Impact Systems is prepared to abandon its channel-only business model and go direct if the pressure of a disproportionate market and "lazy" resellers continues to squeeze its bottom line.
Impact is a desktop PC and server products distributor operating in Australia and New Zealand (A/NZ), with some business in the Pacific Islands. It has 4000 reseller partners.
The boutique distributor has not yet committed to the move, but managing director, Peter Agamalis, told ARN he will make a decision in early 2015.
“It is still up in the air,” he said. “I’ve already got the plans to go to market if I was to make that decision. I know exactly what I’m going to do, I know exactly how I’m going to do it, and I know it’s going to upset a lot of people.”
Impact, which is in-part an importer, is confident it will dominate several product segments due to its pricing structure if it were to sell direct.
The idea to switch business model is the outcome of shifts in attitudes and purchasing habits among Impact’s value-added reseller (VAR) partners. According to Agamalis, reluctant resellers are opting for back-to-back product orders rather than maintaining adequate stock to support customers, while many are repeatedly uninterested in acquiring product regardless of the offer tabled by the distributor.
Although Impact is profitable at the moment, Agamalis said it is hard to remain in that position.
“The bottom line is that resellers have become lazy. We have a specific pricing structure that demonstrates our prices against the competition. We have elements – marketing collateral, professional marketing services, services resellers can expand on, and more – that we offer for free to give resellers a value-added experience.”
Using desktop PCs as an example, he said, “Resellers don’t realise that selling a desktop has much broader benefits.
“When you sell a PC to a real estate agent, you can become its service agent to offer further hardware and services. When the customer wants to upgrade, it will go back to the same reseller. It’s about a broader, long-term potential.”
Agamalis said resellers regularly fail to see the long-term opportunities from selling hardware based on assumptions about the PC market and customer spending.
“We offer resellers an entire business opportunity on a platter, and they still say no. What do you do? How are we supposed to survive when resellers aren’t giving us business? The alternative is to go direct. When that day comes, resellers will have themselves to blame.”
But Agamalis does not exclusively blame resellers for the shift in channel culture; he claims the market has become disproportionate because desperate vendors have minimised potential margins for bricks and mortar resellers by opting to either sell direct themselves, or selling to online stores which can resell at closer to cost price and survive. As a result, resellers become disheartened.
“They say, ‘we can’t compete, so why should we bother?’ Before there were so many online players, average resellers were filling up stores.
“Times have changed and it is what it is. Impact is prepared to support the channel with a lot of product, but it has to be reciprocated.”
Amid his frustrations, Agamalis assures he is unwilling to give up and will maintain a channel approach if it remains viable as 2015 nears.