By Lisa Johnston
New products on display at the American International Toy Fair, held in N
Two major consumer electronics distribution companies were acquired by larger companies in the past year. First Ingram Micro acquired DBL last June, and then earlier this year Synnex acquired New Age Electronics. Among the distribution executives we've spoken to recently, there is some debate as to whether these acquisitions were smart moves in terms of increasing one's ability to effectively serve a customer, and also whether these instances are indicative of a larger trend developing within the category.
"The merger served as a strategic alignment that brought much stronger retail sales opportunities to Synnex," explained Fred Towns, senior VP, New Age Electronics. "For New Age, it meant gaining the ability to expand our warehouse operations and create greater efficiencies, as well as obtaining the horsepower, strength and capital that Synnex provides to help us continue our growth in the retail space."
Smaller, independent distributors had differing opinions on the effectiveness of such strategies.
For instance, Gary Wermuth, president of Wave Electronics, told TWICE, "Since Ingram Micro acquired the local AVAD member in our territory, our business has increased. Since they are national, they cannot react as fast as we can to market needs."
Electronic Custom Distributors owner CJ Provenzano echoed Wermuth. He said, "Mergers continue as the larger players attempt to control the distribution chain. There are several factors that will continue to favor local independent distributors. Location will become more important as freight increases in cost. There is also an increase in damaged freight claims resulting in poor customer service. In addition, contractors have an immediate demand for products. The cost of multiple locations as well as staffing good personnel that have a genuine care for customer service will continue to challenge the big volume suppliers. Policies that are across the board are not flexible to fit the needs of the independent contractor from a financial, training or inventory standpoint. It will continue to be a competitive advantage to have stock in one location where you are certain to find what you need now. As an independent, I believe our place in the distribution chain will remain an important factor as manufacturers seek companies that truly care about the issues and their customers' welfare and not just about volume. Our success comes from making our contractors successful."
While the independents we spoke to may be pleased with their current position, some executives appear to think there's still potential for more consolidation within the category in the future.
Wynit's marketing VP, Jay LaBarge said, "In today's ultra-competitive and hyper-efficient marketplace, the mantra is, 'Either get competitive, get specialized or get out.' Recent acquisitions would indicate some of the larger players are looking for access to specialized customer sets not well serviced by their current model."
New Age's Towns added, "When it comes down to growth opportunities or outsourcing opportunities from the manufacturing standpoint, additional merger and acquisition activity is likely in the industry in the near future. With future acquisitions, the trend will likely be similar to the case of New Age, with companies keeping the DNA of their brands in line."
This TWICE webinar, hosted by senior editor Alan Wolf, will take a look at what may be the hottest CE products at retail that will be sold during the all-important fourth quarter. Top technologies, market strategies and industry trends will be discussed with industry analysts and executives.