The IT economic downturn has had a significant impact on many distributors in the SA channel. They are now wooing segments of the market that were not considered viable in the past in a bid to meet revenue targets.
Resellers and dealers within the small and medium-sized enterprise (SME) sector are now "flavour of the month" and a great deal of emphasis is being placed on marketing programmes aimed at these organisations, says Mark Lu, CEO of SA Rectron.
He highlights some of the challenges faced by distributors in their attempts to address SMEs, while maintaining a "business as usual" facade to their operations.
Until recently, resellers in the SME market represented a relatively untapped resource as far as product and solution distributors were concerned.
The reason is clear; larger resellers dealt with bigger, wealthier end-user customers who enjoyed larger IT budgets.
The downturn in the IT industry - and the consequent cut in IT spending - has seen many distributors searching for new marketing opportunities as their reseller base contracted.
Suddenly, the SME space has become more inviting - and an obvious target for distributors looking to augment their dwindling income.
However, in addressing this sector of the market, distributors will have to adopt new sales, marketing and support strategies. This is because SMEs represent a significantly different target market when compared to the characteristics of their larger rivals.
For example, because SMEs address customers who produce less revenue, more SMEs need to be serviced by distributors before they arrive at a comparable revenue base.
As a result, SMEs require more effort and time to service. The management of SME accounts is also more intensive for the same reason.
It is possible for a distributor`s transaction count to jump ten-fold when it addresses the SME market compared to larger resellers - for the same turnover value.
So, from an operational costs perspective, bigger distributors have been weary of addressing the SME segment. In saying this, distributors today cannot afford to ignore the value of this market which is capable of assisting them to weather the current low IT spend storm.
As a distributor, how do you approach the SME market successfully without compromising your profitability and even your reputation?
Mentality
First, you must have the right mentality: SMEs generally operate in highly competitive environments where profit margins are cut to the bone. This has the effect of making them less loyal to their channel partners and suppliers than their larger counterparts. They constantly search for the lowest cost option - not the best solution for the application.
To counter this, a distributor needs to offer an SME reseller more than a great product and excellent service support. Incentive programmes, for example, should be implemented to cement buying patterns and demonstrate the value of the (hopefully) long-term relationship.
Skills and systems
Secondly, a distributor must have the appropriate skills resources and systems in place to support the SME dealer. The key to success is strict financial control driven by automated accounting systems that enable your organisation to efficiently deal with an enlarged customer base.
In this regard, customer resource management programmes are vital to keeping track of customer requirements and demands, while integrated accounting solutions are able to optimise cash flow.
In addition, your sales team must be able to handle a higher volume of queries and be capable of resolving more problems.
Staffing is critical and individual sales people should be evaluated on their levels of interpersonal skills and industry awareness from both technical and strategic perspectives.
Products
SMEs are not that brand-focused, as are larger dealers, who are often characterised by the brands represented in their portfolio.
SMEs generally require "cheaper" alternatives, which is why component players are performing so well in this space.
It is advantageous to offer a "white box" or component-based service with easy-to-install functionality and backup and maintenance support. This will enable you to achieve critical mass and revenue in a shorter period.
Also, partnering with vendors who are focused on SMEs is a step in the right direction.
What does the future hold?
To be honest, no one - not even the analysts - really knows when the IT industry will stabilise and the focus will shift back to larger enterprises.
But, when it does, it is definitely going to change the distribution landscape once again.
Distributors will then be faced with even more challenges. Not alienating their SME customers, while still being able to benefit from large-scale transactions, will be a difficult juggling act to maintain.
Until then, however, it is a different approach, a different mentality, a different product and a different ballgame.
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