Developments in distribution: How is the industry evolving?

With market consolidation, more money in services, and crowdfunding sites offering vendors a fresh route to market, the distribution sector is evolving. Here Jade Burke finds out how it’s changing and what it means for the industry…

Tech distribution is as competitive as ever, with the big getting bigger. But the industry is a different beast to what it once was. The market has changed significantly, now that there are various new services such as e-commerce and cloud services, but that isn’t all.

With so many different vendors on the scene, the industry doesn’t look like it will slow anytime soon. Rob Brooks, channel sales manager from Channel Dragons, explains: “To sum it all up, the market is very competitive, disties are a lot more cautious than before.”

Due to this, we’re starting to see more distribution companies merge together, for example most notably Exertis’ parent company DCC acquired distributor Computers Unlimited in a deal worth around £24 million earlier this year. Exertis has announced the opening of expanded offices in China, to increase its global presence and help UK brands develop a route to market in China.

Also, distributor Midwich revealed it has recently acquired Reading-based trade-only display solutions distributor PSCo Group.

This consolidation comes as no surprise in such a competitive market, but soon enough there will be fewer, bigger firms in the industry.

Various new product categories are also making waves in the industry, including cloud services. No longer are boxed products enough to spearhead a distie in an overcrowded market, meaning more and more are looking at new services for their customers.

Brooks concurs: “There is no longer room in the industry for disties to specialise; they need to look at new opportunities and revenue streams to compete in this market, after all this is what the most successful partners are doing.”

Now that more vendors are offering their own cloud services, including the likes of Microsoft, Amazon, HP and Cisco, it is a crucial service disties must consider offering to help resellers compete, and embrace managed services.

Not only are products and consolidation contributing to the changing market, but as more crowdfunding sites emerge, including Kickstarter and Indiegogo, and investment sites like Seedrs, vendors have more options to gain a route into the market themselves.

Alysia Wanczyk from Seedrs tells PCR: “Seedrs is making it possible for anyone to invest in early-stage businesses – not just angel investors and venture capitalists who were traditionally the only kinds of investors able to invest in high-risk (but potentially high return) ventures.

“We are available to make any intros or to help a business, if they’d like. Otherwise, we try to stay out of their way so that they can grow their business. Having a huge base of investors is a great way to help market and promote a business.”

Although these sites have begun to shake up the market, at the moment some distributors are not worried that they will disrupt the market or effect business on a large scale.

Dave Stevinson, MD of Entatech, adds: “These sites are interesting and allow early stage investment in products, yet so far have made negligible impact on traditional distribution.

“Distribution is all about managing complexity and adapting resources to enable the reseller partners in partnership with the vendor.”

In addition, Brooks believes that the margins crowdfunding platforms offer start-ups aren’t a detrimental threat to disties. “There is an impact but not necessarily a large one. With retailers sourcing products from China to deliver consumers their own brand product, it is proving more difficult for the crowdfunding start-ups to compete on margin with major retail,” adds Brooks.

Plus, as e-commerce continues to grow in popularity with consumers, more distributors are also taking this on board, offering download services to resellers.

As more similar services and products launch from various firms, it’s more important than ever to offer bespoke services.

It is clear that distributors have an important part to play for vendors and resellers, and to help the latter adapt to emerging challenges.