Distributors are seldom seen, and not much heard—but in reality, they play a key role in making the technology world go round. It is distributors who act as intermediaries between vendors and value-added resellers or system integrators in the IT world. This means that they play a vital role in connecting customers to producers. However, with marketplaces booming, are distributors changing the way they work? Are they becoming more than mere logistics providers, and adding significant value to the chain between suppliers and customers?
We caught up with one distributor who operates in over 20 countries across Europe, the Middle East, Asia-Pacific and North America. It has a turnover in excess of $3 billion for the last financial year, and growth in that year of over 10%. For this company, at least, the business model is strong—but is it changing?
Bringing together resellers and vendors
The company’s core business is distributing over 2,000 products and services from technology companies, including many well-known brands. Like many other distributors, it operates through a network of resellers and retailers around the world, in this case, more than 50,000-strong. This network, in turn, sells on to consumers, and small and large businesses.
Distributors’ models vary considerably. Some choose to locate all their businesses on a single website, marketplace or webshop. Others, like this one, prefer to split their marketplaces by speciality area, with separate sites for mobile, cloud, enterprise, supplies and IT products, their key areas of specialism. There are, of course, advantages and disadvantages to both models. The ‘collective’ approach means that vendors only have to use one site, which may make their lives easier. However, good segmenting of resellers is likely to mean that resellers are often focused on particular specialist areas anyway.
Separating sites has a key advantage: it allows each one to be optimised for its particular market. This allows the distributor’s marketing and sales teams to build strong relationships and tailor their tactics to the market. We have commented before that micro-segmentation can be a strong tool for success in a data-driven world. Certainly, this particular distributor is clear that its strength lies in its people, the relationships they build and the knowledge that they bring. However, the nature of the marketplace may argue against this view.
A question of sophistication?
Many of the modern marketplaces that we have profiled have been extremely sophisticated in matching vendors and buyers. They may also use sophisticated marketing campaigns, with careful profiling. Many distributors, however, may not be so advanced—but is that necessarily a bad thing?
In our conversation with this particular distributor, we considered the question of campaigns. The company is running campaigns near-constantly. However, the specific timing and targeting of each campaign is linked to the marketplace—and therefore the speciality. In other words, demand generation work is simply linked to the broad sector, and not to specific companies or customers.
This is contrary to work on micro-segmentation, and is a fairly broad-brush approach—but the company’s growth in the last year would suggest that it works. Equally, received wisdom would imply that social selling is essential—but this distributor’s experience suggests that it does not have to be very sophisticated to have an impact.
Function over style
If we were to sum up the world of distributors, as exemplified by this particular company, it would be a matter of function over style. The marketplaces are distinct, but all designed to be transactional. Each one is delineated by IT profile, with little background on market strategy. There is little or no sophisticated technology like chatbots, product selectors, intensive document sharing, education pages, or back-end system integration capabilities. These sites have a simple and clear function: to capture orders at the lowest possible cost.
Let’s be clear here: there is nothing wrong with that as a business model. It clearly serves an important purpose and clientele, as this particular company’s strong turnover and growth show. Indeed, it might be argued that marketing perfectly matches this approach.
The received wisdom in the B2B world, as in B2C, is that transactional selling is ‘over’. Instead, marketing and sales are all about relationships between businesses and their customers. This distributor’s own website would suggest that it recognises the importance of its people. However, the nature of its marketplaces and its strong financial performance would suggest that there is still a place for transactional selling. We ignore this at our peril.