Mike,
I think you summed it up pretty well.
I think the problem is that there is an identity crisis in the
Distribution/VAR/Manufacturer businesses.
I don't think its the fault of the vendors, but just the nature of a
competitive industry. Everyone's looking for a way to cut some costs to be
more competitive.
Everyone thinks they can do better than the other guy. When something is
working or not working, somebody is always trying to find a better way.
As a result everyone tries to be everything to everyone, or tries to
replicate what someone else is doing that appeared to be working. Then
somebody always tries to cut someone out of the loop, so the person cut out
of the loop then tries to fight back and cut someone else out of the loop.
Everyone wants to get as close to the manufacturer as possible, every one
wants to get as close to the client as possible. Then support comes to play,
and then everyone realizes why they want to hide and get as far away from
the customer as possible. Then finance, availabilty, or lack of competition
to effect change comes to play, and everyone learns why they need to get as
far away as possible from the manufacturer. Its vicious cycle that
constantly changes and goes around in circles. It would be OK, if everyone
learned from the mistakes, but what usually happens is that history repeats
itself and the cycle goes around and around in circles. But thats not the
vendor's fault, times change, and what worked in the past may not still work
later down the road. And peoples business change, and sometimes jsut want to
do something new, or capitolize on the talents of a new asset or staff
member. This creates the identity crisis.
I think the most successful vendors (distributors/VARs/Manufacturer) are the
ones that solve this identity crisis and are clear on exactly what it is
that they want to be, and the roile they need to play, and the advantage of
what they offer.
For distribution its simple: "availabilty and finance". Get gear to people
quicker, consolidate shipping costs nationwide to lower end cost of to
delivery locally quicker. Thats what a distributor does. And the distributer
that does it best will have the abilty to acheive lowest cost and the most
clients. But I do not think that "distribution" necessarilly has to limit
target client base or deliver lowest price. That is another issue realted
to "margin". I think the mistakes distributors make is that they confuse
needing "margin" with "adding value". Margin is tied to the type of client
and the cost to support them. You charge more margin if the customer will be
more headache such as lower volume purchases or less loyal in its buying
patterns, or typically pays 30 days late. Charging higher margin allows a
distributor to keep those difficult client and still ahve financial gain,
effectively increasing volume and profits. Where the problem comes in is
"adding value", what everyone typically wants to do to increase margins.
But by adding value often the end result is the distributor crosses the line
of their role, and often gains an identity crisis of what they are. A
distributor adding value is really a Mega-VAR. Their is nothing wrong with
that, but its a good way to alienate a VAR channel. And the Mega-VAR should
expect a certain amount of the VAR channel to reciprocate and try to go
around them. So I think a distributor needs to be careful about what value
it is that they add, meaning adding value to make them a better distriubtor
compared to adding value that someone else lower in the food chain already
offers.
But the big secret is realizing the core essential value a company uniquely
offers. I've had difficulty with this in my own business. For example, a
WISP can't be both the best distributor and the best ISP, they are two
different businesses with contradicting demand. In our case even deciding
what message goes on marketing mailers. What is it exactly that WISPs
provide?
We learned some of our core unique benefits were....
"Broadband is already in the building" - quick guaranteed availability.
"If your business lost Broadband for a day, what would it cost you?" - 2 hr
repair time, true diverse path redundancy, again optimizing availabilty to
broadband.
These are things that we can uniquely offer that are worth paying for.
I can attempt to sell 99.99% reliabilty, lower price, better service, faster
speed, until I am blue in the face, and deliver those features in many
cases, or possibly the best compromise of all three. But the truth is,
everyone else also can offer those messages in some shape or form. If you
look long enough, there will always be someone faster or someone cheaper.
I'm more effective selling availabilty, my unique asset to my targeted
prospects. (Why I can offer availabilty better, is another discussion).
If it all boils down to one core thing, "availabilty", why do we bother with
any other messages?
I think the same needs to apply to distriubtors. Defining why people buy
from them and focus most on that. The other value add is just gravy, to help
increase margin, but not the reason people buy. For example, I buy from
Electrocomm for two reasons.... They gave me terms, and they carry stock of
a couple products I need regularly. I buy from Trango, because they are the
only place to buy it from. I bought from WISP-Router, because they tended
to have stock of Mikrotik and PacWireless antennas, and easiest for me to
order after business hours with their unique web system, and when I always
ordered last minute UPS red, its important that the distributor had
everything in one place. (PS. I no longer buy from them anymore for other
reasons). The point I'm making is, for distriubution to WISPs, it is also
because of "availabilty". Availabilty can be expanded to many
sub-categories (but still availabilty). "availabilty at the right cost",
"availabilty with the lowest shipping costs", "availabilty because of ease
of ordering", "availabilty because terms avaoid cash flow barriers",
"Availabilty- because unique authorized channel for a specific
manufacturer", availabilty because the staff is knowledgeable and can help
you find what you are looking for", "availabilty when things break, with
fast RMA turnaround". But a distribuotr can add these value-adds without
losing their identity of what it is that they do.
If I were looking for a job in distribution, I would pick a distributor who
could clearly describe their role and value in two words, and was the most
competitive at offering that. And then my screening process afte that would
be to investigate what there policies were on customer service to understand
what value they put on a customer, to make sure their policies would not
alienate clients. I don't care how good a company delivers its core
competency, if they do things that alienate clients clients don't like to do
business with them.
Thats my 2 cents on distribution.
To answer Jeff's question. Who someone likes to buy from is not always who
they buy from for reasons beyond their control. For example, I really like
to buy from Electrocomm, they offer everything that I'd want from a
distributor, except, they don't carry the products that I most use.
(although not by their choice, I'm a Trango house". I really liked to buy
from Defacto because of service, but again, I use Trango. I think a better
question to ask is what product are people buying today? And that is going
to be telling you where they buy from. Comparing the big distributors like
Tesscos, Electrocomms, and Talley's, are not fair to compare against small
distributors of OEM components. If WISPs want spare parts for Mikrotik or
StarOS OEM system, sales aren't going to be going to Tessco and Electrocom
for those products. For sales people it depends who their target client
base is. I like Tessco because they have availabilty of anything for a fair
price, if I can wait for the gear. Its always the last-in-line place I shop,
because they can always get what I need, and no need to look further. But
they are never the fist palce I call, because their availabilty is worse
than others after considering their shipping policies that suck. I can
order from Double Radius and have the gear tommorrow at ground shipping
costs. I usually call ElectroCom first (if product they would carry), as I
like the people, and I know they'll try hard to get me what I need at a fair
price. If I'm looking for a hard to find item, I might go straight to
WinnComm, because on those special order items, WinnComm might actually
already have it in stock at a heavy discount. Does someone want to get all
the specialty order business, or do they want to get some of the orders in a
higher volume business of standard common stock stuff? So again it goes
back to, what is it that a distributor is trying to be. The goal may not be
to be something to everyone. Their just needs to be a solid market for what
you offer.
If I was a sales person looking for a job, the other thing I'd look for is a
vendor that was generous on offering terms. Offering terms is the number one
way to attract business. But there is risks to that, and you need a
distributor in the position that it is standard proceedure for that risk to
be taken, to optimize ease of sales for everyone.
Tom DeReggi
RapidDSL & Wireless, Inc
IntAirNet- Fixed Wireless Broadband
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