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15 Dec 2008
Comments:1
The predicted spike in channel business failures has already started, insolvency experts have warned.
According to channel advisory service ChannelMoney, the weekly rate of channel insolvencies has doubled to 15 this month, despite forecasts that the carnage would not begin until January.
Nitin Joshi, founder of ChannelMoney, pinned the blame on banks and credit insurers’ lack of support for smaller dealers.
Further reading
“We have seen a discernible increase in channel firms going to the wall in December and we see that pattern continuing,” said Joshi.
“Banks are not lending new money to SMEs and credit insurers have retrenched cover to the channel.”
VARs to have recently entered administration include Comment Retail Services and Brett Technologies Services. Weston Connections and IT Team Solutions are among those to have been liquidated since November.
But Joshi praised distribution credit managers for taking a more supportive role.
Howard Russell, director of reseller Signature Networks, claimed that many smaller firms would voluntarily fold before Christmas.
“There are many companies that need an overdraft, but without knowing what business levels will be next year, are deciding not to risk it and are throwing in the towel,” he said.
Nick Tiltman, credit director at Computer2000, said the distributor had seen no increase in bad debts.
But he added: “Historically, there is a spike before Christmas as many directors that are struggling do not want to go through Christmas with it hanging over them.”
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Do you agree?
Vendors' route to market is under threat
Having spent years buidling up the channel, most vendors are too slow off the mark in reacting to the threat of the credit crunch. There will be many good dealers that could go under in the squeeze between slow paying end users and tightened credit lines from distributors. Vendors risk losing access to key parts of the SMB market and it could take time to recover.
For years we have seen special pricing passed through the chanel to win deals. Now we need to see special credit, tied to specific deals along the same lines. Project financing is going to become the key weapon in these tight credit times. Those vendors with strong balance sheets have a unique opportunity to leverage taht strength to the benefit of their channel.
Posted by Julian Dent - author of "Distribution Channels" | 16 Dec 2008
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