When It Comes To Distributors, Small Is the New Big

VARs are getting big advantages by working with small distributors.

You could summarize in one word why 9-month-old VAR InTouch Technologies buys all its storage equipment from Promark Technology: accommodation.

"With one of the large distributors, it's rather difficult to get terms from the jump," says Mike Schirf, president of the small Frederick, Md.-based reseller. But Promark offered that and more. "They've bent over backwards, right down to...picking up additional [product] lines."

Promark is a hit on the other side of the spectrum as well.

"There's a lot more support of the vendors we try to incorporate in our solutions," says Michael Cook, a technical sales support staff member at Chantilly, Va.-based GTSI (VARBusiness 500 No. 62). "They give us additional resources. They help on [product] registrations when I need them. They'll work with me more on the pricing aspect."

After years of industry consolidation, VARs still find they need smaller distributors. Niche expertise, personal attention and extra services, not price, keep resellers coming back for more.

"It's not always easy to compete with a Tech Data or Ingram Micro at 2- or 3-point business," says Todd Hartung, vice president of marketing at Promark. "But is that truly selling the products, or is it just giving them away? If you look at us, we really look like a systems integrator." Hartung trumpets having systems engineers, depot-level service, a 200-mile-radius on-site call territory, and a GSA Schedule available to resellers. "[VARs] can leverage expertise where they might be light or not have it at all."

Sometimes the largest distributors are as new to a specific market as smaller players, so size is a less overwhelming advantage.

"I feel that we're almost going step-by- step into the [business wireless-handset] space at the same time [as the big distributors]," says Brightpoint senior vice president Dave Brown. Although the distributor only started serving VARs in March, it has extensive experience in products and dealing with service providers. "The overriding concern is that they have the channel, so we have to beat them in other ways," he says. For example, the company provides extensive metrics on passed-through service-plan commissions.

Distributor Interlink Communication Systems in Clearwater, Fla., almost literally sits in the shadow of Tech Data. It also looks to use its flexibility to compete in the networking market.

"We can offer marketing programs to our vendors that can be deployed in days and weeks as opposed to months and longer," says Interlink vice president of marketing Orin Fatolitis. "A lot of the resellers don't have a marketing component in their infrastructure. We might take an Adtran piece of marketing and customize it with the reseller's logo and Adtran's message. Interlink can pass the collateral [sales sheets, brochures, data sheets, etc.] to the VAR or even send it to the VAR's customers and prospects. "And the main [distinction] is that we'll provide the marketing to the resellers gratis."

But most important, Fatolitis says, is the extra degree of service specialized distributors can offer to VARs, letting them sell the way their customers buy, not the way the distributor sells.

"Eight or 10 years ago, the reseller was the guru, the all-knowing guy," Fatolitis says. But today, customers research products on the Internet. "About 70 percent of the time the end user is telling the reseller what he wants. But when they come here, we validate the solution." As a result, Fatolitis claims a return rate of only 1.6 percent, lowering the postsales costs of the VAR.

Like other smaller distributors, Interlink emphasizes more specialized products but with smaller volumes than those of larger players. That gives the company a chance to get the same level of attention from vendors as its big competitors.

Conversely, smaller distributors can focus more attention on the vendors whose products they sell.

Take FreeStone, a Denver-based disty with all of about five employees. The company is the exclusive distributor of a security-software product from CyberSoft and has close working relationships, too, with a few other vendors. In fact, FreeStone identifies so closely with its vendor partners that it sees its competition as vendors of competing products, not other distributors. FreeStone even acts in some ways as a vendor, developing customers in new territories with the intention of turning them over to a VAR.

FreeStone's size is an asset in its dealings with Conshohocken, Pa.-based CyberSoft, which works with larger distributors for its security toolkit but wanted a high-touch disty relationship when it came to other products in its portfolio. CyberSoft wanted to work wth a disty that was willing to invest time and energy in the relationship. And as CyberSoft vice president Rich Flynn says, "FreeStone was a hungry company."