How is the End-User - Distributor Relationship Changing? by Christopher Maione

3/14/2011 4:05:59 PM
By PSN Staff

AV distributors have been part of AV's evolution since this industry began.
 
Some will argue that the AV distributor role formed the basis for what we now refer to as AV "dealer".  In today's AV world, the roles of the AV distributor and the AV dealer are supposed to be very different, but times are changing and these roles aren’t nearly as distinct as they once were.
 
To explain this in more detail, let’s start with a bit of basic fundamental definitions for each group within the industry:
 
Manufacturer: the company that manufactures the product (i.e., the people who build AV stuff).
 
Manufacturers Representative: a company which represents the manufacturer in a sales, support and marketing capacity. Most manufacturer representative firms represent or "carry" several non-competing lines of manufacturers and products (i.e., the people that tell you that you need to have to have "their" manufacturer's product over another and can convincingly tell you why).
 
AV Distributors: a company which acts as a distribution hub and reseller of equipment on behalf of the equipment manufacturer (i.e., the people that resell AV stuff on a local level).
 
AV Dealer: the AV dealer is typically an AV systems integration firm with technical expertise to design, sell, configure, install, and support AV equipment and systems (i.e., the people that can sell you the stuff and make it work with your other stuff in an “integrated” manner).
 
Two-Stepping: This has historically been a BAD process — the process where equipment is sold through more than a single reseller channel. (i.e., Manufacturer A sells the equipment to Distributor B, who markets it up and resells it to either an AV systems integrator or the end-user.  In the instance of the sale going through an AV systems integrator, expect ANOTHER mark up before it is sold to the end-user).  
 
So here are some "sticky" crossover points that have evolved:
 
There are manufacturer representatives who are now also playing the role of the AV distributor.  Not only do they represent the equipment manufacturer in a sales capacity, they also procure and resell the equipment (roles which traditionally fall in the Distributor's world).  In this model, most of the time, the manufacturer representative are "selling" the equipment to AV dealers.
 
Meanwhile, AV distributors are being utilized more and more by equipment manufacturers (especially the larger, non-US based companies) to handle their sales channels.  As AV distributors grow (and they are growing), smaller AV system integrators are being directed to procure equipment through AV distributors.  This is, in essence, legitimizing two-stepping and undermining the strategic positioning of the AV dealer and systems Integrator who has invested time, money and talent in meeting the requirements to sell and support the manufacturer's product lines.
 
What does this all mean?  Well, there are a few issues at hand.
 
1.  When products are two-stepped there is likely a double mark-up of costs from the first step, to the second step to the end-user.
 
Translated: The end-user pays more for the product.
 
2.  Two stepping provides access to equipment which would have usually been reserved to the more qualified and skilled AV Dealer (AV Systems
Integrator).
 
Translated 1:  Less qualified dealers may be selling AV equipment which is beyond their skill set to support.
 
Translated 2:   Less qualified dealers may be able to bid on projects by being able to procure equipment by two-stepping it through a distributor.
 
3.  Warranty coverage can get tricky.
 
Translated:  Be careful as to the chain-of-custody regarding the warranty. If it's direct with the manufacturer, great.  But realize that rarely do AV manufacturers allow end-users to return equipment directly.  If the warranty is through the Distributor, find out if they are qualified to service the equipment to make sure that the warranty process is not just another two-step in reverse back to the manufacturer.  If this is the case, it can be a mess.
 
They say that the only constant is change and if we don't change and grow, the world eventually pass us by.  The role sharing and changing that AV is experiencing will probably not go away.  This is part of the inevitable change which is slowly invading the AV industry.  In a global economy, manufacturers will continue to look for more and more ways to get their products into the hands of end users. Unfortunately, this is not necessarily a good change, as two stepping ultimately means a higher cost and less product support.    Hats off to the AV manufacturer that still maintain strong, properly administered dealer channels through qualified AV System Integrators.
 
The importance here is to provide a value add that ensures that clients understand the intangibles that they get from working with you, the expertise and assurance you can provide over less qualified channels, and the ability you have to support the product with a comprehensive warranty.
 
Christopher Maione, CTS-D, is president of Christopher Maione Associates, a firm specializing in all aspects of AV business, technologies, emerging trends, and marketing strategy. He also serves as an Infocomm Adjunct Faculty, Approved CTS RU Provider, and sits on several AV standards committees. Reach him at cmaione@chrismaione.com.

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