Paul Sangster, sales and marketing director of Hammer Distribution, is a raver. Well, OK, perhaps that's not quite technically correct - maybe more of a club connoisseur. It's Monday morning and he's just spent the past 48 hours larging it at the trendiest nightspots in town. Town is, of course, London - anywhere else will simply not do.
But whereas most of us would struggle to keep up with such a pace, even fewer of us would be looking quite so sharp back at work on a Monday morning - assuming we had made it in at all. Sangster, it seems, is someone who parties hard, but works even harder.
He has turned Hammer into one of the UK's leading specialist storage distributors. The company operates out of offices in Basingstoke and has a headcount of 56. But Sangster has ambitious plans for the next couple of years. "This year, we're probably looking at about £50m turnover. But my immediate plan is to take us to £100m plus within two years. And there's no reason why that won't happen," he adds, in response to a raised eyebrow.
Hammer has reached capacity at its offices and will soon make the short trip across town to premises that can cope with such ambitious plans.
"The move will be completed by the end of this year and we will be looking to increase sales and support staff during the course of next year," Sangster explains.
The search is already under way to find staff who will buy in to the Hammer culture and vision. But don't bother flooding Sangster's office with CVs - if you're already in the computer industry, you probably won't be the right person for the job.
"Finding staff today is very tricky," Sangster admits. "I don't look within the industry for sales staff. Generally speaking, if there are people in this industry looking for a job, I think, why are they looking?
"There's something not quite right somewhere. Plus, if you're very good, the company you are working for is not going to let you go - they are going to keep you happy.
"We employ a consultant. He finds the people to interview. They come from outside the industry but have the right personality and motivation.
"We have a training programme which lasts for three months before they start making any sales calls. It generally takes between three and 12 months before we feel they are really up to speed and ready to do the job. It's time consuming, but bringing our own staff on board and bringing them up the Hammer way makes the best sales staff."
Sangster can spot a good salesperson when he sees one because he's been there, done that. "When I was 18 years old, I got my first job as a sales rep working for a company selling consumable products," he recalls. "I had been doing that for a year and a half when a friend, who was also working as a sales rep, changed jobs and started working for a DEC [now part of Compaq] reseller. He told me that the computer industry was exploding and that I should go and speak to an employment agency. So I went along, was set up with three interviews in a week, and was offered all three jobs. I decided to take the one with Fujitsu.
"I worked with Fujitsu for just over a year before I decided to come out of working for a vendor and go into distribution because it was more lucrative. I worked for two distributors for about two years and then became involved in setting up Peacock UK. That was in partnership with Peacock Gmbh but, unfortunately, after the first year of trading, we had a little disagreement over shares."
Sangster doesn't care to elaborate on this point, but in any case it's all academic because straight after that, he founded Hammer. The company started trading in October 1991, with Sangster and Steve Easterbrook at the helm. A third director came on board shortly after.
"When we first started Hammer Distribution, there were many more vendors involved in the storage sector," Sangster says. "But today I would say that price is the biggest noticeable difference, especially in the way prices have continuously fallen. Someone once drew an analogy: if the computer industry was the car industry, products would cost 50 times more than they did nine years ago. But in the computer industry it's the opposite - they cost that much less, which is the crazy thing."
Certainly an entry-level PC costing £25,000 instead of £500 would increase margins by a percentage point or two, to say the least. But the reality is, they don't. Right across the industry, the battle to retain margins on hardware is a continual one, and perhaps the best sector to do this in is storage. But the question is whether to go niche or broadline. Sangster has no doubt in which direction he will be steering Hammer.
"We're not looking to move outside our core business of storage, but there may be one or two additional product lines on board next year," he says. "More of the companies in the market that are selling products from a distribution point of view are becoming broadline, rather than specialist."
A point which he obviously thinks works in Hammer's favour. "The broadliners are absolutely clueless at selling high-end storage products," Sangster claims. "Most of the vendors offer discounts if companies hit a quarterly target, and the unfortunate thing is that the broadliners take these discounts and put them straight on to the price list.
"Effectively, they start out with product that appears to be four or five points below the real distribution costs. It's crazy. Then they will say the market isn't good, we're losing money, and they've only got themselves to blame. I personally would encourage vendors that are working with high-end storage products to have a hard and close look at their distribution channel."
He looks to Seagate as an example of one vendor that has, and is, doing just that. "Seagate has cut back again on its distribution channel in the US and is running a programme that involves consignment stocking - putting the product in the distributor's warehouse. However, the deal is that the product must be at least 60 per cent of a distributor's business.
"Seagate is looking at launching this model in Europe and the UK market next year if it is happy with the way it runs."
Sangster clearly thinks Hammer will be in line for some action if it happens. "When Seagate cut back from six distributors to four in the UK, it was no coincidence that our business grew. But Seagate's business grew too. There's a lot to be said for the less is more theory. It allows distributors to focus on that product without fear that another distributor can come along and trash the price. That's what has happened in the past. And that's what is unfortunately happening with some of the other products being sold in the market today.
"Resellers need to align themselves with a focused distributor," he adds.
"The broadline distributors, generally speaking, can only quote a price.
"Our business is growing on a monthly basis. It's amazing because everyone is saying the market is stagnant - that's because of the messages coming from the broadliners."
Hammer subscribed to the 'niche is best' school of thought after getting its fingers burnt during a short foray into the monitor market. It's a lesson Sangster has taken to heart. "We started selling monitors in about 1995 to 1996 and we stopped selling them 12 months ago. The reason being it got to a situation where you were struggling to make 50p on some models.
"It was a joke. And when it came to delivery, customers were refusing to pay delivery charges."
The distributor uses a third party for delivery fulfilment, but Sangster claims Hammer loses money in this part of its business. "We try to subsidise delivery costs. Third-party people are continually hiking their prices because expenses are continually increasing.
"It's amazing because it's probably one of the most emotional subjects when a salesperson is cutting a deal. Customers do not want to pay it.
"We could literally put prices up on products if we said it was free delivery.
"People would smile and happily hand over their PO number. It's a problem moving products around, but fortunately we've moved out of the physically large and heavyweight products, such as monitors, because they obviously cost a fortune to deliver and there's no margin in them.
"The other way we lose money is because we subsidise same-day delivery to accounts. We also subsidise pre-10am delivery," Sangster adds. "If a customer receives a product that is faulty, we will send a replacement to them on the same day at our cost. Our accountants don't like losing money and I don't like losing money. But at the same time, it's part of the service. In the general scheme of things, if we still make a profit in other areas then we're happy."
Hammer has an active database of 2500 accounts trading with it and the distributor is working on a non-active database of about 6000 dealers.
Sangster expects to have between 10 per cent and 20 per cent of those on board early next year through a direct marketing programme.
"We have two types of reseller: broad resellers, those that sell off the page and pretty much deal in all products, and we have the small systems integrator. The bulk of our margin will come out of the specialist firms, whereas most of our revenue will come out of the broader companies.
"I prefer to do business with anyone that wants to sell storage. There's no prejudice within Hammer. We simply try to make a margin because unless we are doing so, we are not going to stay in business. I think the resellers appreciate that. So when it comes to doing business with Hammer, we may not be the cheapest, but we are able to pass on the highest level of knowledge."
Sangster adds: "We have product specialists within Hammer who visit our resellers. We pass on knowledge. We advise them on the product areas they should be looking at, the markets that the products fit in to, and then how to go about selling those products. We provide full training for their sales staff and technicians."
He firmly believes that such communication and partnership is vital when working in high-end storage - the very thing resellers are looking for is guidance and skills. For this reason, the significance of the threat of doing business over the web is a minimal one.
"In the short-to-medium term, ecommerce is really only about doing business with commoditised product, certainly not high-end. Our internet presence at the moment is purely marketing, information on products and so on. Offering online stock tracking is something we are very aware of, something that we know we are going to have to fall in line with the rest of the market. How we go about doing this, we haven't decided yet."
Sangster is more concerned about getting the fundamentals right. "We are providing storage systems that fit into a networking environment and some systems can be complicated. At the moment, we are talking to storage specialist resellers and networking specialist resellers. What we want to be able to do is provide a full system, not just part of one. We, along with our integrators, can take some of the pain out of understanding which product works with what and which would be the right system for the corporate. We're slowly building up a team of specialists centred on fibre channel storage area networks (SANs), for example."
Fibre channel is going to dominate the storage industry - Sangster has no doubts about that. "Everyone has been talking about SANs for ages. But in reality, it's not happening. It will happen when there are more brand name products available, which will be during the next six months.
"We understand that a lot of the resellers are buying product from us as components for a large system. If those components aren't working, then the whole system isn't working." And this is where the support from all parties in the channel chain comes in to play.
"This is particularly the case in some of the high-end systems we provide, such as Raid, SANs and autoloaders. If we're in a situation where we need to go to a large corporate, we will go with the reseller absolutely, both technically and commercially. In some cases we will also invite the vendor to come along because that creates a comfort zone for the customer in seeing that from the vendor, through the distributor, to the reseller, everyone's behind the product."
So what happens when it comes to stocking and supporting products from competing vendors? "I suppose the obvious area to look at within Hammer would be Seagate and IBM on the disk front," says Sangster. "They are fierce competitors - they own 80 per cent of the high-end SCSI market between them, and we carry both lines. But I would say in the market there is a crossover of resellers that are buying both IBM and Seagate.
"There is also huge loyalty to Seagate as a brand, and IBM also has a huge following. We don't push one technology over another. We pass the information over to the reseller who can then make an informed decision."
He adds: "I've often wondered about the broadline distributors that may have six different products all offering the same technology: how does a sales person decide which to sell? It's a bit easier when there's only two."
So what does the long-term future hold for Hammer? "Long term, it's very difficult to say," Sangster admits. "I always tell people that I don't have a long-term plan: this industry moves so quickly that whatever your plan is, it will always change."
And what about any short-term plans? "Tonight, I'm going home to sit in front of the television and watch a video," Sangster reveals. So no clubbing tonight then? "Well, if someone gives me a call ..."
TWO MONTHS IN THE LIFE OF HAMMER DISTRIBUTION
- Hammer distributes Sony's fourth-generation DDS-4 (digital data storage) tape drives in conjunction with a three-month reseller incentive programme.
Hammer becomes the victim of an attempted ram raid, for the third time in the past nine months. Unlike the last time, when £170,000 worth of kit was taken, the raiders got away with nothing.
- Following continued growth in sales of the UK's leading storage distributors, Hammer unveils plans to relocate to larger offices in the Basingstoke area in the autumn.
Hammer appoints Jason Beeson as Raid product specialist. Beeson's first task will be to evaluate and position the existing Hammer products.
Hammer and Seagate Technologies announce reseller travel incentives.
Resellers are awarded travel vouchers for Barracuda and Cheetah disk- drive purchases made between 15 June and 30 July.
Mylex appoints Hammer as a distributor for its family of host bus adapters and Raid controllers.
HAMMER DISTRIBUTION - COMPANY CV
Company directors: Steve Easterbrook, Paul Sangster
UK employees: 45
Filing date: December 1997
Trading terms: 30 days
Vendors stocked: Seagate Technologies, IBM, Sony, Maxoptix, Kingston Technologies, CI Design, Tandberg, V2 Electronics, Overland, Dantz, Veritas
Product category: Mass storage, UPS, Raid
Payment methods: Cheque, credit card, bankers transfer
Free dealer training: No
Paid dealer training offered: Call
Products supported by dealer hotline: All
Hammer Distribution and Seagate Technologies offer resellers trade-in vouchers up to $80 in exchange for old disk drives of any brand. The vouchers can be used towards Seagate disk drives. All drives traded-in will be recycled. Hammer takes orders for the Sony SDX-500C tape drive, the first product to support the AIT-2 (advanced intelligent tape) format.
GROOVY, BABY - Paul Sangster, sales and marketing director, Hammer Distribution
What was your first job? It was when I was at school: I was a paper boy and was paid about £2 a week.
And after leaving school? My first proper job was working in an electrical store selling CDs, videos and hi-fi equipment. I was 16 years old and my take-home pay was £19.50 a week.
Favourite film? Austin Powers
Favourite television programme? I don't watch an awful lot of television, but I did like the comedy series Cold Feet. The makers are bringing out a new series which I'm looking forward to.
What would be your desert island CDs? I like all kinds of music, but it depends what mood I'm in. If I'm going out to a club, I like dance music. I like Pete Tong and I like some of the old soul music - Marvin Gaye and Luthur Vandross.
What was your latest large purchase? A car - a Mercedes E55.
What would you do if you won the lottery? Have a very big party.
What are doing to celebrate the millennium?
I haven't decided yet, but I know a few parties that are happening.
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