Reposition or lose out warn analysts

Distributors Oversaturation after commoditisation forces change.

Distributors are being forced to reassess their position in ane. increasingly oversaturated market, as margins on networking products continue to fall under commoditisation.

According to Sandy Cals Summers, analyst at Dataquest, specialist networking distributors will continue to suffocate under the weight of broadliners unless they change their distribution model.

Cals Summers said: 'Competition has increased since broadliners have launched networking divisions. The question is, do specialist distributors still stand on a profitable business model?'

Steve Lockie, networking general manager at C2000, said: 'All distributors now provide value, which is also commoditising, so we have to deliver on the product where volume is very healthy.'

In terms of falling margins, Cals Summers pointed out the challenge for companies will be to sustain high levels of distribution on networking products. She said: 'One argument is whether specialist distributors will find relatively new products to attain increased levels of margin.'

Lloyd Pinder, VP of sales at Ingram Micro, said: 'Some of the niche distributors in networking are not moving fast enough and are getting caught out on commodity products. They are not moving to take market share.'

However, Dave Inman, marketing development director at Anixter, said: 'The bottom line is that few people seem to make it chasing volume.' He added: 'Volume is vanity and profit is sanity.'

Lockie said: 'Broadliners have taken the business from specialists; resellers want to deal with less partners; we focus on less vendors. It takes less logistics for me to shift a box than specialist distributors.'

Cals Summers said: 'This industry is constantly evolving with a whole new range of products, so there should be a natural progression or a concentration on changing cost structures.'