Distribution diversity under threat?

GfK channel survey reveals a move away from using multiple distributors

The latest GfK channel survey compares its 2010 results with 2009 and shows some interesting trends as the UK moves out of the recession. And looking further back into the results from the 2007 survey and the peak sales period, the survey results show actually some remarkable trends.

Our survey investigated independent computer shops and IT resellers. Participants are asked questions to determine the market coverage and reach of the top IT distributors, as well as figure out the market opportunities.

We found in this latest survey that the average number of distributors being used both across the total IT channel -- especially by computer shop specialists -- is decreasing rapidly. In some channels, the number has more than halved in the past three years.

Even more worryingly for those distributors still in business, almost one-third of computer retailers want to change their distributor. The top two IT distributors in the UK both supply around 25 per cent of their products to indie computer shops. However, one interesting trend 2009-2010 is that all top-10 distributors are supplying less of their product to indie computer shops.

So why is there this rapid decline in the number of distributors used regularly, and what is driving the desire to change disti? It is to be expected that the price of products being offered is critical. After all, price tends to top every reseller’s reasons for wanting to change supplier.

However, the product set on offer and the technical support available also rated highly as criteria for computer shops wanting to change distributor. This puts distributors in an interesting position for the disti that typically never focused on technical support – instead concentrating on being able to supply product quickly into the market place.

Overall, we saw some very interesting results around the payment and costs of products -- which is hardly surprising really, given the financial crisis that we have been through in the past year. Criteria such as delivery cost, credit limit, and payment conditions have increased in importance in the past year.

And with the impending VAT rate rise, margins continuing to slide, and consumer spending tipped to slow down even further into 2011, these categories will become even more significant.

On the flip side, ‘softer’ criteria such complaint handling and customer care have plummeted in importance over the past year. The focus is firmly on the money.

Delving into the computer specialists category, we found higher demand for online ordering and product assortment compared to the business resellers. Time saving is clearly a priority. Product assortment points to successes for broadline distribution.

Marketing support was in higher demand by business resellers than by computer specialists -- which does contradict the long-held view of independent and computer retail multiples that marketing support is often in short supply. Clearly, in a time of recovery marketing support is superseded by availability, assortment and price.

IT hardware (as opposed to software and services) continues to make up most revenue for IT specialists, and that is especially true for the indie computer shop that gets almost two-thirds of its revenue from hardware. However, their services revenue is also up on 2009 – quite likely because consumers want to make their existing equipment last just that little bit longer in the current economic climate.

Tracy Goodfellow is senior account manager at GfK