What is happening in the distribution market? Hi-Tech Security Solutions asked a few people who have spent years in this tough and competitive market what changes they saw taking place. Is it going to be a market dominated by large players with big pockets, or is there still space for smaller, niche players with high levels of expertise?
MJ Oosthuizen, international business manager at Sunell Security, says that with many of the larger manufacturers now opening their own consumer-based stores, the future of larger distributors is looking rather challenging. The rub comes, he says, with the enormous range of product models being offered by each manufacturer.
A good distributor needs to have the technical skills for each product and model in order to truly know the spectrum offered, making the logistics quite staggering. The answer is to be able to multi-task across a number of products plus the models in the ranges, with dedicated product or brand managers being the ideal solution.
Ingo Mutinelli, sales director at Elvey, believes that there is a definite shift from merely moving boxes to providing customers with a value added service. In what he terms a cutthroat market, he says it is also essential to maintain large stock levels since if you don’t supply it, your competitor is sure to do so. He adds that specialist technical skills will come to the fore and differentiate the wannabes from the reputable, genuine distributors.
According to Jason Whitson, sales director at Pinnacle Security Solutions, many of the smaller companies will continue to be absorbed by the larger distribution companies. This will allow these distributors to provide both the big box moving capabilities as well as the niche product specialist capacities common with the smaller distributors.
Pasco Latucca of Security & Communication Warehouse, points out that the distribution industry is diverse and includes traditional retail (like Makro), IT solutions and hardware retailers, traditional security distribution as well as specialist distributors. Retail outlets and IT stores are commodity driven and will move boxes, with limited technical advice and service. The medium level traditional security distributors will provide slightly more technical support while the specialist distributors will focus on a narrower band of hi-tech equipment, with high levels of technical expertise and support.
Oosthuizen says that while it involves a substantial capital outlay to hold adequate stock, it is critical to sustainability. He says that Google is one of the distributor’s biggest enemies, since many customers find a product model they like, unaware that it is not a standard model in the South African environment or simply not popular enough to keep on the shelf. Customers are becoming more demanding in terms of what they like and want and are putting pressure on distributors to stock products and models that may have limited popularity.
The right model?
Is there one right distribution business model? Latucca says that the business model should depend on the applications and personal preferences. Since the margins are lower in the retail arena, it is not necessary to employ extensive technical skills. However, the mid-range distributors should have a technical backbone and for the specialised distributors this function is critical. At this level, the technical employees should be able to take a project from conceptualisation, through design to installation and commissioning and even maintenance.
Pinnacle Security’s model involves the appointment of brand managers to market and support their own brand both to the market at large as well as the sales force, who are in turn supported by product managers to ensure sufficient stock levels are maintained Pinnacle offers both pre-sales training and on-site technical support. Oosthuizen says that it is difficult to have the right business model as there are just too many products and model ranges with too many similar features. He is a firm believer that there will always be a need for distributors who are able to provide competent technical advice and support, therefore adding true value to a client wanting to buy a box.
Mutinelli says that that there is always room for improvement but that the feedback Elvey receives from customers is excellent. The company maintains a large infrastructure and provides sales and technical backup at branch level as well as from head office, with comprehensive stockholding, at each of its 20+ branches in South Africa and Africa.
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