Last year was pretty hairy in the UK channel and some of the early signs so far this year are equally grim. Distributors have a pivotal role in maximising the optimal conditions for resellers.
Some 285 channel businesses died in 2012, the most in a year since 2003. Several pretty impressive names disappeared: retailers such as Comet and disties including SDG. Consolidation too saw the likes of VIP swallowing Realtime, and C2000 picking up SDG's remains for a snip.
Where will it all end? Will 2103 be any better?
It is likely we are seeing a lull in the storm, rather than the beginning of the end. It could well get worse. Having said that, since we are looking ahead, in a market where what happens is incredibly dependent on the winds of change, we do not know anything for certain.
So we need to examine the facts before we make any market predictions and chart our courses for the coming year.
One of the overlooked facts is that although the scale of casualties is similar, the underlying conditions are slightly different now than in 2003. Back then it was a question of desktops vying with laptops for the customer's attention.
Now the main battle is between laptops and tablets.
However, the real change is in the supply of money.
Christmas can give ailing companies a shot in the arm, but merely postpones the inevitable.
Many limp into January before they eventually run out of funds and expire. But could we see more companies than usual going to the wall in the end of the first quarter of 2013?
Will the banks become even more cautious and pull the rug from under even more businesses?
Distributors have always borne some of the burden of underwriting credit risks and generally financing their resellers, but now, according to our study, the expectations of them are becoming higher as well.
Certainly, the collapse in the PC business has not helped resellers, and then there is BYOD. According to our study, based on 465 reseller respondents, PC unit sales growth has continued to fall sharply and Q3 2012 saw a particularly dramatic downturn.
Excess inventory built up in the channel, and there were sales drops in July and August. In July, sales fell 26.1 per cent.
Further, it seems the back-to-school period did not spark any rediscovery of the joys of PCs -- most likely because tablets had supplanted them in many people's hearts.
Chart (In Euros): Panel quarterly revenue, % share, by industry sector
© Copyright Context 2013
But tablet sales and software sales are up. The even cheerier news is that the UK seems to be doing better than most of its European allies. Sales of tablets and telecoms (66 per cent up in Q3 2012) have carried on rising and there is optimism about growth in the services space.
Why have UK resellers weathered the storm better? Is it because the UK is the banking capital of the world and our technology sector gets better support? Our research suggests not. According to feedback that we have received, it is the distributors that provide invaluable financial underpinning.
As resellers plan to survive the year ahead, they look to their distributors to improve technical support and shorten delivery times in the future.
However, the overriding need is backup, through sales and marketing support, according to our studies. So the most invaluable assistance of all, our round-up would suggest, is the financial support the distributors must continue to offer the channel. The good news is that distributors seem in many cases to be following through.
Chart: Monthly YoY sales of PC units through distribution
© Copyright Context 2013
Jeremy Davies is chief executive and co-founder of Context
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