Dealers with platitude

Get big, get niche or get out. How many times have we heard peoplesay that in response to troubled times in the dealer business? Was itsound advice? How have companies which took it in the past few yearsfared? Is it still a plea we should listen to? Can you survive as a smallbox-shifter or as a large niche player? Or is it simply too late for thosewho haven't already moved one way or the other?

Popular folklore in the UK PC industry holds that the phrase 'get big, get niche or get out' was coined by former Epson MD Don Pinchbeck way back in 1991.

'Vars should be wondering what they are going to do,' he said, during a speech on board the SS Canberra at the first Comdef dealer forum. 'They can either get big by banding together in buying and marketing groups, or they had better find a niche where they can sell added value. If you are neither big nor in a tight market segment that you can defend, a big fish will be along soon enough to eat you.'

Romtec MD Russ Nathan, who was also at the event, went a step further, suggesting that the land between box-shifting and adding value was 'the bankrupt zone'. But it was Pinchbeck's words that stuck more in the mind.

It reached a popular height throughout the last recession, which also coincided with the commoditisation of the PC and a mass influx of cheap PC clones from the Far East.

Dealers were told they would only survive if they heeded the advice.

Many didn't, and dealer closures were a regular fixture in the news pages.

But was the phrase really that important? Did it really encompass the entire reselling business or was it just a poignant soundbite that got too much press?

'It was one of the more enlightened throwaway expressions of recent times,' says Lapland sales director Martin Clarke. 'It hit the nail on the head as far as reselling was concerned, and an awful lot of people will be looking back now and wishing they'd taken the advice. We got niche right from the word go and wouldn't consider anything else.

'It's important to target a niche, and try to own that market, and then pull the ladder up from behind you so no one else can jump on the bandwagon.'

Lapland is a niche success story. From being a startup just five years ago, it has developed from a u5,000 company to a u10 million company.

'It's absolutely spot on,' says Martin Finn, commercial director at Hamilton Rentals. 'Look at our business.'

Hamilton Rentals underwent a major shift in its business strategy in 1990/91. It relinquished PC and small network reselling in favour of concentrating on higher-end Unix and Windows NT networking solutions. 'Initially we shrunk the business in this change over, but when it was all sorted out we got into our niche and more importantly, got big in our niche.'

Hamilton Rentals achieved sales of u77 million last year, compared with u24 million the previous year. Growth has been quick and Finn believes this would not have been possible if the company hadn't shifted its strategy when it did. As the reseller that has got both big and niche, the well-worn phrase is almost like a company motto and having been around for 34 years now, Hamilton Rentals is obviously not shy of a bit of moving with the times.

While both Lapland and Hamilton Rentals are good examples of companies that heeded the get big, get niche advice, they are by no means the only ones. More will surely follow. But going niche was not and still isn't a guarantee of success. Finding the right niche is naturally as important as the decision to go niche itself. There has also been a bandwagon tendency in the dealer channel that sees a large number of firms follow product trends, sometimes without really thinking.

'A number of dealers got their fingers burnt when they moved into catalogue selling,' says Jinty Weldon, Romtec director of database solutions. 'Some dealers thought they'd be more secure if they got into the direct, off-the-page market, but there's been a bit of a shake-out in that area, resulting in some casualties.'

So taking the advice was one thing, but applying the advice was another?

'Get big, get niche or get out was a very accurate and relevant thing to be said at the time, and has proved to be true,' adds Weldon. 'Certainly our analysis has shown that big names have got bigger and others have become more specialist. There are fewer businesses in the middle ground, a position which we now classify as being occupied by Vars or high-end service companies.'

But like all cliches, there is an element of throwaway generalisation.

Not all cliches are all things to all people. At Comdef in 1991, the then sales director of Apricot, Brian Androlia, was not so impressed. 'The word niche is a glib cliche for specialist knowledge,' he said.

'Everybody needs that whether they are big or small. It's no good just being big if you don't have specialist knowledge. Specialist knowledge is no longer just a matter of knowing how to install a network, it has to go beyond that. If you are a big dealer you can obviously afford to specialise in a lot of areas and become a systems integrator. If you are small you can choose one or two areas to specialise in.'

For some companies, it was just a case of investing more money and getting bigger. While the small fish foundered, the big fish snapped up all the scraps and set their stall out for the next 10 years or more.

Computacenter, P&P and Specialist Computer Centres have been virtually untouchable.

Getting out was, and still is perhaps, the easiest of the three options.

Dealers have not been slow to take the advice and since 1990, liquidations, sales, mergers and acquisitions in the channel have been rampant. In 1994, there were 283 changes of ownership, a 16 per cent rise on the previous year. Between 1990 and 1994, there were 29 flotations, 50 refinancings and more than 1,000 acquisitions. Romtec reports massive changes in dealer outlets. Although these changes may not necessarily mean a dealer has gone under, the feeling is that a large percentage of the totals represent closures.

As an example, Romtec estimates that in 1994 there were 129 closures, or deletions to its database, while in 1995 the figure reached 402. This was peanuts compared with Romtec's figures that emerged during the first six months of 1991. The research firm reported that an average 107 resellers were going under each month. The channel conditions at this time also prompted Context director Jeremy Davies to say: 'We have noticed over the past few months that a substantial number of dealers we have talked to for years and considered safely established, are no longer around.'

Such was the dealer climate of 1991. During the years that followed, Pinchbeck's phrase was more than cemented into the psyche of channel watchers and is still used today. Whether it is as relevant is open to debate.

Most companies have already got big, got niche or got out already. The ones that remain have either cut their cloth in volume or in niche markets and are now trying to develop a niche that generated volume, or a volume within a niche.

Most dealers already specialise in one field or another and more are focusing on service. They have reputations, established client bases, strong vendor relationships, backup and a certain amount of expertise.

We all know the story with volume. Margin on product makes it impossible to be a small player that moves brand-name boxes and does little else.

You must be big and even that is no assurance of long-term success.

If you have not done it already it is probably too late too late to get big or get niche - and it's just amazing that you have not been forced, let alone that you've not got out of your own free will.