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Distribution Evolution: Execs Discuss Their Changing Businesses

As manufacturers become more reliant on third parties to bring their products to smaller retailers, and as the Internet evolves and increases its influence over retailing in general, the role of the distributor has become increasingly important in the supply chain.

TWICE recently discussed these changes with executives from a variety of distribution companies who provided insight about their company’s functions and their views on how the responsibilities of distributors have evolved over time.

TWICE: How has the role of the distributor changed over the past five years?

Alex Paskoff, marketing and business development senior VP, Brightpoint: The role of a distributor has evolved over the past five years by becoming a highly valued integrated component to our customer’s business. Within the wireless industry, this means “value-added” distribution that incorporates product sales, device customization, activation services and multichannel fulfillment.

Curt Hayes, president/chief financial officer, Capitol Sales: The role of the distributor today is much more of a business consultant and product-solution provider. We need to help our customers run their businesses better through education, and not just project education but financial, selling, inventory management and other aspects of running a business.

In addition, with multiple lines shipping from one warehouse, we pay close attention to in-stock inventory and timeliness of orders shipped to dealers (same-day shipping). With fewer factory-direct dealers, the distributors have a larger audience and need to take advantage of Web-based education along with providing pre-sale design and post-sale technical support.

Bill Lyons, VP and general manager, Cardinal Electronics: Not too long ago distributors were looked upon as a necessary evil. With today’s technology evolving at light speed, it has become more important for the retailers/custom installers to have the latest and the greatest in a timely manor — instant gratification. The distributors have the ability to bring that new technology to their customers, as well as training seminars to better educate the installers/salesmen on the intricacies of these exciting new products.

Also, with the huge growth in the custom installation market, manufacturers now can use the sales force of the distributors to better infiltrate the marketplace.

Doug Robison, president, DSI Systems: More than ever, distributors need to add value to the independent retailer. For the independent to survive they need to partner with a distributor that has the ability to help them in many facets of the business.

First, the distributor must have warehouses with product readily available. The independent should be able to invest his capital in his showroom display without having to inventory a great deal of product because his distributor can get the goods there in one to two days.

Second, the distributor needs to be a one-stop shop. The independent retailer wants to make one phone call to get audio, video, DirecTV, cables and the accessories that he needs in a single shipment.

Third, the distributor should be assisting the retailer with how they go to market. Not only providing and tracking co-op dollars, but giving input into the actual advertisements and the marketing plan.

Finally, the independent must be able to rely on the distributor to run interference with the manufacturer if he is having service issues or problems getting resolution on a broken set.

Rob Kalman, VP, U.S. marketing, SED International: Well, I do not believe the traditional role has changed. The primary role of distribution has always been to make doing business easier and more efficient for both the reseller and the manufacturer, providing excellent logistics like pick, pack, ship and credit services, etc. Distribution can also provide additional value by helping to create demand, providing product and solution information, consulting, education and a myriad of other value-adds. All these things we have always done and continue to do.

While I don’t think the traditional role has changed, I do see distribution increasingly filling the role of getting the product directly into the end-users’ hands. We are doing more and more fulfillment for our customers, where we ship direct to the end user on our customer’s behalf. When we do this, we are invisible to the end user, who thinks the product is shipping to them from their reseller. So, as the Internet has grown as a sales tool for our customers, so has the product delivery mechanism evolved and changed.

I also think the role of education has taken on a new significance as well recently with the emergence of the convergence — I might have to trademark that! — of IT and CE products and industries. It is now increasingly important that resellers understand how different technologies can interact and where they want to play in the new landscape. At the same time, and typically when any new, hot technologies are first taking hold, there is a flood of products trying to establish themselves and get a piece of the action. So the combination of those two things means that resellers have a lot of new things to try and figure out and sort through. This is where distribution can really help, and has traditionally done so.

Kevin Kelly, president and COO, Stampede: The biggest change for distributors in the past five years really comes down to our increased acceptance by manufacturers. Manufacturers have fewer resources and are expected to accomplish more than ever before. They are turning to distributors as an efficient means of building incremental business. Good distributors recognize that we are in the customer aggregation business. We bring a whole book of customers to a manufacturer for very little investment. With so much of the growth in the CE market coming from small dealers, more and more manufacturers have come to see distributors as an essential and valuable extension of their marketing team.

Samuel Golowinski, marketing director, Z. Reiss & Associates: The Internet has changed how the distributor goes to market. One has to have his inventory, ordering, product information — basically his selling model has to be online.

Many companies are realizing this and are putting a lot of effort into their online spaces but some companies are losing the personal attention. We have stayed with both … We have tried to increase our online presence but have also tried to maintain a personal connection with clients. We don’t rely entirely on the Internet — each account has an assigned sales person who is responsible for keeping the clients educated about new products.

Education is the name of the game. Distributors have to support the retailer in their efforts to educate the consumer. We have to filter all of the available information so the retailer will know what’s important because they don’t always have time to go to all the trade shows and keep themselves educated on their own. Basically, we have to be the link in the chain and bring awareness of the technology to our customers.