Graham McBeth, President of Avnet Abacus, talks to CIE about the importance of adapting to change in the distribution market.
The distribution landscape of 2012 is a very different picture to the one of thirty years ago when the industry was awash with small dealers knocking on customers’ doors. Deals were generally struck based on simple buy and sell agreements without a contract in sight, and the rapport with the customer was, more often than not, the key factor in how business was won.
By the early nineties, however, suppliers started to demand a more structured approach to sell their products, insisting on formal franchise and inventory agreements, thereby shaping the value-added distribution model that exists today. Relationships along the supply chain are now as important as ever, but the nature of those relationships has changed, with distributors regarded as an extension of the suppliers’ sales force, actively promoting their products, holding inventories and handling customers’ logistics while the suppliers concentrate on their core competencies of design and manufacture. Both customers and suppliers now expect a high level of technical proficiency across a wide range of technologies.
Although small dealers have not disappeared completely from the scene, it is those distributors that adapted their businesses to fulfill the new value-added role that have seen immense growth and are now the major industry players. Consolidation has played a sizeable part in this transformation. A profusion of acquisitions in recent years has caused the numbers of smaller distributors to diminish, leaving just a handful of companies to dominate the market internationally. Take Abacus, for example: succeeding as a specialist interconnect, passives, electro-mechanical and power/battery (IPE) distribution business in 2009, and today boasting a turnover of £300 million as part of the multi-billion dollar Avnet conglomerate. Success at this level is the result of shrewd investment in bringing together thriving businesses that contain the best skills and infrastructure to add value to the entire supply chain.
At no time has this been more important than in today’s fast-moving world of technology. As suppliers have become increasingly innovative, the diversity of electronic goods available on the market has escalated unimaginably, creating a colossal demand for a vast array of electronic devices. Faced with endless choice in a hugely competitive environment, and confident of the quality of service, expertise and global reach of the big distribution companies, many customers now rely on these distributors to assist with product selection, and have formed strategic partnerships to help bring their projects to market more quickly.
Growth has become synonymous with globalization, and it is an incontrovertible fact that those distributors with an international presence are the ones that will continue to propagate. Global is a relatively new word however, and there are still comparatively small numbers of customers who are truly global, which means that local presence in a local market is still fundamental to success. Distributors, like Avnet Abacus in Europe, that are structured geographically to cultivate strong local customer relationships, and at the same time have the capability to develop a worldwide platform, provide the perfect balance.
The distribution landscape today is condensed and very strong, made up of companies that survived the dotcom crash of 2000 and the severe recession of 2009. These are formidable players that have adapted to change and grown through consolidation, innovation and partnerships and have the appetite to be in the industry for the long haul. Continued investment in value-added relationships and a willingness to embrace change will be vital to their future success.