By Deon Botha, HP Personal Systems Group and Magnetic Media Business Unit Manager at Drive Control Corporation
The traditional role of the reseller as a box dropper to move products from the distributor to the end user is an outdated model, as the market has changed and margins are becoming increasingly tight on constantly evolving technology. However the role of the reseller has not fallen away, as there are specific markets that their offering is particularly suited to and added services that resellers can cater to in order to maintain profitability in a changing market.
Incorporating the so called “big iron”, including networking, storage and servers, into the product offering, is one way for resellers to remain competitive. However, because of the complexity of the big iron market there are fairly steep barriers to entry in this field. While the value of individual sales may be higher and the profit margins higher in proportion to the complexity of requirements, making a mistake on such large sales is not an option, so it is vital to employee highly trained personnel when selling this type of product. These resources however do not come cheap, and opportunities are limited, which means that for the majority of resellers this simply is not a viable option.
Another area that can be explored by resellers is the field of services and technical support. Again though there are barriers to entry in this market, since trained technicians are vital and many more resources are necessary if a business is to open a service wing, which can make it very costly and out of reach for smaller resellers. The fact is, there is still a market for ‘moving tin’, but it needs to be done in the right way. Resellers cannot simply take a box from the distributor and drop it at the end user without adding value, because the value adds are where the money lies in this field.
In the past, adding value typically meant delivering hardware with software pre-installed, but since the vast majority of resellers now do this, it no longer acts as a competitive edge but is simply expected by the customer.
Resellers need to up their game, adding value to the end user in a meaningful way by delivering solutions as opposed to products, increasing their margins as well as their relevance to the customer.
The reseller market has a unique advantage in that it has access to products from a variety of vendors and distributors, which means that different products can be combined to deliver a solution to the end user, for example a notebook with office software, anti-virus protection, backup solutions and other tools from various vendors, all bundled together into one offering that delivers immediate productivity for the user. This is where the real value for the end user lies, and margins can be increased by the reseller in this way, ensuring continued profitability.
While large retailers may have bulk buying power and are able to deliver products at cheaper prices than resellers, and vendors have been known to deal directly with large corporate clients on occasion, the reseller still has a very definite place in the South African market, particularly in the Small and Medium Business space. SMBs make up a large segment of the local market, and by focusing on more sales with lower values in this market, resellers can effectively service needs while remaining viable business entities.
The local supply chain ensures that the reseller lives on. Vendors are manufacturers who run the supply chains to produce products at least cost.
Distributors take care of the warehousing and logistics to get products into the country at least cost, but do not necessarily have a presence in all areas of South Africa. Resellers are the ones with the relationships and presence in the market throughout the country and are uniquely positioned to sell products into our geographically dispersed market.
There will always be a place for the reseller that vendors, distributors and even retailers cannot fulfil. However dropping boxes is not the way to ensure profitability. Adding value in other ways is the only means to increase profitability and continue to serve the end users effectively.