Reseller News

Branching out - distributors weigh diversification dilemma

When is an IT distributor not an IT distributor? There’s increasing product convergence in the industry, with moves by some players to spread their vendor net and consider providing more third party logistics for non-IT brands. Reseller News set out to discover how far technology distributors could, and should, step out of their comfort zone.

For Australian-based Firewall Systems, the recent move to change its structure to include a new holding company, Distribution Central, for operational logistics and other units specialising in particular areas in IT, was about capitalising on new opportunities.

As marketing director Nick Verykios points out, the logistics facility could serve vendors outside IT with customer transactions, and need not be limited to the technology industry. “It could be consumer electronics, it could even be fridges,” he says. “For us it’s just an opportunity. We built an infrastructure from scratch; the most important thing is not the products we’re pushing but the way the products are moving around.”

For local distributor Renaissance, capitalising on new opportunities is founded on making the most of its track record in brand representation. Brands general manager Mark Dasent says although IT will remain its core business, the company does not have to limit itself to the sector.

“Our concept is about brand representation and taking it to market and setting up channels, sales and marketing and technical support. That doesn’t have to stop at IT.”

Just how far diversification goes may be dictated by the extent of change in the industry. As Dasent points out, convergence has presented his company with a chance to work in new fields and with firms it hasn’t dealt with before.

“The IT market has become so diverse and is encroaching on other areas.”

When Renaissance started representing Fort Knox’s Alarmfone home security system it began a relationship with Placemakers, and Dasent says this and similar companies may want to incorporate Renaissance’s existing brands in its stores.

“If you’ve got a battery stand, why not have digital cameras or flash memory next to it?”

For Dove Electronics, it also made sense to seize the chance to adopt a range closely related to IT – namely Swann CCTV security – especially as it says a significant part of its channel was already selling it.

Product manager Jonathan Williams says if vendors diversify, Dove tends to take on their extended ranges rather than picking and choosing in the name of staying within IT.

However, he says the move to diversification may be more prevalent among smaller players in the distribution game.

“For a lot of smaller distributors, if product A is growing, that’s where they go. But for the core distributor market such as Ingram Micro, Dove and Renaissance, that’s not going to happen so fast because those products won’t be the main business any time soon.”

As far back as 2001, Renaissance and what was Tech Pacific were touting diversification as a possible avenue to future success in Reseller News, at a time when the convergence trend had clearly emerged. In fact, Tech Pacific was distributing Sony video cameras, Minolta cameras and JVC home electronics. As recently as 2005, Ingram Micro was reported as a provider of third party logistical services for Vodafone, Wises Maps and JVC.

Managing director Jay Miley says Ingram’s strategy is distributing only product ranges that have synergies with its core business of IT.

“What we don’t do is look at completely different business,” he says.

He maintains a distributor’s specialisation comes down to “business 101”.

“By focusing and specialising, companies serve their customers more effectively rather than ones who try to be everything.”

Ingram Micro must consider whether a particular strategy helps resellers and vendors go to market more effectively or reduce costs, Miley says.

But distributors can go too far down the diversification route, as another example from Reseller News’ pages show. In 2005 Christchurch distributor Go Direct shut up shop and resellers knew something was awry when they noted the company began stocking items totally unrelated to technology.

At the time, Glenn Cousins of Christchurch reseller Geek In Your House was quoted as saying: “For some reason they decided to change their focus and began selling a bit of everything. I was quite perplexed to see them selling packs of animal toys and large garden gnomes next to the motherboards and CD-writers.”