The Silver Lining

On the one hand, thinning margins on high-volume products are pushing more vendors to deal directly with larger solution providers. On the other, vendors are seeking to maximize their most profitable relationships with solution providers that are their best customers, no matter the size.

One could conclude that these cataclysmic events threaten the very existence of the distribution model. Still, it truly is an ill wind that doesn't blow some good, and this change in the overall business climate is no exception. That's because the current state of affairs is a long overdue catalyst for change that in the long term will make distribution companies more valuable to the industry.

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MICHAEL VIZARD

Can be reached at (516) 562-7477 or via e-mail at [email protected].

One of the biggest knocks against distributors for years has been that you had to be a multibillion-dollar company to play with them, because even the air their employees breathed was billed back to vendors at a markup. Eventually, bigger vendors began to feel abused and smaller ones complained that broadline distributors were a waste of time because although they paid exorbitant fees, their products were lost among thousands of others.

As we enter 2004, however, broadline distributors have discovered that smaller companies with innovative products that carry high margins are actually their best friends. As such, both Tech Data and Ingram Micro are for the first time in years aggressively recruiting new smaller vendors with attractive terms.

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For solution providers, this is great news. Broadline distributors are finally bringing their extensive credit and logistics muscles to bear on innovative solutions that their channel partners can actually make money on.

For the industry as a whole, this is a major improvement, as well. The length of time it takes for an innovative product to become a mainstream offering should be greatly reduced. And the number of companies that fail because of their inability to bring a product to market should also decline.

So if you're the CEO of a startup vendor, you should take note of the cloud hanging over distribution today because it contains a silver lining for companies like yours.

What value does distribution offer you? I can be reached at (516) 562-7477 or via e-mail at [email protected].