Forget value-added broker jokes: Could YOU shift nuclear plant scrap?

Distie business

Within the distribution channel there's any number of such specialists: from those guys who know where the old kit is and where it's to go, all the way to people like me who know how to monetise the old telephone exchanges (it's the gold on the contacts of the old analogue exchanges that excites).

But we've also got a rather different type of broker, the Strowmans of this world. Here it's not so much the knowledge of who could possibly want this dog's dinner of dead stock. It's who off my patch would want it.

The late, great Howard Strowman Image by Tarquin Millington-Drake

OK, sure, there are times when no one has any idea at all of what to do with some old kit. But that's rare: what is really wanted is a way to get rid of the old kit without cannibalising sales of the new and much more shiny kit. And that's where the asset managers really come into their own. Take the deal that El Reg mentioned, Strowman getting rid of the Sinclair PCs that Amstrad had inherited along with the firm. Yes, of course, Alan, Sir Alan Lord Sugar would like to get some cash for these boxes. But he'd also very much like to make sure that he doesn't flog cheap kit to someone who without it would have bought full price Amstrad kit (erm, an oxymoron but there we are). So the deal in these cases is that the asset manager moves the cheapo kit off into a market where the seller isn't competing at all.

These other markets can be geographically distant: odd lots of kit do turn up in poorer countries often enough. Or they can be channel distinct. For example, a distributor that sells to resellers won't want dumped kit being offered to resellers. But it might be fine with them going mail order or on the shelves on the Tottenham Court Road (or at the sadly late and lamented Morgan Computers).

As to why there is this odd kit it's usually one of two things. Either simply godawful screw-ups (like 160,000 Sinclair PCs) or end-of-line stock. Say, just as an example, that you're a retail chain. You've been flogging that 486 33 MHz (shows you how long it's been since I was in this game) successfully but the 50 MHz is out now. You've got 30 stores but only 20 of the 33s. Better to pull those 20 boxes out of the pipeline altogether instead of wasting money on advertising something that not every store can stock.

Richer Sounds has made a specialty of buying up that sort of stock for decades now. A variant on this is returned goods. Customer buys something, the mouse is the wrong colour, they return it. You don't want this now fixed but lower priced stuff in your distribution chain for shiny shiny. So you get it dealt with by one of the asset managers. Their job, as above, to make sure that these returns don't end up cannibalising your own new sales.

For example, by shipping them off to the people who go to computer meets in hotel ballrooms: no one who goes to those things is ever going to pay full retail anyway.

And the reason that such asset managers continue to exist is that it's never worth the while of any one distributor or reseller to gain the specialist knowledge of where those outlets all are in detail. While it is worth the while of an asset manager who deals with 5 or 50 of the kit makers. Which is where we can put it all into the standard economic terms.

It's all that Adam Smith and his damn bloody pin factory, that thing which has been boring economics students for centuries. Simply the division and specialisation of labour. The manufacturer, the distributor, specialises in the standard part of the selling exercise, getting the new kit to the eager punter. The broker specialises in the odd stuff, the end of line, the mistakes, the getting rid of it where it won't cannibalise sales.

Looking at it this way those brokers aren't going to go away. Indeed, standard theory would tell us that we'll get more of them: a larger and more complex economy provides more opportunities, not fewer, for such division and specialisation. As indeed is happening: recent years have seen the rise of mobile phone brokers operating in much the same fashion as the older computer ones. ®