Hey big vendor, send a dealer's box to me

The minute Computacenter walked in their joint, the disties saw itwas a threat of distinction

When the edges between resellers and distributors blur, it's unlikely to be good news for the channel. That, at least, seemed to be the consensus after it emerged last week that Computacenter is putting more time, effort and staff into distribution.

The firm has shifted tin for a long time, and travellers will have seen its lorries trundling around the country. But now it's putting extra muscle behind the distribution arm of its business and this is getting to be something of a trend.

That, at least, was the story according to Martin Hellawell, the company's head of marketing. At one time Compaq could do no wrong in the eyes of Computacenter. But over the past six months, the UK's biggest reseller and Big Blue have cuddled up together and now it is set to distribute large volumes of IBM tin at preferential rates.

There are other signs that this is becoming a trend. A few weeks ago, Harry Thuillier, chairman of corporate reseller Fraser Associates, announced the formation of Fraser Distribution. Given the predatory way in which broadline distributors have been eyeing up the flesh and bones of their competitors in the past six months, the invasion of the box shifters into the market must be viewed with some suspicion.

The combination of a market dominated more and more by wafer thin margins, increasingly powerful players like Microsoft and Intel and pressure on credit all add up to a problem for broadliners. Yet problems for some are opportunities for others, and Computacenter is no slouch when it comes to seizing them.

Why do firms that make the bulk of their money from selling into big businesses decide to start shifting boxes instead? The answer seems to depend on the type of company they are.

Computacenter's goal is three-pronged. It wants to increase revenue and profitability, leverage its position with vendors and take business away from arch-rival Specialist Computer Holdings (SCH).

Would there be so much fuss if Computacenter had formed a separate division instead of spending lots of money building up a distribution business under its own name? The answer is almost certainly not, according to one highly placed source at Merisel. She said that because of SCH's strategy of pursuing some business under the flag of SCC and other distribution business under the ETC banner, most thought the Chinese walls made all the difference.

This is more relevant than one might think. Paul Mahoney, general manager at Olivetti UK, said his firm would not use a distributor that was also a corporate reseller. But Olivetti distributes much of its kit through ETC.

He said the reasoning behind Olivetti's rule is that distributors attract one rate of discount while corporate resellers got another. There should be no mixing of the channels, Mahoney said, as it confused things and made it harder for vendors to sell in a straightforward way.

This point was reinforced by James Wickes, MD of Ideal Hardware. There was a time, he said, when distributors were distributors and resellers sold to big business. If there was a whiff of a distie selling kit in its warehouse and bypassing the channel, there would be an uproar.

History supports Wickes' view. In the days when Merisel was Softsel, it regularly bypassed dealer International Software which occupied the floor above it. It would sell kit not only to big business, but to anyone who wandered into its premises on the Bath Road.

But the borders have blurred in the 1990s and now it seems that as the distribution companies consolidate their fleets. Big companies like Computacenter can sell to big business as well as leverage relationships with big manufacturers.

Experiments on the continent with new distribution channels began last year. Software firms have been denied access to dealers because the broadliners slimmed down their product lines. But at least the Internet offers another outlet to developers.

So far, there is no indication that Computacenter will extend its operations beyond tin. The relationships it developed with IBM and Compaq at an early stage in the PC's history ensure that those two companies, at least, still love it.

A highly placed insider at Northamber made the point that Computacenter lacked focus in the distribution market. And Northamber's point remains valid. It is a past-master of setting up specialist units to do particular things and in the past three years has succeeded in establishing its presence as a big player in the market.

There is one factor in this race that broadliners, and even corporate resellers, ignore at their peril: the rise and rise of the value-added distributor.

Tony Weaver, Norwood Adam MD, said although broadliners are responsible for around 60 per cent of boxes shipped in lorries around the country, that leaves a pretty fair chunk which is handled by small to medium-sized companies.

Distribution mirrors the rest of our economy. The lumbering giants at MFI have tried to set up specialist distribution arms to attempt to capture some of this business, but it has not been as easy as they might have thought. Distribution hates a vacuum just as much as nature and it hasn't been hard for niche distributors to crawl into the corners of the market.

Yet Computacenter remains impenetrable. For all we know, it may have concentrated its resources and built up a logistics presence that betters its broadline companions. After all, you cannot build up a fleet, service it and ship tin without knowing something about logistics.