C2000 gets channel credit flowing
Distribution giant is determined to keep the channel cash flowing
Computer 2000 (C2000) has admitted it is taking a risk by opening up extra lines of credit to the channel, but said it was determined to keep the cash flowing.
Last week the distribution giant announced it would add another £100m a month of credit to its existing offering from January 2011 to soften the blow of the VAT increase. This will bring its total UK credit offering to close to £1bn a month.
Andy Dow, group marketing director at C2000, said: “Next year the VAT increase will reduce overall credit by 2.5 per cent and our goal is not to let the VAT changes affect the channel’s ability to grow business. We want to ensure that resellers have plenty of headroom.”
Despite acknowledging the risk, Dow said that the channel was more robust than expected. “The channel has proved to be very resilient and well managed. There have not been as many failures as people predicted a year ago. This proves that we are a mature industry,” he said.
Dow also said there was a caveat – that resellers will have to apply for the credit and pass the safety checks.
“Vendors entrust us to look after the relationship with resellers and part of that is we have to give them the ability to grow,” he added. “We are not an organisation that hides behind the phone – we are proactive.”
Nick Tiltman, managing director of credit consultancy EuropeanPlus, said: “This makes sense. As VAT increases, in effect there is a net reduction in credit lines to the channel. It will be interesting to see what other distributors do about their credit lines when VAT goes up in January.”
Ian Kilpatrick, chairman of VAD Wick Hill, said because his reseller base sold to commercial customers, they would not feel the effect of the VAT increase too much, but agreed that credit was a vital issue.
“Credit levels are still being tightened across the channel and some resellers are struggling in the third phase of the recession, with banks not making a great deal of credit available,” he said.
“We are continuing to invest in our credit facilities and expect an increase in demand for credit for at least the next 18 months, as business starts to pick up.”