Distributors in turmoil: what about the little guys?
Credit lines reined in
The current sorry-state of most distribution businesses in the UK may be of little significance to the majority of end users and to many resellers – particularly those with big spending power i.e. the corporate resellers. But to the smaller resellers it’s pretty awful news. Most small resellers are already sick to the back teeth of being mistreated by most major distributors and the current collapse in profits and the knock-on effects it will have in spending is not going to make things any better. Over the next quarter more distributors are likely to rein in credit lines and chase up debts harder as they try to keep the cash moving. Services may also get the squeeze as they seek to cut costs. Ingram and Ideal are both losing staff and while they will, we can be sure, make every effort to keep service levels and morale high, it is bound to have an impact on the interface with the customer. The present situation emphasises the need for closer ties between smaller resellers and distributors, for a better understanding between them and for greater flexibility. The trouble a lot of distributors have now is that they are tied absolutely to their financial success. Once you are on the stock market you have to do well, or the investment goes and so does the confidence. To get back on track you have to make cuts and change fast, you can’t easily develop and implement a new long-term strategy. Image that you are one of these distributors and that today you are totally dependent on hardware sales; how will you keep generating cash and some profit if you abandon that and skill-up to be a services business? You can’t do it. The City won’t accept it and unless you have massive cash reserves, your creditors and bankers will being to get nervous. Market confidence also takes a hit and what these distributors don’t need right now is an exodus of nervous customers or people beligerently refusing to pay bills. More than ever they need loyalty in the customer base – but how do you get that? It is no good looking for it when the trouble has already started, you need it to be there when it starts. Most smaller resellers won’t feel sorry for the distributors currently experiencing problems because they don’t feel that they have been treated well over the years by these firms. And smaller resellers will suffer as a result of their problems. One way in which distributors can cover themselves against the harder times is by engendering loyalty in the reseller base. But they need to do it when they are doing well – they need to shut the gate while the horse is there, not try after it has bolted. For the distributors who are not doing so badly, the next few months could present a good opportunity – to build that understanding and loyalty while many others are forced to re-group and keep everything very tight.