IT distributors have come under increasing pressure from online retailers this year, with many resellers buying up to 30% of their stock through the likes of Amazon, according to the latest annual ChannelWatch report from Context.
The market analyst’s ChannelWatch 2018 report is compiled from interviews with a representative sample of over 7,000 resellers to provide key insight into market trends and channel priorities across 14 countries: Australia/New Zealand, Baltics, Czech Republic, France, Germany, Italy, Poland, Portugal, Russia, Slovakia, Spain, Turkey, and the UK. It found that nearly a third (30%) of responding resellers buy up to 10% of their stock from etailers, 16% said they buy 10-20%, and 14% said they buy as much as 20-30%. A few even claimed that they buy everything through online retailers, displacing traditional distributors.
The countries most loyal to distributors were Australia, New Zealand, Russia and Turkey. Price was pushed into second place from last year by product availability as the main reason resellers are flocking to online retailers. Product availability was a particularly strong factor in Russia and France but less of an issue in the UK and Germany. Pricing was the main issue in Germany, Turkey and Poland.
“Ease of doing business” was the number one reason for buying from etailers in the UK, Portugal and Slovakia, highlighting the importance of features like a regularly updated website with accurate and detailed product information. Although overall IT distribution revenue grew 5.1% year-on-year in 1H 2018, the growing pressure from online retailers shows no signs of abating, with Amazon launching a B2B business in 2017. The best chance for distributors to cope with this disruption is to focus on value-added services, and solution-driven areas where they can help on complex issues, such as cloud — which represents a €29b opportunity for them. They should also take account of changing reseller expectations, not just around price and product availability, but on customer service. When asked what resellers liked most about their distributor, the provision of B2B customer portals jumped six places compared to last year’s survey to take the number one slot. There’s also room for growth in terms of educating the channel: training in IoT and sales techniques were in popular demand across the regions surveyed, with cloud dropping slightly from last year. However, 30% of resellers claimed there were no areas where training would be valuable — rising to 40% in France and Germany.
“The transformation of IT distribution has been driven in a large part by the growing presence of major etailers and changing reseller expectations. Smaller resellers especially feel increasingly that their interests are not being looked after by distributors, and they’re flocking online as a result”, said Adam Simon, Global MD for Context. “However, it’s not time for distributors to hit the panic button. By focusing on things like customer service, training and adding value in areas like the cloud and multiple new service areas they can find ways to differentiate. Reassuringly, distributors continue to invest in infrastructure and skills to support their clients. But we may see price pressures push several players into finding economies of scale via acquisition over the coming year — potentially in APAC and LATAM.”