Viewpoint - Vendors on the road to nowhere

The 'wham bam thank you ma'am' attitude to the reseller channel isripe for a change.

I am increasingly of the view that the reseller channel is headed down the road to disaster unless vendors stop treating it as a short cut to cheap sales. Like the rainforests of South America, the reseller channel is being abused and laid waste to, and nothing is being put back in.

One symptom of this malaise is the current staff shortage. Dealer businesses have to be increasingly sophisticated in the technology and sales techniques they use, but they find it harder and harder to recruit staff of the right calibre. Most resort to poaching staff from their rivals by waving a wad of cash at them. But there needs to be a long-term plan on both sides of the fence - resellers and vendors - if this situation is to be repaired.

One of the problems is that many vendors look at the reseller channel as a means of achieving distribution with low expenditure. They think they can throw product at dealers and then absolve themselves of any further responsibility, apart from a bit of co-operative marketing, and then only if the resellers achieve sales targets.

That is the beauty of the dealer channel, they think. They believe it is indefinitely self-motivating and self-perpetuating, but the plain fact is that it needs investment. It is certainly not a cheap route to market.

If the resellers were their own direct sales team instead of the virtual sales team that the vendors regard them as, they would not think twice about investing in training, marketing, research and so forth. But because reseller businesses are seemingly autonomous, most vendors happily regard them as being able to take care of themselves.

The resellers themselves are partly to blame for this situation - they can't have their cake and eat it as well, as it were. The freedom to switch suppliers, flit from vendor to vendor and cross-sell may be one of the benefits of being an independent reseller, but understandably it makes many vendors reluctant to invest in the development of sales, technical skills and close relations.

In an ideal world, the resellers would be an extension of a vendor's own sales team, and the vendor's only function would be to create sales leads and facilitate sales. Some vendors seem to appreciate this and have a loyal and profitable channel as a result. Those who have successful channels usually have two characteristics in common: one is that they invest freely and without links to volume, in developing their resellers' businesses; the other is that they develop good lines of communication with plenty of two-way consultation.

You'd be surprised at how many vendor companies still treat their resellers according to the mushroom method of management - keeping them in the dark and throwing shit at them. Few will actually consult their channel about strategies, preferring to present them as a fait accompli.

On the one hand, somewhat surprisingly, some of the larger vendors are better at channel management than the smaller ones. At one time the large vendors were arrogant and aloof, and happy for a tiered distribution system to keep them away from their grassroots resellers and their customers. Now they can't get close enough.

On the other hand, some of the small to medium-sized vendors, who once showed a keener appreciation of the business problems that resellers face, are now trying to distance themselves and leverage the channel for their own improved profitability.

This is a short-term strategy. I often meet vendors who have absolutely no idea who their resellers or customers are. How can they hope to develop the channel and invest in product development if they don't know exactly what problems and opportunities the resellers face, or what the customers really want?

There are one or two vendors - as far as I know only large ones - which have stopped thinking of the dealer channel as a cheap route to market and now budget on spending as much on the cost of sale as if they had a full-sized direct sales arm. If that's the case, you might ask, why bother with indirect sales?

Vendors bother with indirect sales precisely because a dealer channel can be 10 times the size of a direct sales division for the same outlay. Resellers get everywhere while a direct sales force is finite. The snag is that an indirect sales force will also be finite unless vendors are prepared to regard its problems as their own. And then do something about them.