While the source may be somewhat biased, it appears the IT distribution channel – at least in the U.S. – is not only surviving, but thriving.
The reason? Vendors are seeking to increase their presence in the small to mid-size business market, according to the Global Technology Distribution Council (GTDC), an international consortium of IT distributors.
Members of the GTDC say they’ve experienced substantial growth in sales across multiple product categories. And they have the numbers to back up their claim.Market research firm NPD conducted research on behalf of the GTDC (NPD provides point-of-sale sell-through information for the IT distribution market, from VARs to direct marketers to corporate resellers).
During the six-month period ended March 31, storage systems, computers, RISC-based systems and communications product categories grew between 10 and 20 per cent (this is based on U.S. sales data from member companies). During that same period, U.S. sales were up seven per cent.
More significantly, however, is that 88 new vendors started doing business with these distributors. While it’s not clear if the vendors introduced brand-new products into the market or moved away from a direct model of distribution, it reflects a significant number of new products entering the distribution channel.
And let’s not forget that Dell – the previous champion of the direct model – has turned to the channel. It’s hard to think of a more fitting example than this of the re-emergence of a channel that was once thought to be dying.
The GTDC says the “direct model mania” has subsided, due in part to a strong push for business in the SMB space – where the channel has traditionally played a strong role. Most small businesses prefer to deal with a local reseller partner, rather than be a small fish in a big pond with some of the larger manufacturers. This symbiotic relationship also works well when it comes to service and support, where they can deal with a familiar face rather than rely on a toll-free number to an offshore call centre.
The research also shows there have been advances in financial management, where American GTDC members’ selling, general and administrative expenses declined from seven per cent to 5.8 per cent of sales. This is a convoluted way of saying that distributors have improved their operational efficiencies.
These members handle some 50,000 customers monthly, ship more than 150 million items per year and sell 100 million software licenses per year – not to mention extend more than US$5 billion to the channel.
Though it’s easy to be skeptical of research about an industry conducted by that same industry, it’s clear that the IT distribution is not dead. It seems, instead, it’s the direct model that’s ailing.
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