Dealers, distributors and manufacturers

The marketplace has seen some unusual gyrations in the last decade. Many companies have changed strategies and old taboos have been broken. We’ve seen dealer direct companies change to distribution and companies used to selling through distribution going direct. None of which has seriously changed the face of the marketplace. What are the challenges we all face in our individual roles? Let me explain. Dealers Many dealers try to go direct mistakenly believing that this will insure profitability by cutting the distributor out. More often than not several dynamics come into play that aren’t normally considered. Often the pricing isn’t good enough to justify the prior planning and shipping required for meeting job installation deadlines. Dealers soon learn that a lot of the flexibility that they enjoyed from their distributor is lacking from the manufacturer. Manufacturers are not in the finance business and are less understanding of slow paying customers. Being tied directly to a manufacturer requires meeting volume commitments, which makes it harder to compete in the real world with various specifications and equipment. Distributors Many distributors don’t provide many of the services that dealer want and need to compete in today’s marketplace. Because distributor are required to carry so much and so varied an inventory it is difficult to provide the expertise required on technically complex products. Smart distributors align themselves with equipment manufacturers who can supply technical support in a time sensitive fashion to installers in the field. Innovative distribution seeks to partner with their dealer and assist them in competing in their markets by providing services designed to increase their effectiveness and flexibility. Services like specification development, consulting, sales training, CEU training, joint venturing, bidding expertise, niche market development, and third party leasing. These services make their dealers more competitive and elevating them professionally above their peers. Manufacturers Some manufacturers want to have their cake and eat it too. They start out selling through distribution but the demands for growth, profits and increased market share soon produce a hybrid program that is neither fish nor fowl but equally disruptive of both market channels. This frustrates their distributors and they begin the search for competitive replacement product and their new dealers who resent that the product remains available through distribution at prices in line with theirs. The distributors cease recommending the product and demand decreases putting the manufacturer back to square one. The manufacturer also begins to experience the joys of the collections process. Instead of collecting from one distributor, with whom he has some clout, he is now chasing many dealers who have alternate products available at their local distributor who is happy to see them again. Dealers sell security products to the end user. Distributors sell the products of many manufacturers to the dealers. Manufactures make the products that distributors sell to the dealers. It is an orderly process in many industries. It is very harmonious when we all understand our role and perform it adequately. When we depart from the natural order of things chaos reigns. Exceptions to the rule There are always exceptions to any rule. Historically these have been access control and fire alarm. Many of the largest manufacturers have dealt with selected dealers in a geographically controlled market. Many of these programs have suffered from changes in the market place; the increasing numbers of new and competitive products available through distribution, the sophistication of the distributors in marketing, the increase in technicians turned dealers from the larger companies, and increasing demand for downsized versions of enterprise solutions designed for the smaller installation. All of which lend themselves to smaller dealers being serviced through distribution. An evolving marketplace The continued increase in product complexity and the required technical expertise to insure customer satisfaction with these products is producing a new model for success. This will require a real partnership between manufacturing and distribution. Dealers will require that both parties supply the badly needed training, technical support and field representation by qualified technical personnel to support these products. Recognition of the IT department as the final arbiter in the selection process of equipment and dealers is being felt in the marketplace. Increasingly IT has the budget and the credibility with administration to drive decisions. As more and more products are network deployable this phenomenon will grow. Smart dealers, distributors, and manufacturers will recognize this shift in the decision-making process and respond with solutions that are designed to support the end users and enhance their market share. Henry Homrighaus, Jr. is senior vice president of marketing and sales for Security General International, a distributor with offices in Texas and Oklahoma.