The distribution game has changed. Back in the day, a security distributor could simply take orders and deliver boxes and life was good. Today things are not as simple as the distributor often has to take on the job of finding projects, assisting in scoping and designing a solution, holding the hand of integrators and supporting the product to a certain level after the job is done. And that is not to mention the financing distributors are often expected to provide, either directly or through extended terms.
There is a lot of risk, low margins (except in financing) and all the blame when ‘your product’ does not live up to expectation – the fact that the installer is not trained on the product never seems to be the cause of problems. Not to mention the intrusion of IT distributors that work on even lower margins, have their support structures honed and see the security market as an easy target.
Today’s security distributor needs to do so much more than drop boxes, they need to become strategic partners. Hi-Tech Security Solutions asked some of the leading distributors in the South African market on what it takes to be a security distributor today and how the game has changed.
How has the game changed? How will it change?
Bernard Senekal, MD of SentronicsSD: The game has changed because of the influx of new and sometimes ‘foreign technologies’ to the traditional market. This has created a demand for value-added, solution distribution as opposed to the typical distribution model.
Over the next few years value added distributors will play more roles in terms of pre-sales engineering in order to ensure that post sales technical services are managed with the channel to achieve overall end-user satisfaction. Other changes would be the fact that value-added distributors will form part and parcel of projects as and when required in order to charge not only for product, but also services they render through the supply chain.
John Rogers, Secequip: The industry is under far greater price pressure and many more product suppliers are around. Product quality is not necessarily always key to product selection as it was a decade ago. Pricing pressure has increased.
We believe the industry will continue to be under pressure in the foreseeable future or at least until an industry can somehow educate the end user as to the value services we supply as an industry (unfortunately our performance and service is often tested when a major incident or threat occurs).
Walter Rautenbach, neaMetrics: Box dropping was the norm at the beginning of the decade. The focus was on setting up a good relationship with the manufacturer and making their life easier so that they would then refer local leads to the distributor who would in turn have to deal with the hassles of payment, product training and support. Sometimes the easy way out for the distributor was to setup an exclusive distribution relationship with the manufacturer.
However, the paradigm is changing and will continue to do so over the years to come. Value-add from the manufacturer, distribution and reseller channels are required. Manufacturers these days are passing up exclusive agreements in an attempt to avoid burning their fingers. This in turn puts pressure on distributors to become their favourite.
Distributors cannot just drop boxes – they must add value.
Bertus van Jaarsveld, CEO, Miro Distribution: It is becoming easier for people to ship products from anywhere in the world, which threatens distribution agreements and pricing models. It is no longer good enough to just import the product and make it available. You have to add value. Training and technical backup are two key issues for Miro Distribution to add value to our customers.
Charles Volschenk, Geutebrueck: More manufacturers have introduced more products, which has led to an explosion of distributors outside the manufacturing countries. So the first big change is that you now have a lot more distributors than a decade ago.
Many manufacturers also often attempt to get their product distributed by a large local player in their target market, leading to big distributors becoming even bigger. Often the original objective of the manufacturer is negated by this step, as the big distributors offer multiple competitive products to the market.
The large distributors will become larger – out of (incorrect) manufacturer belief that these distributors will be able to sell more of their products (even against competitive in-house brands that earn them higher margins). The integrators/installers who buy cheapest (due to purchasing large volumes and getting big discounts) will continue to have an advantage over smaller installers/integrators when competing in projects.
David Lello, Datanet: Datanet is a relative newcomer to the security distribution arena after many years in the networking space. The emergence of digital technology and analytical intelligence prompted the company to move into the security market. With a track record in networking, the drive to IP surveillance is right where Datanet wants to be and it has brought a number of international brands on board (Ganz and Verdi) as well as its own DVR.
Nichola Allan, G2 Security: Box shuffling is out. Today’s distributor needs to know their products and technologies very well. In G2’s case, the company offers a smaller portfolio than many other distributors, but one that it can support well. The channel also wants more help these days and G2 provides it in most areas it serves, however, in the fire market it only deals with installers who know what they are doing because of the inherent danger of poorly installed fire systems.
Andrew Stead, ADI Global: A few years ago, the distribution was different in that there were only a few distributors and a few products in the country. However, the high crime rate soon made security a must-have in South Africa and the distribution industry changed.
Today, distributors are not exclusively committed to one or two brands and manufacturers are not likely to support exclusive distributorships. Distributors therefore have to be sharp on their pricing, stock and customer relationships.
Trevor Harty, Technoswitch: Distribution today is no longer a box-moving exercise. We have a lot more interaction with the channel, from installers, integrators, consultants, suppliers and users. There is more call on us to do analysis and assessments to assist them in integrating their fire solutions into vertical solutions.
Pasco Lattuca, Security & Communications Warehouse: The distribution business is still the distribution business, but the focus has changed over the years. Today’s distributor is more strategic than before and we have to play a larger role in more complex projects involving more products.
Jack Edery, Elvey Security Technologies: South African distributors have evolved over the years from box droppers to a more sophisticated business model in which they add value to their channel through training, service, support and stock holding. We are working harder than ever to support our product ranges in the market. In fact, if a product does not require value-added services from us, we do not distribute it as the only way to win business with those products is on price and that is not always worth it.
How important is a channel these days when distributors sometimes have more skills than installers?
Walter Rautenbach, neaMetrics: It is absolutely essential. Without a reliable channel, the trust of the end user is compromised. A distributor without reliable reseller and installer channels is like a novice entrepreneur that believes he can do everything himself – in the end it will only result in total burnout. The roles of distributor and resellers should be clearly defined. Our resellers must also add value; they are the ones the client calls with demands for service and support. It is our role to ensure they receive the sales and support training required to do their job.
Bertus van Jaarsveld, CEO, Miro Distribution: We believe that channel is critical. By keeping to our channels, we can focus on the core of our business, which is distribution, training and technical backup. We do not engage with the end user or with projects, we rely entirely on our channels. In the other direction, our knowledge empowers our integrators and resellers to tender and quote knowing they have full backup from Miro when they need it.
David Lello, Datanet: The channel is still very important to Datanet. To be effective in this market the company has to understand more than technology, it needs to have a keen insight into the security world and that is where channel partners can add value to the distributor and visa versa.
Nichola Allan, G2 Security: The channel is still important as partners are the ones chasing business. Distributors do not have the infrastructure and resources to deal with end-users as well. G2 insists on trained partners however, to ensure the products it represents are not poorly implemented.
Andrew Stead, ADI Global: For ADI, the channel is crucial and the structure of manufacturer, distributor, installer and user is not to be changed. Over the past few years we have seen some manufacturers getting more involved in managing their own destiny and opening local offices. When the manufacturers work with the industry to create more awareness and pull for their products, distributors and the industry itself wins. The opposite usually occurs when they try to cut out part of the channel.
Trevor Harty, Technoswitch: In our case, we have an advantage in being a manufacturer. When responding to tenders or special requests, Technoswitch is able to customise products to customer requirements.
Pasco Lattuca, Security & Communications Warehouse: The distributor is a key part of projects today as the end user wants transparency throughout the supply chain. The users want to see not only their installers and integrators, but they want to know who the product suppliers are to ensure the equipment they choose is well supported and that the support will be there for the long term.
Jack Edery, Elvey Security Technologies: To survive and thrive, the distributor must offer more than the manufacturer can through its value-add; and it has to offer more to the end customer than the installer through other value-adds like support for the long term. That said, distributors should not bypass their channel partners and try to compete with them.
How does the distributor balance the traditional hands-off approach to distribution with the requirement to be strategically involved with customers?
Bernard Senekal, MD of SentronicsSD: Through the channel, technology and solutions are presented with much more exposure than by attempting direct contact, and in the process opposing the channel. You can develop business and drive demand at end user level but a distributor cannot hunt direct business.
The business case for having a channel is unsurpassed by any other. The channel has infrastructure geared for installations and maintenance whereas the value-added distributor has no infrastructure for supporting business at end user level, but rather for supporting the channel. These are miles apart and the one complements and needs the other. It is all down to roles and responsibilities.
John Rogers, Secequip: It is key that the distributor is hands off regarding installations to end users. However, the distributor needs to offer full support to the end user when necessary through the installer.
Walter Rautenbach, neaMetrics: Firstly, training needs to be provided to resellers to do the job. Secondly, the distributor should commit never to operate in competition with their resellers. This creates a platform for resellers to get distributors involved directly with customers should the situation require it. Direct customer interaction with the distributor should be monitored and reviewed regularly because it can be a sign of a lack of training or confidence on the reseller’s part, and should call for a review of the tools provided to serve the customer on their own. As mentioned earlier – a hands-off approach is ideal for the distributor, but a hands-on approach must be available when the situation calls for it.
Bertus van Jaarsveld, CEO, Miro Distribution: This is one of Miro’s core values, the hands-off approach. We understand how competitive it is at the end-user front and we will only get involved at the request of our customer. More often than not, this will even be under the brand of the customer.
Charles Volschenk, Geutebrueck: The days of a distributor being hands-off and supplying products to anyone who wants to buy, are over. Integrators/installers nowadays have to be specialists in a wide range of electronic solutions to remain competitive – think of access control, fire, surveillance, building management, networks etc. In addition, they often have to offer a few different brands depending on project requirements (a Rolls-Royce solution will be inappropriate for a Mini project). So how do they stay on top of all that information?
This is where I see distributors getting strategically involved with customers and consultants. They know their systems best. They can demonstrate their unique value – and they can recommend competent installers to supply, install and maintain their systems. The new distributor assists their dedicated installer partners to win projects.
David Lello, Datanet: It is all about TCO (total cost of ownership). The IT industry discovered this a few years ago and now the security industry is undergoing the same evolution. Cheap products are always welcome, but the distributor and its partners need to work together to deliver complete solutions to clients that solve business issues. A thorough knowledge of the technology, the industry and the intricacies of integration with other products and networks is required if projects are to proved a return on investment (ROI) to the end user.
Andrew Stead, ADI Global: Distributors today are expected to play a greater role and add value in terms of after sales services to the channel. These value-adds are necessary to ensure the end user is happy with their solution. That is apart from the value they always add by keeping stock on hand and handling certain levels of repairs.
Is loyalty still a reality in the distribution game?
Bernard Senekal, MD of SentronicsSD: Loyalty from neither channel partner nor manufacturer is or has ever been guaranteed. This is the nature of business and everyone will always make the decision that they feel is best for their business at the time. The secret is to balance the act of deciding when to burn a bridge and when not to do this.
John Rogers, Secequip: Loyalty still plays a role within our industry. However, it is probably low down on the pecking order in many cases.
Bertus van Jaarsveld, CEO, Miro Distribution: I would love to say yes, but it is probably easier to get a dog if you want loyalty. A segment of the market will change suppliers for any saving, no matter how small. We do however find that a significant portion of our customer base (especially the larger customers) tend to be loyal once they see the value we add to their business.
Nichola Allan, G2 Security: There is a lot of price sensitivity in the market with installers often opting for the cheapest supplier, no matter what service they receive. However, G2 finds that once a relationship of trust is established and the roles of both parties defined, many installers are inclined to support the company they have built trust with.
How has the poor economy affected distribution in South Africa?
Bernard Senekal, MD of SentronicsSD: The run rate in the tier 2 and tier 3 markets is down and an influx of cheaper products has increased the number of players in this market, increasing the pressure. In the projects market, more previously unknown entities have entered from a distribution perspective and more suppliers/manufacturers traditionally pushing product through distribution now have ambitions of either quoting directly to the end user and/or bypassing the channel. These are all short or medium term models that present windows of opportunity for those sticking to the models and routes to market that have proven successful over time.
John Rogers, Secequip: The economy has had a slowing effect on the security industry: less disposable income among end users, project budgets on hold and it will probably be 12 to 18 months yet to see a return to normality.
Charles Volschenk, Geutebrueck: I think the effect on distribution is not yet completely over. It ensures that quality distributors sharpen their focus to keep their installer partnerships strong and to increase the marketing of their products – plus it will weed out the box-movers who add no real value to the lives of installers, consultants or end-users.
David Lello, Datanet: The economy has impacted the market, although South Africa has not seen a downturn as tough as the UK and USA. Nonetheless, we are finding that as distributors we are having to finance projects with extended terms based around project timeframes. And the distributor only gets paid at the end of it all. The majority of the business Datanet gains is project work that requires some form of financing.
Andrew Stead, ADI Global: The economy has impacted the distribution industry negatively over the past year or two. This year has been up and down, especially with the FIFA World Cup and the recent strikes, major projects are on hold.
Trevor Harty, Technoswitch: Although the economy has been poor, Technoswitch has been growing and opened new branches in Durban and Cape Town. Over the next three years we will also be moving into sub-Saharan Africa.
Pasco Lattuca, Security & Communications Warehouse: The economy has slowed payments down. Although the distributor has always been called on to bankroll projects. The key is to select those channel partners that will complete projects successfully and provide the returns required. You cannot finance anyone off the street anymore.
Jack Edery, Elvey Security Technologies: The economy affected everyone and there was less work out there. I am cautiously optimistic as there appears to be an upturn, but I do not expect the growth we have seen over the past few years.
What are the top three tasks of a successful distributor in 2010?
Bernard Senekal, MD of SentronicsSD:
1.) Be hands on with driving demand at end user, consultant and integrator/installer level.
2.) Stringent debtor management that mitigates risk, but provides a working model for the projects market.
3.) Inventory and supplier/manufacturer relationship management is also key.
John Rogers, Secequip: The key factors in distribution are good quality, reliable products at competitive pricing with reliable back-up support and training.
Walter Rautenbach, neaMetrics: Service, service, service. Those three are the most important. Thereafter, adding value during the distribution chain, improved reseller relations and measuring their performance.
Bertus van Jaarsveld, CEO, Miro Distribution:
1.) Train your integrators and resellers.
2.) Provide technical backup, support and warranty services.
3.) Have stock available when they need it.
Charles Volschenk, Geutebrueck:
1.) Market/communicate the unique value that their products can offer potential customers – thereby helping to get their products sold.
2.) Ensure that sales and technical staff of their installer partners are properly trained and competent.
3.) Never to lose a relationship once gained – through providing exceptional service and assistance.
Nichola Allan, G2 Security: You cannot win business if you do not have stock on hand. There is not always time to order goods when a channel partner knocks on the door. And if your technical support is good, your partners will have the confidence to come back time and again.
Andrew Stead, ADI Global:
1.) Service excellence.
2.) Personal interaction and an open-door policy.
3.) Stock availability.
Trevor Harty, Technoswitch:
1.) Relationships built on trust are key.
2.) Service delivery.
3.) Technical backup.
Pasco Lattuca, Security & Communications Warehouse:
1.) Improve the skills of your channel.
2.) Ensure the service to the user will be good by insisting integrators set up service level agreements (SLAs). We insist on SLAs to protect ourselves and the user.
3.) Diversity. Do not depend on only one revenue stream.
Jack Edery, Elvey Security Technologies:
1.) Focus on the market you want to address. You cannot be everything to everyone.
2.) Be flexible to market demands.
3.) Ensure your operations run efficiently and economically.
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