Distribution proves its worth

Eyes were opened at the Global Technology Distribution Council's first European investor conference, says Sara Yirrell

In most industries, distribution is often overlooked, with customers never sparing a thought for how their products reached the shelves, or were delivered to their office.

But at the Global Technology Distribution Council’s (GTDC) first European Investor Relations Conference, investors started to realise the value of IT distribution and the contribution it makes to the industry as a whole, according to the organiser.

Held at the Wyndham Grand Hotel in Chelsea Harbour, the event attendee list read like a Who’s Who of distribution, including Greg Spierkel from Ingram Micro, Roy Vallee from Avnet, Don Bell from Bell Micro, Fabian von Kuenheim from Magirus, Gary Coburn from Horizon, Tom Dolan from Westcon Group, Robert Dutkowsky from Tech Data and Joe Hemani from Westcoast ­ one of the GTDC’s newest members.

Number crunching
During the day, several panel debates were held on topics such as the impact of the credit crunch and the changing face of the SME.

The event also featured a vendor day, where top channel executives from more than 20 vendors were able to grab some face-to-face action with the giants of distribution.

Tim Curran, chief executive of the GTDC, said: “We have held vendor meetings in Europe for about five years, but this was the first time we had combined the event with an investor event. The feedback from the investor community was very interesting and the event seemed to open their eyes to the value of the distribution community.”

Curran said the GTDC is growing in popularity and is still keen to recruit members across the UK and Europe.

“Clearly we are in growth mode and there are distributors out there that see the value in collaborating. Our role is to promote the industry and create lines of communication.”

As reported by CRN earlier this month, the distribution industry as a whole is trying to stay positive and remains warily upbeat about the constantly talked-about economic slowdown.

Curran agreed: “As a whole, the distribution community is cautiously optimistic ­ in the US, UK and Europe there are some signs of softness, but overall, sales have held pretty steady,” he said.

“There are so many products and technologies covered by distribution, and pockets of weakness and strength, but the market will hold its own going forward.

“I think there will be consolidation. Particularly as during a period of weakness, the firms that have seen some financial weakness will struggle in this period. That is when consolidation will take place,” he added.

“However, there will always be a demand for broadline distribution and the specialist players. There are always emerging niches in different sectors, but these need the breadth of broadline coverage as well.”

Energy crisis
Other issues discussed at the event included the impact of rising fuel and energy prices on the distribution supply chain, as well as the availability of credit through distribution.

Roy Vallee, chief executive of Avnet, said credit is vital.

“One of the value adds of the channel is providing credit,” he said. “We have thousands of accounts that are managed daily. While the credit crunch is creating some concerns, it is also creating interesting opportunities in terms of consolidation.”

Ordered distribution
Alain Monie, president of Ingram Micro, said: “Distribution has to be very disciplined in how it manages its working capital. We have the capability to have 150 to 250 people who can examine the credit risk of our customer base. We also use a mix of insurance available in the market and it really is one of our core competencies.”

Tom Dolan, chief executive of Westcon Group, said: “We believe that if we look at the credit in the channel it will be to our benefit and we also get more operating profit out of an individual transaction. We can play it as another value that we bring into the fold.”

Jeremy Davies, founder and director of analyst Context, which gave a presentation at the GDTC event on market trends and insights, said distribution has a strong future.

“It all boils down to one thing: distribution is there and it fulfils a very useful purpose.”

He added that growth areas include anything to do with bandwidth and storage, and the notebook market.

“It is tough for distributors at the moment,” he said, “because it is a mature market and it has certainly had its challenges in the past quarter. In the UK, which is unique because it has a prominent financial industry, we are still waiting to see what effect the credit crunch is going to have on distribution.

“However, distributors should stay focused on making their operation more efficient and ensuring they are a true interface between the vendor and the reseller. That is the key to survival,” he said.