Distribution disasters?

In his final column our correspondent voices his thoughts on manufacturers who have multiple paths to market.

There are 2 principle routes to the trade market for AV manufacturers in the UK – distribution or direct to dealer. Both have their advantages and disadvantages, but both are valid paths to market.

So, does a manufacturer need both paths to market and if concentrating on the distribution path, does that manufacturer need multiple distributors in the same market? No – not really.

Too many manufacturers have multiple distributors as well as a direct sales force. Signing three different distributors in the same market place doesn’t give you three times the coverage, it simply creates a bun fight between the distributors who find their margins driven down. Consequently the distributor loses interest in the product, doesn’t put the effort into pro-actively selling the product range (pro-active work is expensive and time consuming), which leads to a decline in sales. The manufacturer gets frustrated at the lack of sales and looks for another distributor to increase sales and the whole thing starts all over again!

Let’s examine the two routes to market;

Distribution - distributors have ready made client bases and established businesses and market penetration. If you are a small or niche manufacturer looking to break into the market then distribution may well give you a quick route to volume sales. But how many distributors do you need?

Direct to dealer sales – here the product manufacturer runs their own sales team and sells direct to the AV dealers. This is a slower route for start up companies seeking an entry into the market and often is more suited to the bigger ‘names’ in terms of manufacturers.

Some manufacturers have multiple distributors and also sell direct. All this achieves in my eyes is to confuse the market. The distributors fight each other, the manufacturer fights the distributors and everyone loses as the margins are driven into the floor.

It is far better to concentrate on growing your business through a single distributor and worry about if that is the right distributor, rather than try to use multiple distributors to develop the same market. A manufacturer running three distributors in the market doesn’t get three times the coverage – they just get three times the headache and three times the numbers of complaints about lack of margin in the product!

The manufacturers really need to review their routes to market. We have direct to dealer sales, channel partners, distributors, sub-distributors et all. But are any of these non-dealer paths really adding value to the industry and doing the manufacturers justice? Are the manufacturers getting the returns they want? And most of all, are the dealers and end users getting the service and support that they need with all these choices of where to buy the same product? I think the answer to the last question is almost certainly a resounding ‘no’.

I wish manufacturers would select a distributor on the basis of the technical competence of that dealer to support the product, as well as their ability to ‘shift boxes.’

Recently, I tried to get some information on a long throw lens for a projector from a well-known distributor. The technical support person had never heard of the lens I was after, couldn’t give me any details on it and suggested I call the manufacturer in a foreign country. Great, so one of the national distributors can’t even give me the focal length of a long throw lens for one of the projectors they distribute. Suffice to say, I never rang the manufacturer and went to another distributor where I selected a different manufacturer’s product and the technical support person could give me all the information and support I needed.

Manufacturers need to select their distributors carefully, they need to train the sales and technical staff and make sure that they can answer the common support questions. They also need to question if that distributor adds value to the brand and path to market. If appointing distributor B in addition to distributor A is going to result in a bun fight on price between the two companies and not grow the market, then there is no justification for the appointment. If you then add in direct sales you simply add to the mess.

Some large manufacturers will no doubt need both the direct sales route for their major accounts and a distributor to look after the lower end of the market. But do you need four different distributors to go after those same accounts? And if you have a very successful sole distribution agreement with a competent distributor, with growing sales and good support to the dealers, why risk destroying that relationship by opening another distributor in the same market – you won’t get double the business.

The distributors can also do their bit by not handling eight different brands of plasma screen. Concentrate on a limited range, grow the sales for that range and don’t be paranoid when one of your competitors announces a new brand to the market thinking that you also have to have that brand.

If everyone took a more pragmatic view of the market, perhaps the support would be better, sales targets would be met, the customer would get better support and everyone would make more money. Which after all, is what we are all here for!

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