Distie Question Time: Here’s what Entatech, Exerts and VIP think about the shifting PC market

Senior tech distribution executives gathered at PCR Boot Camp North 2015 to answer your questions and discuss the shifting PC market.

Chaired by Channelstar Media’s Simon Meredith, our panel included Westcoast’s Alex Tatham, Entatech’s Darren Perks, Exertis’ Jon Sutherland and VIP’s Richard Marsden. Here’s what they had to say.

Anthony Lay, AML Midlands: “Some distributors are going into other verticals such as internet connectivity and hosting. What do you think of this and the role of the distie today?”

Rich Marsden, Director, VIP: It’s a very challenging market and margins are slim. So if you’re not looking to evolve or move into different areas, then you’re simply not going to be here. We’ve seen many examples of consolidation or distributors dropping out of the market. A constant change in the business allows you to move forward. Whether it’s into cloud services or something else, I think any business in tech would be foolish not to be looking at other avenues. In some instances that may alienate some of your customers and I’m sure there will be challenges ahead, but our core business will be components and devices.

The new opportunities are there to ideally supplement our business and potentially our customers’ businesses. Everyone should be looking to diversify in some format because this is a tough market. Diversification is a good thing.

Rakesh Selarka, The PC Surgeon: “As an indie, why would I want to buy direct from distribution, as I can get greater options, better pricing and flexibility from some of the big etailers?”

Darren Perks, Head of Sales, Entatech: First of all, Ebuyer and Amazon are two fantastic companies and have done very well for themselves. If you look at what distribution is about, it’s your gateway to the manufacturer, so if you’re not partnered with a distie, I’d recommend you do so fairly quickly. It also gives you access to all the support, all the programmes, all the rebate incentives and marketing funds, and access to channel incentives.

“Price feeds are almost a necessary evil, but the best price should come from your account manager, because it should be built together with your total order.”

Jon Sutherland, Exertis

Jon Sutherland, Sales Director, Exertis: I agree. We give credit too, which is helpful, and there’s a cost to that as a distie. If you want to buy one unit online, okay, that’s your choice. But certainly, value-added services are vital in terms of MDF funds, support from vendors and so on.

Rich Marsden: I think you want to be engaging with a distributor to access benefits. VIP has its own independent retailer programme which gives you various benefits and sale or return stock etc. So if going onto Ebuyer’s website or Amazon’s website is your way of wanting to buy a product, then obviously you will be missing out on a lot of support that you can get from the vendor or the distributor.

I think the days of having a huge differential in price are gone, but in terms of getting better pricing, ultimately the vendor also needs to help us. It’s not always easy to adjust pricing. A lot of the time, market conditions are outside of our control. But I would encourage all resellers to engage with your distributor and try to funnel your business into one, two or three preferred distributors out there.

Alex Tatham, MD, Westcoast: Firstly, whether you buy from a retailer or a reputable distributor, I’m still going to get some money by delivering it. The second thing is that you potentially will get a better price from Amazon or a retailer, because of deals. Westcoast shipped 35,000 Bing SKUs to Ebuyer earlier this year. That is a huge amount of money we made in one go. And if you look at those kind of deals, they will happen. What we’ve seen this year is increasing numbers of sub-distribution coming out of Ebuyer, Amazon, Insight, Misco and the like.

Effectively, a distributor’s role isn’t just to support retailers – it’s also to support the vendor who is making this stuff, and to drop it somewhere and get the sale themselves. As a result of this, it creates this particular marketplace. Is the vendor going to change? I don’t think so. Can I offer you a deal? Absolutely I can.

Gavin Holder, GHI Computers: “Why do price feeds on distie websites differ to prices offered by account managers? If prices are inaccurate, how are retailers expected to operate efficiently?”

Rich Marsden: If you look back over the years in terms of when I started in the industry in 1999, there was a very clear differential in that pricing. Now, a lot of it comes down to your relationship with the account manager. So when you go and talk to them, the account manager can price it how they feel on the day – they could give you a better price. And I’m not a big fan of price feeds to be honest – they can take some value out of what we do. But I don’t think any distributor is going to put the cheapest cost available out there in the market straight away.

“I do not want to take millions of phone calls off you to negotiate all day long, particularly if you’re buying just one machine. I encourage you to buy off our website.”

Alex Tatham, Westcoast

Jon Sutherland: I agree with that. Feeds are almost a necessary evil when talking about stock levels, but the best price should come from your account manager, because it should be built together with your total order.

Darren Perks: It all depends on you picking up those deals. We do try to marry up the two prices, but if you’re looking for more volume and some additional help to close the deal, then that account manager is always there. Unfortunately, data is changing consistently.

Our price feeds are going to change rapidly, so the more you check them, the more up to date that price would be.

Alex Tatham: I couldn’t disagree more. If you log onto our website, you get a feed from us. If you phone us, you’ll get the same price. I worked at Ideal Hardware and we used to have a website which we called Boris. But it soon became known in the marketplace as ‘better off ringing instead’ – what a waste of time. With the effort and the amount of money I put into my website, [the price] has got to be the same.

I do not want to take millions of phone calls off you to negotiate all day long, particularly if you’re buying just one machine.

I encourage you to buy off our website. Of course you can phone your account manager and of course there will be deals, but actually you can claim all the special bits you need – that are eligible to you – on our website. So I would thoroughly disagree with my colleagues here; I put an enormous amount of effort on making sure the prices are the same.

Keith Sorrell, Airedale Computers: “We can’t afford high priced gaming gear. VIP has offered to supply indies with £2,500 worth of gaming products on sale or return. Will any other disties have similar offerings?”

Jon Sutherland: We don’t offer sale or return. I’m not keen on putting product in that you’re not going to sell.

Darren Perks: At the end of the day, you want to put product into a store where you’re very confident it’s going to sell. If we put product into any independent, we’re there to support them and make sure it shifts through, but ultimately it’s up to our account managers and our own knowledge of your business to ensure we’re not putting product in, which you’re going to have to return two or three months later.

Alex Tatham: If the vendor supports it, we’ll do it.

Brian Trevaskiss, More Computers: “How much of a problem are rogue online traders to disties? For example, those who may not register themselves properly or pay taxes…”

Alex Tatham: First of all, pay your damn taxes – it’s immoral not to. That’s the key and that’s the same for every particular etailer or retailer or whatever company you are in the UK. If they don’t pay their taxes, then they’re illegal as far as I’m concerned, and I’m hoping the police will catch up with them.

And if they’re selling counterfeit product, clearly that is also an issue. It’s much more of an issue for your end users, rather than me as a distributor, because this is a fairly minor problem.

We had one of the UK’s premier resellers who lost an enormous customer, because they put counterfeit products into their servers in a spare, and lost the entire customer. So I’d really encourage you to buy from an authorised distributor because we get our products from the vendors.

Darren Perks: I think none of us want to actually go out there and deal with anybody who’s going to be doing anything illegal. So we’ve all got to follow due diligence processes to ensure we aren’t dealing with any rogue or suspect companies.

Nic Carter-Jones, New Millennium Internet: “Where do you see the marketplace in five years’ time? And with software vendors moving to a subscription model, where will disties and retailers make their money?”

Alex Tatham: We’ll be significantly larger than we are today with a much larger range of services around Europe, both to retailers and resellers in the channel.

Whilst of course we’ll do plenty of accessories, home products and smart home products, you’ll see Westcoast push upwards into more higher-end solutions categories. And we’ll take retailers and resellers there.

“The revenues and average selling prices are up on Black Friday, but I question where the margins sit for any of us.”

Rich Marsden, VIP Computers

Darren Perks: I think we’ll probably see an increase in recurring revenue, the leasing of products, software as a service and hardware as a service. This brings a change for a lot of people, in terms of how you set your company up to cope with going from a transactional based model to a recurring revenue.

You’ll have to change your resources based around that, and also you will have to look at how you deal with your customers and copewith that.

Jon Sutherland: I agree. For me, we’ll also be seeing virtual reality come to life. I’m excited about that, not just from a gamer perspective, but also what that looks like in the educational space, for example kids wearing virtual reality headsets to experience historic events etc. The smart home will also explode in the next five years.

Rich Marsden: We’ll continue to invest in our core markets: gaming, devices and PC components. There are slight differences in terms of what each distie does, and certainly you can’t sell a gaming keyboard on a subscription model. So we want to continue bringing the best brands in PC gaming and assisting you guys in getting revenue out of that market, which will continue to grow.

Should indies get involved with Black Friday and Cyber Monday each year, or should they take the weekend off and leave the deals to the big etailers?

Rich Marsden: It depends what you want to do. The revenues and average selling prices are up on Black Friday, but I question where the margins sit for any of us. If you want to use it as an opportunity to market your shop or site and have some strong offers, get involved.

If you want to make some money, I’d probably say take a sabbatical for the weekend and come back on the Tuesday, because it can get very messy. So I don’t think there’s money in it for any of us, but I do think it’s a good opportunity for a reseller to attract some new customers.

Darren Perks: Definitely get involved. With so much buying activity going on in the marketplace and so much spend to capture, why wouldn’t you want to get involved? Most of the majors I’ve spoken to said they’ve seen uplift across all of their portfolio – not just the products they’ve put into Black Friday deals.

Don’t miss the next PCR Boot Camp conference and expo event, taking place at the Emirates Stadium in London on May 18th.

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