IT distributors provide a faster inventory turnaround and bigger productivity increases than distributors in any other industry sector, but lag behind most of them when it comes to financial valuation of their business. Making the argument in a recent presentation to investors at the Global Technology Distribution Council European Conference, CEO Tim Curran produced figures showing that IT distributors excelled at inventory management, with a significantly lower monthly average ratio than other wholesale industries. He told Irish Computer that IT distribution was “an extremely capable industry and an extremely efficient one”. Curran suggested growing numbers of vendors were opting for the distribution route, claiming over 100 additional vendors had started doing business with GTDC members in the US in the past two years. One reason for their enthusiasm for the two-tier distribution model could be its lower overall cost to market. A study produced for the GTDC last year concluded that the overall cost of two-tier distribution was cheaper than selling direct to customers, direct to resellers or through mail order. The study scrutinised the sales, general and administration costs for nine vendors, including HP, Lenovo, Cisco and NetApp. It showed that the web was cheapest of all routes, but the GTDC stressed it was typically limited to single unit consumer-based sales that were often fulfilled by distributors. While some costs in distribution were higher than for other routes to market, Curran said they were more than offset “by the infrastructure and other costs vendors incur by going direct”. Opinion at the conference from luminaries in the GTDC membership – including the top executives from Ingram Micro, Avnet, Actebis and Arrow Electronics – appeared to be fairly downbeat about the prospects for 2009. Although Curran thought there were signs the recession had bottomed out in the US in January and had possibly “turned the corner”, he was less sure about the European market, which he said “does not appear to have stabilised yet”. However, Curran’s optimism for the US – based on a reduction in the rate of year-on-year decline in US distributor sales in February and March – was not reflected in the figures for April, which showed a significant fall of 21.1% according to figures from NPD Distributor Track. Figures from Context for Europe showed a hefty fall of 20.8% in April, quashing any hopes of improvement sparked by the decline of only 8.7% in March. UK trade magazine MicroScope reported Ingram CEO Greg Spierkel as telling a roundtable audience at the conference: “Europe is getting worse with every passing month, and it is lagging behind North America.” Avnet CEO and president Roy Vallee was slightly more optimistic, but stressed the industry was “a quarter or two away from any form of year-on-year growth”.
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