The retail sector has often been viewed as “the saviour” of the local channel, especially in dire economic times – such as those we are faced with today. Once again, many in the channel find themselves turning to retailers in order to keep their heads above treacherous waters.
And, as strange as it may sound, strong linkages exist between retail and this month’s cover story – Channelwise’s annual feature that names the IT industry’s top distribution channel executives.
These linkages are very specifically characterised by the trading environment faced by all top executives across an ever-increasing number of industry sectors in the retail industry that are rapidly transitioning to online platforms from traditional shop-front operations.
The so-called retail revolution is not a new phenomenon to the IT industry. Way back in the early days of commercial computing when the PC was first identified as being destined to become an ubiquitous device intended for home, work and play, one particular top executive in the South African retail market launched the country’s first supermarket-style IT retail outlet.
His far-reaching, almost revolutionary vision at the time was that consumers would collect a trolley at the entrance to the store, walk around the aisles filling the trolley with IT hardware, software and peripherals, check out at the till point, go home and then simply “plug-and-play” what they had bought. If this scenario sounds familiar, it is suggested that a visit to any online IT marketplace be tried for absolute proof that the concept was entirely feasible, but way ahead of its time.
It was certainly not an overnight success and floundered for several years before gaining traction in the consumer retail sector on the back of rapid technological developments that helped turn the mystery and complexity of IT into a must-have, gimmick-driven, easy-to-use commodity product.
The emergence of IT retail based on bricks and mortar shop fronts posed something of a dilemma for all IT industry channel executives in those early days.
Since inception, the successful establishment of IT sales operations across all industry sectors has always been based on what is commonly referred to as “channel integrity” – respect by all players in the supply chain for the classical, well-tried and proven three-tier distribution business model.
This model dictates that a vendor can only hope to address the entire potential market for their products by selling to officially appointed distribution partners, who are then required to sell to resellers who are then expected to sell and support the vendor’s products in the end user market.
In those very early days of IT retail, the prospect of a vendor being able to move products into the consumer sector (including small business and home office) in quantities that were previously only imagined in the wildest of dreams, initially posed a threat to distribution. This threat was founded on the belief that the traditional channel structure could be bypassed by the vendor electing to cut out the “middle-man” (distributor) and sell direct into the retailer, thereby increasing both unit volume and profit margin.
As many IT vendors discovered to their cost in those early days of emerging retail sales, dealing with the trading terms and conditions dictated by highly successfully retailers is not for the feint-hearted. And certainly nothing like as easy as imposing formal distribution agreements on local distribution partners.
As the top distribution executives named in this issue of Channelwise will surely attest to, any attempt by them to copy what is imposed on their organisations by their vendors – such as non-negotiable quarter-on-quarter growth targets related to what products they must order and keep in stock – would be laughed at by the retailer as a customer.
So too would any expectation that the distributor should be paid by the retailer on terms as short as 30 days from statement rather than the 120 days that is generally the norm. And that’s without taking into account that the retailer expects the distributor to manage sale-or-return of stock and also carry full responsibility for all warranty and repair issues on behalf of the vendor.
It is therefore a fitting tribute to the experience and leadership qualities of this year’s top distribution executives – identified and named by the three-man panel of “geriatric IT experts” – that the IT retail sector in South Africa can be rated as one of the most advanced and active of all on-line trading environments in the country.
The ability of these, as well as other top executives in the distribution sector, to serve the classical three-tier business model and adhere to the principle of “channel integrity” continues to help ensure that IT products, as well as a wide range of other high-tech “connectivity devices” are freely available in South Africa in the face of some significant threats and fast-changing circumstances in the trading environment.