Distributors: What is their Value?

Author: Brian Rhodes, Published on Jun 12, 2012

What do integrators really think about their product distributors? In some cases, relationships between integrators and distributors span decades. However, to what extent do integrators see distributors as a critical part of the supply chain? In this note, we review our survey results to see what the 'temperature of the relationship' truly is: trust? contempt? skepticism?

Overview

We asked our globally distributed group of integrators the following survey question:

We offered 3 choices: Very Important, Moderately Important and Not Very Important. The responses:

  • Moderately Useful - 44%
  • Very Useful - 31%
  • Not Very Useful - 25%

While opinions are mixed, the general opinion of Distributors are positive. We dig in and break down the explanations below.

Integrator Response Overview

Overwhelmingly, integrators gave feedback that broke into three different categories.

  • Good: The majority opinion is that distributors affect the sales and fulfillment process in a positive way. Good distributors benefit integrators with pricing, logistics, and training.
  • Bad: A smaller, but pointed group of responses consider distributors to simply be 'middlemen'. The phrase 'necessary evil' was mentioned more than once by responders in this group.
  • Ugly: Many integrators spoke bitterly of distributors as competitors. These integrators refuse to buy from distributors who threaten to steal customers or sell directly to them.

Because experience with distributors is so locally dependant, it became difficult to classify which distributors are 'the best' or which ones where 'the ugliest'. Prevailing opinion of distributors was significantly dependent on specific regions or branch offices.

Analysis

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The Good

Many integrators were complimentary of the distributors they work with. These comments reflected the willingness of many distributors to provide real benefit to the relationship. Integrators noted good distributors have 'know how' when it comes to sourcing, specifying, and stocking product.

  • "Great resource for new products and provide services such as configuration"
  • "We typically don't buy in volume high enough to warrant direct manufacturer purchasing, so having a stocking distributor is very useful."
  • "They have a closer knowledge of the problems installers encounter and often have been a technician at some point."
  • "Distributors have generally good knowledge and provide a good sounding board."
  • "Our main distributor is very helpful. They employ sales/techs that are specialized in a specific area: access control, alarm, cctv."
  • "ADI has a systems department where I can call and they can give me design info."
  • "I find distribution to be helpful in product selection when we are doing something that we do not normally do."
  • "Distributors streamline the ordering process and in some cases treat you better than the manufacturer."
  • "Good technical knowledge and ideas are always helpful."

The Bad

Integrator responses in this group spoke plainly they see no benefit in working with distributors. The responses in this group question the value that distributors bring to the table, and more than a few responses called distributors 'a necessary evil'. 

  • "I stock my own equipment, manage cash flow, expend my resources to sell product. Distribution does nothing but take 15% of of my margin."
  • "we don't have much choice anymore....they are a necessary evil"
  • "Very little value aggregated. Better to deal directly with the manufacturer."
  • "a necessary evil, few if any really deliver any addition value other than order taking"
  • "i prefer to go direct, they are just middlemen"
  • "most are just order takers"
  • "Just one more link in the chain to screw up my order."
  • "We find distributors a necessary evil. When we can buy direct, we do. However, some OEMs only sell thru distribution (thus the necessary evil)."
  • "Most of them are just box movers/ cash collectors. Often they can say about product nothing but price."
  • "In summary: Most of the time, I view them as a necessary evil, because AXIS won't sell to me directly."

The Ugly

A big fear of many integrators is that "Distributors steal my customers." There is substance to this fear, as we addressed in out "Distributors Dealing Direct to End Users" report that elaborates how many distributors, especially the largest national chains, specifically bid and resell on 'equipment only' jobs, undercutting the integration channel under reseller cost.

  • "Most want to sell direct to your customers..."
  • "Just don't trust them - they all claim to not sell to my customer but over and over I get cut out because the customer buy's direct from where I buy."
  • "Distributors are notorious for going after end-users (even though many deny it)."
  • "I have had good and bad experiences with Distributors trying to take deals direct and this causes me pause."
  • " if they are approaching customers to sell direct, then you have a MAJOR CONFLICT OF INTEREST. "
  • "I view them as competitors, so we are not crazy about using them."
  • "With so many distributors fielding direct sales staff, the value of distribution is all across the board."

Distributor Value Proposition

Despite the mixed opinions, integrator responses acknowledge that distributors are most valued when they focus on delivering core compencies: product merchandising, logistics, and sales/warranty administration. A substantial number of comments indicate that when distributors act to 'bridge the gap' between manufacturers and end users, their value is most appreciated.

  • "I personally like having a middle man to deal with the manufacturers. They often stock items that I cannot afford to. They are very helpful."
  • "Easy access to large product pool."
  • "Recommends product that you might not be aware of."
  • "For me distributors earn their keep when it all does wrong, its easy to take an order and deliver some cameras, its when the delivery goes missing or the manufacturer has a recall that distributors earn their kudos."
  • "I like being able to fall back on the distributor when something goes wrong or a shipment gets screwed up. Its good for someone to have my back."
  • "ADI does represent many vendors and they handle the warranty issues - we don't have to deal with the vendor directly."
  • "No hassle returns and RMAs."
  • "They are good for getting equipment but their design teams are usually not very good. Ive ran into problems sending them specs and them sending me back something that just would not work for that applications. Good to get equipment and to try and procure demo gear."
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