Reseller insolvency rare, from distie perspective
- 02 August, 2012 22:00
Maclean Computing’s July 13 liquidation was a relatively rare occurrence in the channel, from a distributor's perspective.
“I think it’s less common now than it used to be, let’s say eight or nine years ago,” says Paul Johnston of Express Online. “There’s a lot more care applied to how credit is given. It's something you’ve earned. And so a number of companies have tightened up the processes. It used to be pretty slack. A reseller used to say I’m starting a business and I need $10,000 or $20,000 in credit, and you pretty much got it.”
Distributors have put in place credit searches and due diligence, sometimes taking insurance out against default, after learning lessons from the days of high volume, quick turnaround. This was especially true for some companies which would buy PCs on credit, sell stock off at a low rate, go into insolvency and go back into business under a new name, but seeking new supply arrangements with vendors that had no experience in the local market.
While distributors interviewed for this story said they did not believe that was the case with Maclean Computing, there was a sense that it would be difficult for Maclean Technology, which was formed in November last year, to gain trust in the channel from suppliers.
“Everybody that has worked with Allan Maclean in New Zealand for a large number of years, says the support they’ve gotten was because of Allan’s relationship with people and that probably has contributed to this because everyone trusted him,” says Paul Plester of Express Data.
Both Express Data and Express Online (as Simms) were listed in the initial liquidator's report as secured creditors. However, neither company is owed any money from Maclean Computing, nor have either done business with Maclean for at least a year.
Express Online insures credit it gives to a company. Express Data insures very little of its credit, according to Plester. But it does do extensive credit checks. The distributor is said to have discontinued its relationship with Maclean because of missed payments.
“I think it was the whole global financial crisis that brought a lot more due diligence robustness into people getting credit,” says Plester. “Historically, someone could sign a personal guarantee and get credit. Depending on how their business grew or how closely they were monitored or how well they paid their initial bills, that credit was relatively fluid in terms of being increased as demand required.”
Plester says Express Data makes it a point to understand a partner’s business, and emphasises open communication, in order to detect when it perceives business starting to go south.
“If we’ve got a small guy in Wellington selling to IRD, for example, that has a few more impacts on us…than a small reseller we’ve never heard of before saying the same thing,” he says. “Our ability to understand their business, the end user, the flowthrough, and the engagement is important because we are obliged to share POs with our vendors. When someone walks in the door and says they want a $100,000 order, it’s almost always too good to be true.”