A number of UK distributors have undergone major changes in recent weeks, so why is it happening?
Big players, big decisions
The senior changes at UK distributors have come amidst a backdrop of some significant contract decisions by big UK manufacturers and retailers.
Pressure on distributors has risen as certain big names have moved to cut the number of partners or, in the case of Tesco, ditching them completely.
How these decisions to cut partners play out in reality is another matter altogether, in the case of Tesco in particular the flexibility that distributors provide must be a hard one to give up.
Another of the major brands that decided to look at its distribution strategy was Samsung. The manufacturer spoke of ‘deeper relationships’ and ‘long term partners, but it would be interesting to know what some of the terms on the ‘deeper relationship’ contracts are.
Mobile VP Conor Pierce went on record to say that the move comes as part of shift in strategy, he said: ‘We are really looking at a way to sell out rather than just volume selling and that will put a lot of dependencies on our distribution partners because they also need to change their way.’ How players like Samsung put this vision into reality will be the big issue.
The price of the product
The hardware market in the UK continues to be incredibly competitive, the prices on devices are being consistently squeezed and percentages for partners reduced. These conditions make it tough for distributors whose margins can be slim in any case.
Apple’s dominance of the UK market adds to this challenge, because as many in the industry will tell you; they are not always the easiest partner to work with. The lack of any other manufacturers selling significant volumes other than Samsung means that financials cannot be spread over a range of different brands.
Whilst there still appears to be significant demand for the flagship models in the future, determining how big is difficult to say. But undoubtedly the price of hardware will continue to fall. In such a climate distributors must uncover new revenue streams that go beyond the device.
It’s clear that in order to generate the funds necessary to compete distributors need to be able to offer a range of services that go beyond hardware.
Logistics, repairs and software are all areas that have been explored by UK distributors; from Ingram Micro’s acquisition of repair and recycling firms, to Tech Data Mobile’s Microsoft 365 training initiatives. Exertis have demonstrated the innovation is there through their development of salary sacrifice schemes. Brightstar’s Activate platform has also really led the way when it comes to multi-channel connectivity.
These types of initiatives will be critical for the future of all the UK’s major distributors and it’s positive that these businesses are seeing the possibilities that exist. The whole industry is progressively moving towards a model based on service revenues rather than product margins. But there may be more drama yet as industry players make this transition.