Major vendors are bypassing billion dollar distributor Ingram Micro to go direct to mass retailers this has forced the Company to slash costs, retrench people and offer extended credit to key retailers in an effort to retain a relationship say several industry insiders. It has also forced them to consider a new service revenue model.
In recent weeks the Company who are the largest distributor of technology products in Australia has undertaken extensive restructuring surgery in a move that one analyst has described as “worrying”.
And while local management has refused to comment on their problems their global Chief executive Greg Spierkel has confirmed that mass “box shifters” like Harvey Norman, JB Hi Fi and the likes of Officeworks are buying their mainstream branded products direct from vendors. This he says has resulted in the Company refocusing their business on mid tier resellers where he says the Company is making more money.
“In recent years mass retailers or the box shifters have invested in distribution systems that allow them to deal directly with vendors and distribute products across their networks. This has impacted us in some Countries like Germany the UK and Australia”.
He has also confirmed that several of the mass retailers that are still dealing with them are now demanding extended credit terms. “Our normal terms are thirty days however we are renegotiating some 45 days. The retailers would prefer 60 days but we are not going to go there”.
He added “There are changes taking place in the distributor channel and yes we have lost some of the major brands because they are supplying direct to the mass bricks and mortar retailers however this is not necessarily a bad thing as the margins were always low. We are now focusing on a new breed of mid tier resellers who understand that one of the key components that the mass resellers don’t want to deliver is service and support.”
“n the US some of these resellers are seeing their business models change from being predominantly hardware driven to being service and support driven” he said.
He has also said that Ingram Micro Australia may launch a brand new service where the distributor sets up a 24/7 remote access service division that resellers can on-sell to their customers.
“We are currently rolling out in the US a model whereby we value add the service proposition that a reseller can deliver without them having to invest in expensive tools. This will allow them offer ongoing support and a 24 hour hotline”. Said Spierkel.
In Australia things are not tracking well for Ingram Micro with one senior executive at one of the biggest notebook Companies claiming “Ingram Micro has become irrelevant as vendors are dealing and supplying direct to the mass retailers including the likes of Harvey Norman, Officeworks, JB Hi Fi and Woolworths owned stores such as Dick Smith and Powerhouse”.
They added “They have lost their way and are no longer delivering a value proposition for resellers or the vendors whose products they are selling. Many of the most popular brands are dealing direct with the mass retailers and this is a win, win, situation for both the retailer and the vendor as both make more money”.
Attempts by ChannelNews to discuss this issue and the problems facing the mass distributor locally have been met by a wall of silence. Calls to Ingram A/NZ vice-president, Jay Miley have not been returned and shortly after making a call earlier today we got a call from a New Zealand PR Company who admitted that 24hours earlier they had been appointed to manage the PR for Ingram Micro.
When asked why Ingram Micro Australia was resorting to the use of a New Zealand PR Company they said that they had been put into place to facilitate media inquiries. When asked why Miley was incapable of picking up a phone and returning calls they said “That’s what we are here for. We want to facilitate media interviews”.
Earlier this week Ingram Micro closed their ACT and Adelaide offices this follows the axing of the Companies Australian
Ingram Micro also announced several redundancies last month after they moved their credit control department to Asia. They have also been forced to cut up to 7% of their workforce across account management, sales and technical roles. The General Manager of Solutions Group, Stuart Ellis, was also retrenched.
A senior executive in the Company said “Things are not looking good. I would lose my job if they could identify who it was that spoken to the media. Revenues are down significantly for example in February when retailers were reporting significant sales of consumer electronic sales at Ingram Micro were down over 45% because we have massive exposure to the enterprise and SMB market that has stopped spending.
Another problem is that the other half of the SMB market is now buying direct from the likes of Officeworks, Harvey Norman or other mass retailers who are selling products like notebooks and mobile phones and attach devices which are supplied direct by vendors who have an operation in Australia. Where are picking up business is from vendors who are cutting back their presence in Australia and want Ingram Micro to still distribute their products. We are also getting the business “.
