Dealers are the modern consumers. They operate in a near-perfect market. They have a fairly good idea of who the players are and who is offering what and for how much. Price, rather than service, is the key factor for dealers and Vars in deciding where they place their business.
Against this is the search by distributors for the fledgling dealer - the criteria sought is quite simply integrity in the management and quality in internal control systems.
Sadly, this search may bear little fruit. Just when a trading pattern has been set, the dealer is enticed away. Some will gravitate towards the cheapest source even if service is poor. Such behaviour means the distributor has unfulfilled sales ambitions and, like the jilted bride, may find it difficult to re-open its arms to a credit-rich marriage.
Dealers cite what they see as a lack of credit capacity as the reason for this strange buying behaviour. Clever devices to deal with this problem are not always welcomed. I had an example where a distributor refused to provide credit above the agreed limit - which was insured - even though the user was a blue chip. The offer to invoice the blue chip directly was also refused. As a result, the distributor lost an excellent sales opportunity, profit and prospective long-term trading partner. In this case, the distributor was probably unjustifiably nervous.
Paranoid fears about revealing the identity of the customer base are usually ill-founded. The trade-only distributor is usually more concerned with risk management than with milking the dealer's customer base. In most cases, the distributor is not equipped with either the skill, resource or inclination to tackle the needs of the user. They would prefer to leave corporate sales to the dealer. But fears persist and don't aid the cause of a long-term trading partnership.
Playing musical chairs with suppliers is an operation that requires dealer agility - to be able to set up credit lines across the board and being able to use, abuse and discard partners as it begins and evolves its life as a dealer.
But with the high level of credit skills that exists among distributors, the dealer will not prosper by taking this route. Such a strategy leads to transient trading relationships which will deprive the prospect of a profitable partnership.
It is a short road to nowhere.
Nitin Joshi is a director at Pannell Kerr Forster, business advisers and accountants to the computer sector.
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