/** worked ****** *** ************ ********.

Opening *** ******

***** **** ******* (*************) *** ****** (***********) **** **** ****** with ***** ************ *** *** **** ** ***** ********, ** see ** *********** ********* (*** ** ********* **** ******** ***** *********) ** **** ** *** ******** ********. ** *** *** going ** ****** **** **** ************ ** **** *** ******, you ***** ** **** ** ** ****** *** ** ***** at ** *** **** ** **** ***** *****.

Comments (16)

The person who cited inventory/credit/logistics is the one who nailed it.

We rely upon our distributors to maintain an inventory of product and be able to get it to us within one to two days. If one distributor doesn't have it in stock somewhere in the US, then we call a different distributor. I have been burned too many times with late shipments from manufacturers who either don't meet their quoted deadlines or their product gets hung up in customs.

We also rely upon our distributors for credit. They fill the gap between installation of product and payment for product that comes 30 to 90 days later. And they are willing to take on large project risk. Without putting my personal assets on the table as guarantee which I would be doing if I had to deal with a bank. Screw the banks, I'd much rather deal with a distributor. Unless Amazon figures this piece of the puzzle out they will not get my business.

It had not really occurred to me that integrators would rely upon distributors for product knowledge or technical support. We don't call them unless we have a part number in hand. If I could rely upon them for knowledge and support then I would hire their employees for my own business.

Ben, insightful comment!

"It had not really occurred to me that integrators would rely upon distributors for product knowledge or technical support."

I agree that most integrators do not think or expect to get knowledge / support from distributors. However, evidently many manufacturers are hoping that would be more the case.

I agree that most integrators do not think or expect to get knowledge / support from distributors.

I've seen all versions of this. IMO, part of the problem is that the distributors are not happy with their core compentency (box moving and credit), because those things are really just price-driven and will have low switching cost for the customer.

Distributors try to position themselves as product experts, especially when it comes to integrating things together. Much like the example posted here a while back about designing the single-door access control setup, the distributors will tell their dealers that they can help solve problems/recommend solutions. My experience with this (dealing with a slightly more advanced product than a simple camera) is that the typical distributor employee or tech won't fully understand the products they are recommending and will often make bad suggestions. OR, they have to call in to the manufacturer for advice, at which point all they are is a bad middleman in the conversation, offering no value.

There does seem to be a pretty large faction of dealers who think their distributor is a reliable, competent source of information. And that's kind of scary.

"IMO, part of the problem is that the distributors are not happy with their core competency (box moving and credit), because those things are really just price-driven and will have low switching cost for the customer."

And that's the Catch 22. If they are honest and say "Hey we just move boxes and provide credit", it's hard to justify margins / premium. But then they say they provide solutions (e.g., Anixter) and get hated on.

Yet Scansource seems to be good, so it's evidently not impossible to do it.

Having worked for both integrators and manufacturers, I think the issue is that integrators DON'T rely on the distributors for tech help because they know that the disti knows less than they do so they just call the factory tech support if they need help. However, the manufacturers are TOLD by disti's that they'll provide local tech support so the manuf., thinks this will ease the load on thier tech support people but that never materializes.

I think the manuf., needs to understand that tech support is and always will be thier responsibility because we integrators are not going to stop calling them directly - like it or not. They need to staff up to handle it and maybe that means smaller discounts to the disti's. The Anixters of the world need to understand that they can't demand deeper discounts just for moving boxes and adjust thier staffing and price models to reflect that.

To the integrator, it doesn't matter if I have to pay a couple dollars more to the distributor to get free tech support from the manufacturer, we'll just adjust our margins or increase our end user price.

Frankly I don't think the disti's will raise thier prices as a result anyway. Its a competitive busiiness and if they want mine, they need to compete because as Ben said - Once we select the product we want (using factory tech support) we integrators will shop around for the best price & if ADI is even a few bucks less than Anixter or whoever, they'll probably get the business.

I wonder if heavily promoting in-house brand W Box is going to ever factor in manufacturer opinion turning decidedly sour on ADI.

Only a few in the survey touched on that point, with this the most explicit:

"Now that Tri-Ed and ADI are both promoting their own brand of cameras, they're seemingly wanting to compete against the manufacturers they say they support."

The interesting thing will be how 'high' or broad their house brands grow. From speaking with a few manufacturers, the understanding or agreement was that the distributor house brands were just supposed to be simple commodities - cabling, connectors, SD analog cameras, etc. Not recorders or 1080P IP cameras, etc., as W Box is now doing.

"It is high volume relatively low margin business"

I think the latter part of the above sentence is inaccurate. I think the margin is relatively high, they all want it to be higher of course, for what they actually do in the main ...in my experience.

I think the 'relatively low margin' means in relationship to what the manufacturer and integrator typically get, which is generally considerably more than the distributor. Of course, the others do more, so it's understandable.

It is interesting to see that distributors have much the same reputation on both sides of the table. That said, inside sales reps are the unsung heroes of distributors that truly make things happen and tend to get caught in the vehemence directed at "sales". It is frequently outside sales reps that are really the proper target for the lack of any product knowledge comments.

From the article: "If you are going to accept that most distribution is just box moving, you might as well go to Amazon who is great at it and does it with lower costs."

Distributors - it's time to make your web portal usable. If I have to call/email your staff to get tracking info for every PO I send, the battle is already lost.

Box mover and credit, that's the very turth. For technical support, its better to set up direct contact between integrator & manufaturer, trainning distributors cost a lot, and the main problem for them, is their tech tream are not "stable". big problems.

Since a few distributors sell direct to the end user it would be interesting to see what distributor (especially Anixter) margins are on various product lines.

Maybe manufacturers should start lifting their restriction and sell more direct to internet distributors instead of low tech box moving product flippers.

Truth be told - most manufacturers depend on distributors to get and keep their products in front of installers and integrators, and in addition put a tremendous amount of volume and stocking commitments, etc. for distributors to be able to make any margin whatsoever. Many love end of month deals to unload inventory and then in most cases, disappear until the end of the next month or quarter. Is this a case of corporate strategy or a lazy salespeson? The answer is somewhere in the middle I guess. Distributors also provide huge value in terms of logistics and the accounting side of things. Distributor marketing, events, counter days, trainings, are all opportunities where manufacturers have their chance to connect and re-connect with integrators. A real distributor, can be compared to a broker. If you call a good broker, he will understsand your business and review various insurance providers and put you with what makes the most sense for you, as opposed to if you call the insurance company directly they are only going to tell you why and how they are the best, they only company to have blah blah, made up buzzwords go here.

Of course a manufacturer would want to de-value this, because they want to get all these benefits and not give up any margin either. This is a microcosm for life in which their is a pattern of devaluation all around and leverage battles between distributors, manufacturers, and integrators. It's rather sad at times. Can't we all just get along? And be honest too? I forget, business is too cutthroat and competitive for all that.

Not to say there isn't a ton of truth to this article and the comments, because there certainly is, when you consider the distributors. In their defense, their number of locations and terms offered are their value. If you need more or expect more, than simply stop buying from them as an integrator and stop supporting them so much as a manufacturer. We tend to complain about jobs, or relationships, etc. but when called out are scared to take action.

Speaking for DWG, we get hundreds of calls per week from installers as well as integrators that needs help with their projects. Now some of them might believe they don't, or like to pretend they don't in fear that this will show and value as leverage to us as the distributor, which they don't want to admit in many cases. This is often exposed with the preface, I just have a "quick, easy question for you". "Or, I'm not going to take too much of your time, I just need to know which system will, etc. etc. etc." Or, "I just need a quote on generic term 1 , generic term 2." We get this, and understand the position they are in, so we are used to it and accepting of it. And certainly they would not always tell the manufacturer that DWG is their savior by testing XYZ product in the middle of their job because that might hurt their chances of "buying direct" or getting better pricing down the line. They can easily forget or downplay the important of someone correcting their order last minute or doing their power calculations for them. Understandable. We are all "poker players" nowadays. We have evolved. We are all great self promoters. [I am going to write an article one day on how people can sell the crap out of themselves, but can't sell anything otherwise.]

We also have integrators that send us parts list, of which we review and usually find mistakes. An example would be a reader that doesn't work with a particular access control. Or a system that just makes absolutely little to no sense for the particular end user entity. We in all cases, speak our opinion. We often will ask questions to figure out more information about the project and expose new ideas to the integrator. The power of questioning is so strong and by doing that, we make so many things better for our customers on the short and also long run. I do believe there are many good reps at other distribution firms, that also have good peope that really care, and are probably somewhat offended by some of the comments, and maybe just didn't have enough time to actually stop and write it all down in this thread.

As a distributor we are able to keep tabs on technical information, more easily than most installers and integrators. In turn we get a lot of "pick your brain" type phone calls, because our customer base knows that we will tell them true differences between various manufacturers, whereas in many cases the manufacturer themselves cannot do that. Like the broker who has insurance options, We will unravel the manufacturer proprietary names for features and break them down to what they really are, so we know what we are actually comparing. Whether they admit it or not, our customers do see value in that, or else they wouldn't keep calling us. Now there is manufacturer loyaly no question, if we know someone is using Vivotek, we will try to coach them through an issue and way out the benefits, rather than tell them to jump ship to Axis, in the face of their first technical issue.

Not to generalize, but....many manufacturer's staff sadly are often in a bubble and really believe that they have some sort of proprietary new compression, or ground breaking feature, while few do. They bad mouth each other with false claims. We are better than Manufacturer B, because they don't have XYZ (of which they have no idea). Rarely are they called out on this, so it continues. This is also why so many of them despise IPVM, because it cleans up so much of this for the integrator and is really such a good resource. We on the other hand, like IPVM are comparing and contrasting the features and benefits of these manufacturers, testing products before we stock them, and using them internally to get to the bottom and cut through the marketing information for our customers.

Now this article and comments are definitely accurate on many points, because of the distributors it is referring to. Due to their sheer size and strategy to be a logistic hub, nature kind of takes it's course unfortunately. That is why you see the comment of the manufacturers wanting to work with the smaller, more helpful distributors.

To truly be successful, the chain needs all levels, manufacturers, distributors and dealers. (With exceptions of course.) Now if a particular part of the chain is not doing their fair share, that is probably a fault in that particular link, not necessarily the strategy overall. (The grass is always greener right?) I will say that who you partner to go to market with will depend on your goals and capabilities, but make sure you partner with and work with people that actually care and are willing to understand the situation. Don't give in and feel you have to work with "lazy" people. There are good people and good companies out there, that can be good links in this chain. Manufacturers - stop giving in to the distributors that don't provide value, because you feel it's easy and start to give your best pricing to distrubutors (and project deals for integrators) to the ones that are actually "selling" your products not just taking orders.

In business the best relationships are those that are beneficial for all parties, so we need to stop looking for ways to "kill" each other and see the value we each provide objectively and be appreciate of that all around. Again, if the value is not there, than shut up and move on. No one is trapped in this industry. One thing there is plenty of is options.

Any thoughts on how the attitude toward distributors (from both manufacturers & integrators) is changing? For example are perceptions of distributors and their "value-add" improving or getting worse?

To put it another way: if we had survey results for the past 5 years, how would the perception of distributors today differ from the perception in 2010? Would it be meaningfully different, either better or worse?

5, that's a really good question. Since we have not done an earlier survey like this, I can't say anything definitively.

However, we'll track this going forward and see if we can ask any other survey questions to learn more about how this is trending.

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