Axis' partner police - keeping you from getting hosed by web resellers?

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04/06/2010
As part of my ISC West coverage, I related a little bit of the press briefing put on by Axis, during which I made myself slightly irritating by asking questions about their claim to sell "100 percent through the channel." How could this be, I wondered aloud (and have been wondering), when any schmuck can buy an Axis camera off of the Amazon Web site. Like, you know, right here. How is me buying something off of Amazon "going through the channel?" At this point, I was introduced to the concept of the "partner police," and the fact that Amazon is just a reseller, and doesn't even get the best pricing because it's not actually an authorized reseller, and because there wasn't time to really go into it at ISC West, I had a conversation today with Larry Newman, director of North American sales, about how Axis operates its channel and how the company creates transparency so all installers and integrators and resellers know where they stand with the company. I think the conversation was instructive and may correct some misconceptions that exist about Axis in the marketplace. Maybe those misconceptions were my own alone, maybe not. Regardless, here's a bit of a back and forth, edited for brevity and clarity, between me and Newman: Me: So, what do you mean by partner police? How does that keep internet resellers from undercutting the installers and integrators? Newman: The Partner Police, well, that's kind of an internal thing I've called it. We’re not just the police, we want to ensure that we run one of the most transparent channel programs, and with the highest consistency and integrity, so the partners always know where they stand, and we can treat everyone in a fair and honest method. We want to make sure when you’re an Axis Partner, there’s a true benefit to being a partner, and if you’re an Axis Gold Partner, or a Silver Partner, or just an authorized partner, you get the benefits of being a gold, silver, or authorized partner. We want to make sure everyone earns their way up the ladder, those that work the hardest and drive the projects. If you spec and drive a job, you're the one involved in the job, you should be rewarded with that opportunity, within the limits of the law, of course. When someone joins the program, everybody joins at the authorized level. Based upon revenue commitments, revenue production, you have the ability to move up the chain or down the chain, and we do have on a quarterly basis a partner review process - it’s an automated process, but we review all of the partners in the channel. If someone does exceptionally well, we’ll move them up to the next level. If someone does not make the requirements for silver or gold, they get a letter that says, "thanks, you were supposed to do x, you did y, now you have a quarter to catch up, or we’re going to move you down one level." Me: But you don't actually sell directly to integrators or resellers, right? Newman: We basically sell to seven customers. We sell direct to seven distributors. Me: Globally, or just in the US? Newman: In the US. There’s a few more in Canada. We have seven distributors in the US, period, which is very restrictive compared to our competitors. They in turn sell product to integrators, resellers, dealers. They do not sell to end users. Me: And Amazon is one of those resellers. Newman: Amazon is a reseller. Axis does not sell direct to them. Axis very honestly sells only to the seven distributors, and we don’t restrain trade in any way. We don’t tell them who they can or can’t sell to. The large end users with project driven business are going to work with integrators who purchase from distributors, though. The Amazons of the world are not taking business in the solutions sales business. They're selling the ones and twos of cameras to the end users who want one or two cameras. Rarely are they doing the large amount of cameras to the end users who are doing the integration-necessary solutions. In a school for example, the camera is only a small part of the solution. You need to make sure the network infrastructure is there, the VMS, all that integration. Anyone requiring a total solution is not going to buy from an Amazon. And the system is designed such that the higher level of partner, you have the potential of receiving a better price than a person buying from an Amazon. We use the word "potential" because the only price we can set is the distributor's. We publicly list the MSRP of the product, but what I would always challenge folks to do is go on to the Amazon and look for any Axis product and see what percentage off list price you can purchase an Axis price for. We monitor weekly our pricing on the web. Our web pricing is relatively close to MSRP, where the majority of our competitors you can find their products 40-50 percent off MSRP, because they don’t police the web. Me: So what level partner is Amazon? Newman: Amazon is not even an authorized partner. They don’t have any relationship with Axis at all. Their relationship is through distributor. Me: So, to be a partner do you have to have an installation arm of some kind. I'm sure their volume is large enough... Newman: To be an authorized partner, you don’t necessarily have to have an installation arm, but there is criteria that says you don’t exclusively sell product on the world wide web. The other says that you provide a total solution, not just sell cameras. The channel program is a solution program. It was never designed for the web resellers. We don’t have a relationship with a Amazon. Me: So, if you see a too-low price on the web, what do you actually do? Newman: The first thing we do is see if they’re in the channel partner program. If they’ve signed that agreement, agreeing to not sell exclusively on the web and not below MSRP. If they are a partner, we call right away and say they are violating the agreement, they’re advertising below MSRP on the web, you have 24 hours to correct or you’ll be removed. And weekly we do remove people. If they’re not in our channel partner program, then legally I have no recourse to go after them becauese they have no relationship with us. But you'll see that if you do call and try to get that great price, you’ll see that the shipping will be a ton of money, or it will be out of stock. Usually it's not real. Me: So you're not worried about some rogue web site undercutting prices. Newman: I say fine, go do it, because I know it’s not real. I know they can’t do it, and it’s not an authorized partner. By monitoring our web pricing every single week, and removing partners weekly who violate our program, we have full transparency to everybody, and people constantly applaud us for being one of the very few who physically monitor the program on a weekly basis. Me: So there's really nothing you can actually do if somebody wants to sell far below what an installer is selling a camera for? Newman: If you want to purchase products from us, and sell it for 50 cents, I have no legal right to go after you. Me: But you can monitor the price the distributor sells it for, and that's the only way the web site can get it? Newman: I can’t legally monitor the pricing of a distributor. By law, I can only sell for a certain amount and let them price it how they want. I can’t tell them by law how much they can make or lose. It’s illegal for us to dictate margin. By having a MSRP, there’s an implied margin in there, they know what they’re paying, but I can’t tell them what to make. That’s up to their business sense. Me: So, those seven distributors, is that number going to change? Newman: The number is relatively firm. Axis is of a philosophy that rather than have our product widely distributed by many, where we’re not very important to anybody, it makes sense to us to be loyal to our partners, be a larger chunk of their business, and have the business spread out among a number of partners that make sense. Additionally, very honestly, why do we use distributors? We are perhaps not experts at distributing merchandise, they handle credit, and by having seven it’s easy to control. We have no plans to expand our channel at the current time. In the event we were to expand the channel, we would do that only if we felt it could bring us truly an incremental customer, a different customer who’s not purchasing our product through an existing partner. It makes no sense to just move a customer from one business to another. We get calls all the time from regional and national distributors that we don’t have, saying we’d love to handle your line. To date we have not found an additional distributor that will truly bring an incremental customer, because of the diversity of the seven distributors that we have right now. We have the bases well covered in our mind. Me: So what do I get for being a Gold partner? Newman: It has to do with pricing and support, it has to do with project pricing. We don’t give volume pricing discounts, we give project discounts. We want the partner who was actively involved in the deal to receive the benefits. It’s Axis academies, the access to demo equipment, some marketing funds for co-marketing events. Depending on the level that you’re at, there are more or less benefits. We make it valuable to be a partner. People are proud if they’re a gold partner. Me: Do you make co-op funds available for purchasing advertising in local newspapers, for example? Newman: There’s nothing that’s predetermined – there isn’t a co-op accrual, like other industries. A partner has a form they can fill out, through the partner pages, which is part of a unique portal online - they have access to exclusive information, etc. - they can go in and fill it out, identify what activity they would like, maybe have us sponsor a lunch and learn, sponsor them at a trade show, defray the cost of some advertising, and it’s done on a pre-approved basis, and then we evaluate them at the end. Me: And there are something like 30,000 partners worldwide? Newman: It's something like 30,000 partners worldwide. That’s in the ballpark. We’re constantly reviewing and adding. We add 50-60 partners every week, and we lose a couple every week. We police them out of there. We want to maintain the transparency. Me: And how many of them are Silver or Gold? Newman: If you look at the typical pyramid, there thousands of authorized partners, hundreds of silver, and a couple hundred of gold, max. It's a stable pyramid on the bottom, and we want to nurture and grow that stable base. Look, we have never once sold directly to an end user. And customers have said, "we won’t buy it unless we can buy it direct," and I’ve had to tell them, "well, I’m sorry I can’t get your business." And the channel applauds us for that. You need to stay true to your channel. EDIT: Axis sent along some numbers for the partner program: Axis Partner Program, April 2010: • Axis Partners Worldwide: 30000+ • Axis Partners North America: 10000+ • North America Gold: ~300 • North America Silver: ~200 • North America Authorized: ~9600 Note that the numbers fluctuate, as Larry noted above. People come and people are kicked out fairly regularly.

Comments

I am glad to see you are back to investigative journalism :) Good examination.

Axis says: "Axis very honestly sells only to the seven distributors, and we don’t restrain trade in any way. We don’t tell them who they can or can’t sell to."

That's interesting because a lot of other IP camera manufacturers do restrict their distributors from selling to certain 3rd parties. I have this same topic of conversation with 3 of the top 10 largest selling IP manufacturers and they all had more aggressive 'policing'.

As such, I  am confused and skeptical of Axis position. If they really did not want their products to be sold on Amazon (or wherever), I think they could do so. I'd be curious if they could elaborate on why they don't tell their distributors who they can or cannot sell to.

If I had to guess, I'd say that a fairly large chunk of Axis' revenue comes from the eeevil internet retailers, because Axis cameras are fairly solid, easy to understand, requires little tech support, and is easy to use, perfect for IT guys who need to throw 10 or 12 cameras at a small project. If you can set up a commercial router, and Axis camera is a piece of cake.

In this, I'd say Axis is being realistic. There is absolutely nothing you cannot buy online, and the sooner manufacturers embrace this fact, the better.

Seriously. Want to buy Speco product? Try Grainger (http://www.grainger.com/Grainger/closed-circuit-cameras-and-recorders/cl...) Want to buy a Napco panel? Smarthome, a home automation website, has a P816 for $75 (http://www.smarthome.com/79723/NAPCO-Gemini-P816-Security-Panel/p.aspx) Enterprise grade VMS from OnSSI? A1 Security Cameras, $2,150 (http://www.a1securitycameras.com/OnSSI-NetDVMS-Base.html). They can even sell you a little red box from ioimage to go with it: http://www.a1securitycameras.com/ioimage-CAMMMP100DN.html

Heck, I even found a key machine for MulTLock, arguably the most paranoid, protect-the-channel company I know of: http://www.lockandhinge.com/scripts/main.cgi?action=big&product=HP12...

The internet will not go away. If all you can offer your customers is a good price, the internet will beat you every time. Learn to compete in knowledge and customer service instead, which are things the internet will never be able to compete on.

Here's a question for you Ari: Why isn't there a major integrator with a great web presence doing what you guys are doing with putting all the products they install on the Internet and working hard-core search optimization?

What an excellent question that is, Sam. What an excellent question that is. I suppose IT guys are expensive? Or perhaps we're running out of room on the Internet. Maybe people are simply afraid of trying new things? Whatever. I, personally, like making money. If other people don't like making money, then avoiding hard work is an excellent strategy.