Call me cynical, but I nearly cried when I read the press release. Maxdata, it says here, is ?launching into the UK with the unique business model that propelled it to become the German market leader in monitors?.
You can argue that a journalist is in many ways a paid cynic, but how many times have we heard something similar before? You can understand the relief, then, when I say that UK managing director John Adams, without wishing to trash his scribe unnecessarily, hints that he agrees. ?I don?t think it?s anything revolutionary,? he says. ?The channel is the channel.?
Maxdata?s initial appeal to resellers is its focus on that channel, not that it is doing anything spectacular with it.
So we step back and look at the story. Maxdata has been successfully selling monitors in the German market for some time. The company has been looking to expand and part of this plan means it has its eyes on the rest of Europe, as well as Taipei. It has formed a bridgehead into the rest of Europe through a British subsidiary in Wokingham, headed by the aforementioned hype-buster Adams. Six staff are with him, and they all share in common a solid background in selling monitors, even the accountant.
So why does an accountant need to know so much about the market in which his company sells? ?Er... well, he does credit control and the same names keep coming up,? answers Adams. You could get to like this bloke.
It?s an interesting time to be setting up in the UK in particular. As this article went to press, we were alarmingly close to a general election. No matter who wins, the chances are there will be further haggling over whether we adopt the EU?s social chapter for a while, and whether the minimum wage will apply over here. And nobody can really say which currency companies will be working in 24 months from now with any great confidence.
In fact, arguably, there has never been a less stable-looking time to be investing in a start-up on this septic isle. ?But if you take that approach there?s always going to be something to stop you,? points out Adams. The decision to set up in the UK had to do with the culture of the company, the culture of Britain itself and a perceived opportunity in the market.
It sources its monitors from five suppliers, none of which can be named because, as Adams says, there?d be no point in sticking on your own badge if you were going to go around telling everyone what they were before you got at them. It is equally true to say that if no one knows who they are, the suppliers can be rejigged, replaced and moved around in the event of shortages or price hikes.
?We prefer to keep the products on for a two-year cycle,? says Adams ? quite a long time given normal product cycles in the IT industry.
Adams believes he secured the MD?s position because he knows so much about monitors ? and just when he was starting to look quite human. Monitors have been his life for 14 years, he says, sounding not in the least bit embarrassed. He started by spending eight years at Microvitec, where he rose to UK sales manager, and moved to Samsung where he became business manager for monitors. After a stint at an OEM company that sold to Taxan as well as Maxdata, Maxdata approached him with a view to setting up a UK operation.
So much for the CV. What resellers will want to know is how the company?s tack differs from anyone else?s, and that is where its channel focus comes in. Maxdata has grown to its current size in Germany by focusing entirely on the small-to-medium dealer. It won?t go direct to the user and it won?t go through distribution.
Oh right. And what?s wrong with going through distribution? ?Most dealers buy at least some of their components from distributors and in business terms, arranging a distribution contract must be one of the lowest-risk strategies for entering a country that is a new territory to the supplier. They wanted a proper presence in the major high-volume markets,? says Adams. ?In Poland they?ve established a distributor instead.? Poland always gets it in the neck when it comes to discussions on market size, you?ll notice.
Maxdata UK started trading on 1 April with its dealer-only mission very much in its mind, and sent mailshots to a few thousand SMEs. Three weeks later it was getting its first repeat orders through from a base of 20 dealers, which means the product is selling through. More recently, it was shipping 50 monitors a day and therefore had some way to go before reaching its target of 50,000 in the first 12 months going through 1,000 dealers. Product literature is available with or without pricing, so that it can be used to publicise the product to end customers as well as for reseller information.
This leaves dealers free to charge whatever they want for the kit, you?ll notice. Adams isn?t at all keen on quoting retail prices as they have ended up in the past as a yardstick against which customers can demand whatever discount they think they might get away with. Not that the company is overkeen on selling exclusively on price, either.
?It is always a danger and we?re not the cheapest for the spec,? says Adams. Even so, he believes the dealer should decide which business they want to be in, but people wanting just to undercut won?t find much to appeal. A say in the components the supplier uses is key to the company?s policy, and this precludes going for the cheapest tubes ? as does the fact that as a European company the organisation has to make utterly sure its products adhere to any eco-standard that happens to be imminent.
As well as all the flicker-free regulations contained in the Health & Safety Executive?s wonderfully woolly legislation, in which vast amounts of specifications are summed up in the word ?reasonable?, the UK is probably about to be swamped with Euro legislation on take-back of IT products as well as recyclability in anything electronic we manufacture ? only last month the government exhorted organisations including the Industry Council for Electrical & Electronic Equipment Recycling (ICER) to develop guidelines for remanufacture and reuse of electrical items, in advance of the anticipated European legislation.
In Germany the laws are such that users pay an extra #10 or so on top of the standard retail price for their PCs so that the manufacturer will come and take it away when it is no longer required. Although at this stage Maxdata is making little of this, it is worth noting because sourcing from a country closer to the heart of Europe will mean such guidelines are likely to have been adhered to in the design before the UK has heard of them.
This is not a point on which the company sells particularly at the moment, since the average Brit is only keen to recycle after ascertaining that it does not cost anything. Instead, Maxdata stresses the quality of its products and above all the logistics. There is a reason for this. Although the company eschews the distribution model, it is actually set up more or less as a distributor anyway: it sells commodities and offers more technical support, including a three-year return to base warranty (which can be productised and sold on or bundled in the total package the dealer puts together), but it does not manufacture.
Its skills are in getting the product from A to B, quickly. Its competition includes the Northambers and Ingram Micros rather than the bona fide manufacturers, so its logistics have to be as slick.
Getting the right premises was the first step, and the company had a curiously difficult time of it. Five hundred commercial estate agents came up with a total of 30 suitable properties between them, and there were no particularly special requirements. The Wokingham address has been set up to carry about three weeks of stock, and Germany makes a suitable second port of call in an emergency. ?I?ll be able to call on the Far East as we grow,? adds Adams.
Overall, there should be every chance of products reaching customers for next-day delivery, every time. Handling this with a staff of seven is going to be tricky, he admits, but he hopes to increase this to 14.
So why does a neo-distributor like this have to specialise in something as narrow as monitors rather than go broadline? It?s all commodity, surely? ?It?s a commodity but it?s a big commodity,? says Adams. ?It?s the single largest item in a system, it?s bulky, fragile and awkward to ship and store.?
You also need to know which applications work with which graphics card, he points out ? a monitor is only a commodity in the general market. Specialist applications and environments can require specialised knowledge. Adams has spent a lot of his time developing an interest in monitors ? esoteric certainly, but profitable and necessary. ?You have to be careful with monitors, you can?t store them for too long,? he says.
So far, so dandy, but Maxdata is not the only company to come over and say ?Hi guys, we?re best-sellers and you?re going to lurve us.? Several companies have fallen flat on their mush afterwards.
Long-term readers will remember the Daewoo brand ? ?hi folks, we?ve been making monitors for other people to brand for ages?. No doubt they continue to do so, but their own-brand PCs died horribly in the UK. Peacock is another monitor name that is big in Germany. It came to the UK in the early 90s, only to shuffle out last year after failing to become a household name for anyone who isn?t called Peacock.
Adams is insistent that Peacock?s problem was its lack of focus. ?They were selling everything they could get their hands on,? he comments. ?PCs, notebooks, anything.? Ironically, the comms sales are reputed to have kept Peacock going in the UK for a while, as they were profitable when the internet started to reach some sort of commercially viable mass. This is why Maxdata in the UK will not be selling its parent company?s PC range, called Artist ? also because the distribution model is a lot stricter in Germany, where resellers buy their monitors and PCs from another tier rather than buy in the components and build their own, which is a tack adopted by several resellers in the UK. ?We?d feel as if we were competing with our dealers if we sold the computers too,? says Adams.
The trick is going to be persuading the small dealers that the computers won?t come over eventually. Time and time again companies have claimed that they will never sell against their channel, and commercial circumstances have forced them to backtrack and do so anyway, much though they might regret it. Knowing that a group of clones is ready to enter the channel if the parent company dictates it must is far from reassuring.
Policy on what product enters the UK comes from both the German end and the UK, and Adams is quick to offer reassurances. ?We both sat down and agreed that the best thing to do would be to specialise in monitors and nothing else. We are not going to sell PCs for the foreseeable future,? he says. Given the collapse of other organisations that have spread themselves too thinly, he is likely to stick to this.
Brian Norris, senior partner at consultancy Brian Norris Associates, sounds pretty bullish about the Maxdata?s prospects. It may be a little-known fact, but there is still some good margin to be made rebadging monitors. ?There?s always room in the market for someone with a very good range of products at very competitive prices,? he says, and he joins Adams in condemning the Peacock example as being due to lack of focus. ?It came over with its PCs at first.?
Yet it remains true that with Taxan, Microvitec and the unnamed monitors on the market, there is little enough need for another. Peacock?s sales were insufficient to leave much of a gap behind as it exited from the market, so where are these new devices supposed to go? Norris maintains the market changes constantly, so they will find their niche, and he quotes the company?s success in Germany as evidence that the targets are likely to be met over here.
But the UK is different from Germany and requires a different approach. The absence of PCs in the line is the best indicator as yet that the company appreciates this, and the appointment of a local person with solid knowledge of the right market is another, even if it is a funny idea learning so much about monitors. Most reassuring to the smaller trader is that a company will be interested in fulfilling onesy-twosy orders. ?I don?t see why we should insist someone takes 20 just so they can have a marketing booklet,? says Adams.
Should be an interesting one to watch.
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