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Distributors Discuss Downturn, Credit, Holiday Outlook

10/27/2008 02:00:00 AM Eastern

New York — Distribution executives overall seem to be approaching their businesses with a general sense of caution mixed with long-term optimism that they will survive the economic downturn.

Recently TWICE queried a number of executives from a variety of distribution companies and each shared their reactions to the downturn along with their strategies for riding out the economic storm and the credit crunch along with their expectations for the holidays.

Following is a “virtual roundtable” of sorts in which these executives share their thoughts.

TWICE:What effects are you feeling from the credit crunch? Are you finding vendors less willing to extend credit? On the flip side, are you having trouble extending credit to your own customers?

David Weisman, president and COO, The Advantage Group: [My feelings on the credit crunch are] likely the same as anyone else in business — new credit is difficult to come by but existing credit lines remain available. For the most part [we are not finding less willing to extend credit], our existing vendors are being very supportive. What we have noticed, however, [are] shorter terms being offered by vendors we are negotiating with for new lines. [As for the credit we extend to our own customers,] we are certainly being more careful than we may have been in better economic times.

Trevor Hansen, purchasing VP, Volutone: Like many we are experiencing some effects from all of this. It's certainly not business as usual. Fortunately, [though,] we have strong relationships with our vendors and we work well together in all economic conditions. [As for our own customers], we have a small percentage of our dealer base on terms so it's easy to monitor their accounts.

Jeff Davis, sales senior VP, D&H Distributing: We have felt minimal effect so far. In fact, D&H has gone in the other direction and has extended an additional $28M in credit for our dealers and resellers this year. D&H's goal is to extend additional credit during tight financial markets when dealers need it most.

David Kaplan, executive director, Digital Delivery Group: Vendors are telling us that they are being more cautious and tightening credit but for the most part—so far — it has not directly affected the members of Digital Delivery Group. I suspect that where we may feel a pinch is upside seasonal adjustments that in previous years perhaps could be taken for granted.

While we are taking the usual precautions in terms of watching A/R, we are also exploring all opportunities to enhance variety and flexibility in credit opportunities for our dealers. For example, Mitsubishi 3 Diamond Credit offers our authorized Mitsubishi dealers the opportunity to offer their clients “6 Months Same as Cash” financing at no cost to the dealer. Dealers can offer this financing on all A/V, accessories, delivery, install, etc. It beats the cost attached to credit cards, assures an orderly cash flow from end user to integrator to us and gives our dealers one more reason to call previous clients to offer additions to previously installed systems. We are leveraging this and other opportunities to help our customers grab sales in a tightening economy.

Brian Wiser, sales and vendor management senior VP, North America, Ingram Micro: One core competence that we share throughout all our regions is to serve as a reliable financial resource on behalf of our partners. We have been extremely diligent about managing the risk and balancing the business demands of our North American customers, so much so that we are not directly affected by the credit crunch that has recently emerged.

We maintain a strong credit rating and balance sheet as a company which has allowed us to continue to have access to capital, as well as maintaining sound credit practices which have limited our exposure to poor credit quality customers.

In fact, we have many financing options available to our partners from understanding how to leverage product leasing by [value-added resellers] as a means of financing purchases to vendor term offers with certain products and straight credit advancement — we are in a strong cash position and we can support the growth of our partners.

RJ Hirshkind, residential and commercial A/V, telephony, central vacuum senior product manager, ADI: We haven't experienced any credit issues with our suppliers at this point. We have very strong relationships with our vendors, and they feel comfortable doing business with ADI considering our strength, history and position in the market.

John Sullivan, sales VP, ADI: ADI has experienced minimal trouble providing credit to customers. We do realize that it may have become more difficult for some customers, but we haven't had to make any changes to our program as of yet.

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