Of mice and middlemen

Trade

By David D’Arcy

Multinational companies addressing the Irish market frequently face the dilemma of whether this relatively small country deserves a dedicated sales channel or whether distribution can be managed through existing agreements with large distributors who are themselves multinationals.

Logitech, probably best known for its mice but which makes other peripherals for PCs among its wide range, is a case in point. The $2 billion company has had a manufacturing site in Ballincollig in Cork since 1988 and currently employs 80 staff there. But it did not appoint its first Irish sales manager, Fergal O’Brien, until July 2005.

Since his appointment O’Brien has helped to shift more of Logitech’s product through locally based distributors and has overseen a rapid growth in the company’s Irish business. As Logitech declines to disclose sales figures for individual countries, O’Brien is unable to quantify his success publicly – though he does claim that growth in the Irish market was among the fastest in Europe in the most recent fiscal year.

So why did it take so long for Logitech to address the market with a dedicated channel resource? “It’s often the case that Ireland is one of the last countries in Europe to get a sales guy on the ground,” he says. “However, many in the company, not least among the people at Ballincollig, felt that the Irish market was underdeveloped and could benefit from a dedicated local resource.”

The growth in sales that Logitech has achieved since installing a local sales representative shows that their hunch was justified. “The statistics vindicate the decision,” says O’Brien.

Although Logitech has always gone through a standard channel structure – from distributors, through to resellers and on to consumers – it was traditionally the case that distribution was handled largely from Britain and supervised by Logitech’s UK sales team. In fact, many of the big consumer multiples continue to be supplied by British distributors and do not come under O’Brien’s brief.

O’Brien’s mission when he was appointed was to boost the sales of Logitech products both by energising the local channel and by pushing awareness of the Logitech brand among end users. “One problem was that Logitech was not one of the main brands carried by our distributors here,” he says. “People knew about it but there were not huge stocks held here so they tended to go to UK distributors because they could usually supply the products more quickly from their stocks.”

That has changed under O’Brien, who has broadened the number of distributors in the Irish market and tried to increase the profile of Logitech, both among consumers and in the channel. (see panel). “When I was appointed we had two distributors, ISA and Midia. “Since then we have added Memory Bank and Beltronics.”

Each distributor tends to concentrate on a particular section of the market. Logitech has traditionally had two routes: OEM and retail. It started off as an OEM supplier to computer makers and still retains channel partners dealing with that sector. Beltronics, for example, is solely concerned in Ireland with that sector.

The retail sector is by far the largest, accounting for 88% of Logitech’s sales internationally. Midia supplies to Irish retailers, and Memory Bank to a mixture of retail and OEM. ISA traditionally distributed the Labtec range of PC audio products, including the widely used speakers. It now supplies other Logitech products since Labtec was acquired in 2001.

At the start of this year, Logitech added a third channel, namely the business-to-business sector. This will allow resellers to address large customers directly and with the full support of Logitech. In tandem with this new approach, Logitech is introducing a client programme agreement which will provide special benefits to large customers.

O’Brien says that Logitech will appoint about six resellers in Ireland with formal responsibility for this sector. Negotiations for the first of these were nearing completion at the time of writing. He uses an example from the UK, where the new channel is already up and running, to illustrate how it will work.

“A large accountant’s office wanted to use wireless keyboards and mice,” he explains. “You can get these products from retail outlets but, typically, they are intended for small or home offices and should not be used in a large office environment because several of them in a small space will interfere with each other. However, we have wireless peripherals that are designed specifically for the corporate space and you can safely use 100 of them within a 10-metre radius.”

The advantage of a B2B channel is that large customers can avail of these products with the security of knowing that they are guaranteed to meet their requirements and that they are fully supported by the vendor company.

The client programme agreement is designed to support resellers by giving customers a greater degree of access to Logitech. “Large customers who participate in the client programme agreement will get a greater amount of care and special treatment,” says O’Brien. “For example, they will get samples of new products as and when they become available. I myself will also go out and see them two or three times a year. They also have the comfort of knowing they can deal directly with me if there are problems, rather than having to go through the reseller. Our rate of product returns is less than 1% world wide, so we have a reputation for good quality anyway, but it is comforting to know they can deal directly with the vendor.”

All product fulfilment will be handled through the reseller, and O’Brien insists that the level of support offered by Logitech works in the resellers’ favour. “It’s great for the resellers because ultimately we are doing the selling and support and they are getting the benefit on the installs, and it also gives the customer more confidence.”

He is confident that his presence on the ground will lead to a greater proportion of Logitech’s products in Ireland coming through the local channel, and that this will have benefits for Logitech customers. “The local channel, resellers and distributors, are the best people to support local customers,” he says. “They are closer to them, understand their needs, and are best placed to advise them on how our products can be used in their businesses.”

Read More: Trade News