When is a reseller not a reseller? When it?s a dealer. Oh, how the tomatoes would fly if any comedian tried using that one as a joke, but a joke it is. Reselling is dealing. Yet resellers don?t usually see it that way. They tell you they add value and they balk at the very idea of being called a dealer.
So what is a dealer then? It used to be a dirty word to many people who saw the dealer as a box-shifter, uncaring for its customers and reluctant to offer any form of support or additional services. The shift to the term ?reseller? afforded many outlets the opportunity to divorce themselves from the tarnished dealer image. Resellers cared. Resellers held the customer?s hand and stroked it lovingly. Dealers just grabbed it and bit it, chewing on a quick buck and spitting out the products in the face of rapid price erosion.
Of course, history has proved that volume-sales, box-shifting outlets live on a knife-edge. They still exist, but there are fewer of them. There is also a grey area where this type of dealer overlaps with the retailer. Often they are one and the same, but only for as long as they have a shop front, or some sort of high street presence.
It is the supposed distinction between dealers and resellers that is more intriguing. ?Vars argue that they exist in their own right, but really they are dealers,? says Martin Clarke, sales and marketing director of specialist portable computing dealer Lapland UK. ?It?s about time people stopped regarding dealer as a dirty word.?
Clarke adds that few definitions of channel outlets actually stand on their own two feet. Although channel outlets have never been that clearly defined, we know what a retailer is and is expected to do and we know what a distributor is and is expected to do. Systems integrators and assemblers also have clear boundaries.
?Assemblers really do exist in their own right,? says Clarke. ?They don?t have to rely on anyone to provide the warranty. These people own their own warranty. Retailers are also geared up for a specific function. They have boxes on shelves as opposed to providing an advisory type sale, more typical of a dealer.?
It is the phrase ?advisory sale? that distinguishes a dealer from a retailer. Dealers are supposed to be specialists, who customers can consult on system requirements. They ask and answer questions. They are interested in the customer?s business.
But some companies, like Hugh Symons, confuse the issue. Hugh Symons assembles its own Centrex PC brand. It also operates as a large dealer and has retail outlets in Bournemouth and Exeter.
?How does SCC fit in?? asks Clarke. ?It?s a hybrid. It has a corporate reseller in SCC, a distributor in ETC and a retail outlet in the Byte superstore chain. You can also add Computacenter to the hybrid list. And what about Datrontech? That is going the other way, from trade-only distributor to dealer.?
These channel hybrids are becoming more common as dealers dip fingers into new and different pies to add that that little bit of extra revenue to their bottom line.
Clarke says: ?It?s important not to get too angsty about it all.? But if we are going to try to pigeon-hole outlets, as we all invariably like to, then we need to know exactly what certain types of outlet are up to. There is no point pretending that resellers do a different job from dealers if they are really one and the same.
The bottom line is that all dealers need to add value. In essence, therefore, all dealers are Vars. But something like this is really open to interpretation. It depends on who is doing the defining and the criteria they are using to reach those definitions. How much services business can a dealer do before it can call itself a Var, and so on?
One company that tries to keep pace with all the channel moving and shaking is market research firm Romtec. The Maidenhead company has followed the channel for years and needs to use precisely defined terms so that data can be presented in a clear and concise manner (see boxes). For example, Romtec uses the term reseller to encompass anyone who sells computer products or services to users.
PC sales are still dominated by dealers, despite the problems they have experienced over the past few years. For April 1997, Romtec says dealers accounted for 50 per cent of PC sales through the channel. Retailers accounted for 21 per cent, Vars for 13 per cent, direct marketers nine per cent and service companies seven per cent.
Despite Romtec?s gallant attempts to define the channel, problems will arise. Dealers that fall into Romtec?s category may be keen to move up market and offer more solutions-based services. A Romtec study in May revealed that over 400 resellers in Europe needed to look at increasing service revenues in the face of increasing direct competition.
?They realise that greater revenues and profits can be achieved with well-judged assistance. Development of reseller services business in this direction requires improved skills and the study identified these to be product expertise and professional skills,? says Romtec managing director Russ Nathan.
If this is the case, the definitions of channel outlets are going to start getting a little ragged around the edges. A study of 400 corporate resellers by Romtec showed that only 29 per cent of total revenues came from services. Romtec defines a volume dealer as having less than 25 per cent revenues from services. A matter of three per cent service revenues therefore separates a volume dealer from a large number of so-called value-added resellers.
Most people would agree that a line has to be drawn somewhere but it?s an unavoidable problem that inevitably leads to confusion. Mike Boreham, head of product management at Info Products, describes the market as being in a state of flux. This is not an unusual assessment of the dealer channel: dealers have always been under pressure and the industry?s mantra of ?get big, get niche or get out? has become so popular that it should have been set to music and released as a single.
?Over the past two years, more people have diversified, recognising that someone needs to provide services over and above the vendor?s services,? says Boreham. ?Delivering equipment to the desk, implementation and support are all important for dealers now.?
Boreham suggests that this trend toward diversification to offer greater services could be better achieved by not undergoing a fully fledged review of core business. ?We decided it was better to partner with a specialist than to try to diversify ourselves,? he says.
This could be why the dealer category remains the most prominent in Romtec?s study. Dealers are still dealing, but now they?re offering services which are provided by another company off the back of the initial hardware sale.
?We?re about providing the infrastructure to build solutions,? says Boreham. ?Some dealers were going wider and wider, trying to cover everything from consultancy, sales and marketing to delivery, maintenance and training. Some top consultancies were even getting involved in product pricing. Now most people have realised this wasn?t working and they?ve started getting back to their core businesses.?
Naturally, this would enable companies to define their businesses more easily. But what?s in a name? There are some more fundamental problems that have arisen from trying to put people in boxes. Vendors which try to form policies on the back of channel outlet definitions are heading for disaster.
If a retailer calls itself a dealer, does it get a better or worse discount? If a dealer does a bit of distribution, does it mean that ultimately it can make more margin on products deemed distribution-only by not having to pay margin for the middle man?
Clarke says there have been instances where a certain large vendor has given preferential treatment to outlets calling themselves resellers when in fact the company concerned was a dealer/distributor. It?s not unusual for vendors to rate their discounts depending on customer volumes, but how you can judge purely on a definition is unclear.
Toshiba, says Clarke, is not such a company. ?It has a flat channel policy. Dealers are authorised whether they do #1 million or #100 million. There is no preferential treatment. It?s important for manufacturers to take dealers on face value. Look at quality and not necessarily quantity.?
Clarke reiterates his call for an end to the bad boy image of the term dealer and goes so far as to suggest that the words dealer and quality really can be uttered in the same sentence.
These are prejudices that have to be overcome and dealers will need to work hard to prove that they care about customers and are not just selling kit in volume at market stall prices. At a time when corporate spending is expected to be on a go slow, this becomes more important. A Romtec study in May revealed that the average IT spend in UK corporates is expected to be cut by about #30,000 a year.
?Our findings underline the increasing focus of corporate IT spending,? says Joff Morgan, Romtec business manager for database products. ?Gone are the days when five-digit budgets were signed off with no clear allocation of funds. Careful targeting of resellers? direct marketing activity is more important than ever in this market.?
Against this backdrop, the channel is in for another shake-up. It?s no secret that the PC market is slow at the moment. Although many have blamed this on summer coming early to the UK, other factors may also be responsible. Confusion over the number of different processors, such as Pentium Pro, MMX and K6 is just one factor.
The market slow-down is expected to hit retailers as much as anyone, but dealers are also under scrutiny with corporates queuing up to jump on the slow boat. Third-party outlets scrummaging for sales will be looking to widen their scope for fear of missing out on revenue in traditional areas. This will make a mockery of any definitions.
?The bottom line is that outlets are not and cannot be clearly defined,? says Boreham. ?It?s all a bit of a sham, really. Most third-party outlets don?t live in neat little boxes. Yes, we can invent definitions and categories until we go blue in the face, but the reality is that businesses tend to change fairly quickly and fall in and out of some defined categories but retain certain other labels. It makes for confusing reading.?
So many outlets overlap the various definitions that it is often too difficult and too pointless to try to tie them down. Perhaps the question that should be asked, then, is why should they be tied down to a narrow representation of what they can do? When competition is fierce, everyone needs to try to make money from all angles. And, if it?s lucky, that?s how a dealer develops into a hybrid company such as SCH.
With a bit of dealing here and a bit of distribution there, you too could possibly become a Times Top 100 earner.
Please adjust your volume
Retail is the most easily identifiable part of the channel, with most business coming from walk-in customers and the majority of companies having a high street location with a shop front. Alternatively, they may have an out-of-town premises as part of a shopping estate. Less than 25 per cent of their business is through their own software and services.
These resellers specialise in selling by one or more of the following methods: telesales, catalogues and off-the-page advertising. The focus is on internal rather than external sales resources. The provision of their own software and services accounts for less than 25 per cent of their business.
Dealers rely on volume third-party sales for most of their own business and, like retailers, less than 25 per cent comes from their own software and services. It is more likely that recommendation or an externally based salesforce is the primary method of selling.
If services account for more than 25 per cent of a reseller?s end-user computer-related turnover, it is a sales value oriented company.
Vars ? A reseller which makes between 25 and 50 per cent as a result of end-user computer-related revenues from computer services.
Service companies ? These resellers derive more than 50 per cent of their turnover from services.
Automation firms UiPath and Automation Anywhere close out their funding rounds with $265m and $300m respectively
View photos of last night's awards ceremony in London
View photos of all the winners from the 2018 Channel Awards
After a glittering awards evening in Battersea celebrating 25 years of the Awards, we are pleased to share the list of winners and judges' commended winners