by Lou Slawetsky

During the course of a normal week, we talk with a large number of office imaging systems

dealers regarding the state of their businesses and their relationships with their vendors. 

Some of these conversations occur during our ongoing interview process.  Others come

unsolicited – possibly out of frustration.  Over the years, I suppose we’ve become the shoulder

to cry on (or the face to yell at) for many in our industry.  But, during the past year or so, the

din has increased noticeably.

There was a time – one that we all remember – where vendors and their distribution networks

(primarily independent dealers) saw themselves as partners in growth.  Strategies were

developed and implemented that benefited both parties.  When one grew, the other grew along

with them.  Industry observers often spoke of “partnerships” between vendors and their

distribution network.

Somewhere along the line that relationship changed.  I’m not sure when it happened.  There

was no audible “click” that signaled a change in direction.  Whenever, it sure isn’t like it used

to be.  Mergers and acquisitions of both vendors and dealers alike have caused major

disruptions in relationships.  Consider just a few:

·                     IKON

·                     Danka

·                     Global Imaging

·                     Kyocera Mita

·                     Konica Minolta

·                     Ricoh Family Group (Ricoh, Savin, Gestetner and, soon, Lanier)

·                     Océ Imagistics

            One of the more significant results of these disruptions is a significant change in the   relationship between vendors and their

distribution channels.  Our work with independent dealers and vendors alike shows, for example:

·                     Dealers are increasingly competing with their primary vendors in the same territories -this, as manufacturers continue to establish

their own branch distribution systems.

·                     We see indications of the lack of a level playing field, with dealers indicating that manufacturer branches receive favorable pricing

for the same levels of quantity purchase.  While an occasional complaint in this area could be attributed to a “sour grapes” response to

direct competition, the frequency with which we hear these complaints lends a certain level of credibility to the issue.

·                     In an ongoing attempt to reduce overhead, many vendors have reduced administrative staff.  Others have switched to new

computer systems in an attempt to automate support functions.  Regardless of the cause, dealers rate their vendor support activities

lower each year.  This increases their cost of customer support.  In other words, vendors support budgets are, in effect, being transferred

to the distribution network.

·                     Warranty claims are harder to process and even harder to collect.  In some cases, it has reached the point where dealers simply

give up the claim in order to avoid the hassle.

Of course, the deterioration of the vendor/dealer partnership is not all one-sided, to be sure.  Part of the dynamic lies in the dealer

counter-strategy that results in representing multiple brands so as to be able to compete effectively with manufacturer branches and

pricing disparity in other areas.  It would appear that we’ve gotten ourselves into an escalating guerrilla battle.

Perhaps it’s time to step back.  Vendors have to do what they deem necessary to maintain unit

sales and increase market share.  To attempt to accomplish this at the expense of more than

50% of their distribution network seems counterproductive. 

Dealers have to hedge their bets with multiple vendors as they see fit.  But, to add a vendor

that offers the same negative dynamics seems equally counterproductive.  When considering

additional (or replacement) vendors, look beyond the hardware which, for the most part, has

reached parity.  Examine:

·                     Training support

·                     Administrative support

·                     Territory protection

·                     Mutual determination of quotas

·                     Warranty support

·                     Relationship between dealer and direct channels                    

Dealers, take a deep breath.  Determine what can be done to work with your primary vendors to develop a strategy in your market

that benefits both sides.

Vendors, consider the impact on your distribution when you consider “special” pricing, open your own branches or cut back on support.

We’re all after the same thing.  Increased market share coupled with stable margins.  With that as a common ground, we should be able

to move closer to the partner-ships we maintained in

the “good old days.”