Back to basics

In the early 1990s, most of a manufacturer’s sales came from direct interaction with their customers. Today, that proportion is much lower. While the principal may retain a handful of big customers, the rest have been handed over to distribution. And there’s logic behind it – at least from the manufacturer’s point of view. For distributors, it should also be good news – more customers, more revenue and more profit. Yet within this apparent win-win situation, all is not rosy. Distributors will, almost to a company, point to ever thinner margins over the recent past. More customers and more revenue, maybe. More profit? Maybe not. All of that pertains in ‘good times’. Today, times are not so good, as evidenced by the latest forecast from industry association Afdec. For the first time in its history, the association has been unable to forecast beyond the next six months. And what could be seen wasn’t pleasant. It’s not a surprise to find that distribution has been reinventing itself somewhat over the last decade. There’s been consolidation, a resurgence in what was known as the ‘catalogue’ business and, not least, the emergence of the web as a prime channel between designer and distributor. Given the world is facing tough economic times, what can distributors do to help designers and – importantly – help themselves? Stig Enslev, managing director of Arrow UK noted: “The challenging economic environment means businesses must work harder than ever to focus on those elements that deliver maximum benefit to their customers. It means suppliers must make sure they are providing service and support that is in line with the customer’s requirements.” Neil Harrison is Farnell’s managing director, Europe. He said the market is weak and may stay that way for the first half of 2009. “We think slightly differently to other companies because of our focus on design engineers. This means we don’t think we’ll be impacted so heavily as others may be.” Gerry Hewitt, director of marketing, EMEA, for NuHorizons, sees opportunities in exploiting its expertise in particular areas of technology. “Power is a big focus area for us – and has been for a number of years,” he noted. “In fact, we see there are massive opportunities in the sector, mostly related to different franchise alignments.”