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Electronics distributors find new reality in virtual space

Posted: 25 Nov 2014 ?? ?Print Version ?Bookmark and Share

Keywords:electronics distribution? POS? manufacturer? virtual office?

Traditionally, a regular business needs to have its own hard-site office before it can transact, negotiate or purchase from another business. Times truly have changed as business activities can now be performed over the Internet. Taking this into consideration, we look at the existing developments and how these can impact your job and your company.

When distribution began to evolve, suppliers all got compensated on what the distributor bought for local franchise, paid on Point of Acquisition (POA). Each distributor had to support its local franchise with shipments from its local warehouse; thus, the need for a hard-site office.

Many of today's manufacturer reps began as "stocking reps," which competed with distributors for the customers' orders. Most/all of them evolved into distributors or non-stocking reps; but the hard-site offices remained.

Suppliers also opened offices to show a commitment to each local market. Training and meetings were conducted on a regular basis: "Your place or mine?" was the battle cry.

POA was replaced By Point of Sale (POS) sales and commission plans. Computers were invented and came into use; inventory was consolidated into one or several regional warehouses, yet the branch offices remained in place.

But what has happened over the last decade or so? Distributors have been hubbing inside sales and product management at different speeds and in different methods, and for different reasons.

But then one well-known distributor, the folks in Thief River Falls, changed the game. They opened one branch that housed all sales, product management, asset management and engineering. The savings realised in not having to invest in "bricks" was invested in an online tool that has become the de-facto standard for engineers worldwide. Now, that distributor is knocking on $2 billion in revenue, all out of a single location, with a virtual field-based sales force.

What does this mean to you and your company? Have you asked your customer if they really care that you have a local branch with local sales and local engineering? Do they really care that you personally come in to visit them?

But wait: Where will we have meetings? Where will we do our training? Where will I go each day?

Go into any coffee shop from eight a.m. to noon. Look around and who do you see? People holding meetings! They have a virtual office at Starbucks or Panera Bread and use it for free! Of course, they run the risk of not getting seats only then to be (politely or not so politely) ushered out for lingering too long and buying too little!

Amazon (the clicks expert) is a huge threat to Best Buy (a favourite electronics brick-and-mortar store) as many folks window-shop in person at a store and then buy by clicking their way through Amazon Prime. Have you taken a peek to see which of your top components are being sold today on Amazon? Plenty! How many offices or field sales or engineering folks do they have? None!

The clicks are taking over slowly but surely, and it's high time that all of us assess how we react to the new reality. Even purchasing agents and design engineers are starting to realise "I can shop when I want with no distractions or interruptions."

If you decide to stay a brick company, remind your suppliers and customers that you are committed to the local market; ask them to support you as you try to support them. You cannot fake the bricks!

Get ahead of this new wave before it drowns you and your company... or stay the course and don't apologise for "old school" selling. Many customers still need and demand local folks with local facilities that build local market knowledge, also something you cannot fake!

Let us know where you like to do your sourcing. Are you a brick person? Or do you prefer clicks?

- Walter Tobin

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