Distributors show their worth as recession countermeasure
The Global Technology Distribution Council (GTDC) published an interesting report this month in partnership with Channelnomics which – unsurprisingly given the organisation’s name – extolled the virtues of distribution.
What is slightly different, however, is the report’s emphasis on the value of distribution in times of economic adversity. The title puts it quite bluntly: Distribution as a Recession Countermeasure.
Under the heading ‘Economic Outlook’, the report sets out where we are. “The consensus among buyers and sellers is that the tech market is experiencing recessionary conditions,” it states. “In layman’s terms, sales are slow, and growth has been reduced to a crawl. Since the beginning of 2022, the S&P 500 Technology Index is off by more than 30% as investors pull back on bets that hardware, software, and cloud services will continue to grow faster than the general market.”
One solution for vendors is to lean more on distribution, which Channelnomics describes as “a wealth of resources at deferred costs”. While vendors may think of distribution as a means of inventory management, credit and financing and fulfilment, it offers “many more cost-saving services”.
The report lists 10 ways that distributors can help vendors save money and maintain their go-to-market coverage during an economic downturn. They include expanded partner management, partner recruitment, technical support, entering new markets and increased marketing.
As the report acknowledges, many of the suggestions seem obvious because they are: they’re pretty much what distributors do everyday. But that’s the point.
Appreciating the differences
The things that distributors do for vendors are possibly more valuable in tougher economic times than when times are good. The combination of greater (and more targeted) resources with deferred costs is likely to seem even more attractive at a time when money is tight for vendors.
The report suggests that vendors gain a greater appreciation of what distribution does for them in recessionary conditions. It’s no longer something that’s taken for granted, it’s something that’s valuable. And the best part is that distribution becomes more valuable to vendors in tough economic conditions without doing anything differently from what it did before.
That says something very powerful about the strength and value of the distribution model. If you were being glib about it, you might sum it up with that well-worn phrase: When the going gets tough, the tough get going.
That doesn’t mean it should take a recession for vendors to appreciate the value that distributors provide, but there’s no harm if an economic downturn increases their appreciation of the distribution model. After all, the best stress test for the efficacy of a particular strategy or model can be how it performs in times of adversity.
The report describes distribution as “an economical resource enhancer that can produce benefits regardless of the economic conditions”. I’m not sure that ‘economical resource enhancer’ is going to be a term that distributors start using to describe themselves anytime soon but you get the gist.
It concludes that realigning and re-engaging with distribution in recessionary times “to contain or defer costs, fill gaps in capabilities and capacity, and tap unaddressed opportunities requires a different level of thinking”. But it’s not really that different at all. Fundamentally, nothing has changed. The model endures.
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