If you ask Mitchell Martin, the president of Synnex Canada if the Canadian market is over distributed his response is an overwhelming “Yes!”
Martin is pleased with the ongoing consolidation in distribution starting from Ingram Micro’s deal with the Chinese conglomerate HNA Group to Tech Data’s acquiring Avnet.
“Consolidation is inevitable on a global footprint. As it relates to Canada; I believe Canada is over distributed already and we cannot sustain the same amount of distributors as we have now in the U.S.,” he said.
What has occurred from Martin’s estimation is that there are distributors and vendors in the U.S. who believe that signing up for the Canadian market will achieve a good relationship with the two operations in the U.S. and Canada. This has led to an over distributed situation.
According to Martin, over distribution undermines the margin opportunities for distributors and resellers. Broadline distributors especially suffer through this and others who are specialized or have a focus on a niche market not so much. “But if they don’t play that way and are just another broadliner with no unique value than it’s over distributed. We see it challenging margins and there is a strong correlation to that with the resellers,” he said.
Martin indicated that sectors such as printing and imaging and components such as motherboards and hard drives are over distributed in Canada.
CDN spoke to one channel partner who said solution providers if they need a printer, or a motherboard or a server can call on anyone of four or five broadline distributors for this product.
But is it truly a problem for both the solution providers and the distributors? This solution provider executive told CDN that it’s more of an issue with the distributor. There are several resellers who work the phones to get a printer for 52 cents less from distributor A over distributor B.
Another way solution providers have avoided the margin crunch on commodity products is by setting themselves up with one primary distributor. But doing this they can leverage a distributor for a good price because they are devoting 90 per cent of its business with that main distributor.
One quick hit before I go. NetSuite Inc. has appointed Sam Levy to the position of Vice President of Sales Americas. In this role, Levy will be overseeing NetSuite’s sales efforts in North and South America. Levy most recently served as Vice President of Sales at NetSuite and he was responsible for sales for product companies across manufacturing and wholesale distribution.