Distribution Partnering Guide: Valuable Partnerships

Savvy salespeople at Computer Discounters understand the value of long-term partnerships. Some of the Virginia Beach, Va., company's best customers have been buying products from it for years. But when it comes to sourcing

certain items, Computer Discounters is willing to look beyond long-term, value-driven partnerships to something else that is helping its bottom line today: bargains.

Like many reseller and service organizations, Computer Discounters is looking beyond traditional wholesalers and is now bidding for products on eBay. Recently, for example, the authorized Hewlett-Packard Repair Center hoped to secure an HP LaserJet 8100 printer on eBay for approximately $1,000. That's a price Computer Discounters cannot afford to pass up, much to the chagrin of some of the megabillion-dollar distributors that offer products to Computer Discounters and thousands of organizations like it.

To distributors, the rise of alternative sources of computer products represents one of the most significant challenges to their businesses. Estimates vary, but off-distribution product sourcing might represent as much as $50 billion worth of goods bought in North America. According to research from the Global Technology Distribution Council, national, regional and specialty distributors account for 60 percent of the reseller products purchased. The balance of product sourcing, thus, is fulfilled by a legion of manufacturers, local resellers, retailers, dealers, e-tailers, mail order houses, exchanges, auction houses and other product sources.

Some distributors have reacted to the growth of the off-distribution product sourcing by sticking their heads in the sand and ignoring the phenomenon. Others have taken the "if-you-can't-beat'em-join'em" approach. Ingram Micro, for example, instead of sitting idly by while customers choose alternative sources for products, has responded by opening an auction site of its own on eBay, where both resellers and customers alike can source products from Ingram's inventory of slow-moving merchandise.

Truth be told, Ingram and other distributors would much prefer that partners source products via traditional means. But with so many options--including auction houses like eBay, direct-response fulfillment houses including Dell, specialty catalog suppliers including CDW and e-tailers such as buy.com--distributors are challenged to cement partnerships like never before.

Ironically, VARs and solution providers stand to benefit from the current situation because competition has forced distributors to offer new benefits to entice customers. Consider the experience of Tim Baldwin, COO of eServ, a Sun reseller in Peoria, Ill. For years, distributors have filled his voice mailbox with highlights of new services in an attempt to cement their relationship with his $15 million company. Recently, however, MOCA, a division of distributor Arrow Electronics of Melville, N.Y., helped arrange for his salespeople to attend a sales seminar that actually put money into his business. The training, put on by longtime IBM veteran and independent sales guru Robert Swanson, taught Baldwin's salespeople to look beyond traditional IT buyers and cultivate ties to higher-level business decision-makers instead. Thanks to Swanson, eServ made inroads at nearby manufacturers Caterpillar and John Deere. Baldwin now views MOCA as an altogether different kind of partner.

"Absolutely one of my best," he says.

To better position their companies, leading distributors are working overtime to cement relationships with companies like eServ. They are going about it in two ways: pointing out the pitfalls of off-distribution buying and promoting the value of traditional distribution.

Part 2: About Alternative Channels

Part 3: Value In the Era of Distribution