Security distributors, how's your rapport with manufacturers?

There are no two ways of looking at it -- the security industry is going through a tough phase. From manufacturers to distributors and systems integrators, the pressure to adapt to market changes is becoming more and more evident.
 
In this context, an efficient working relationship between manufacturers and distributors is extremely important. Along with appropriate strategies, security companies now need to rethink how their relationships can be made more fruitful to boost their business prospects. It would be fair to say not enough research has gone into this topic so far, but remains a critical factor that could have a lasting impact on the industry.
 

Do Distributors Get Enough Support from Manufacturers?

 
It is imperative that manufacturers and their channel partners understand each other well. While several industry players acknowledge this, the dynamic nature of current economic climate necessitates dealers and producers to continuously reach out to each other.
 
“In our opinion, several obligatory conditions have to be fulfilled for the manufacturer and the distributor to work successfully on the local market,” said Victor A. Yugai, CEO of Russia-based distributor VideoSCAN. “Prompt and transparent communication between the parts, adaptation of an existing solution to the client’s requests, consistent quality and acceptable solution cost for the market.”
 
Yugai added that since an effective solution cannot be the cheapest one due to objective reasons, only collaborative hard work of manufacturers and their representatives helps to secure a footing in the market.
 
Jorge Fernando Bardales Duarte, President of the Central America -based Tecnología, Acceso y Seguridad (TAS) elaborated on this point further, indicating that manufacturers should be aware of the target market situations and be active in attracting the end users.
 
“Frequent visits to the countries are very important, along with help in taking customers to visit factories, understanding the market, and their needs,” Bardales  said.
 
A distributor who has managed to receive such a keen support from their principal is the Israel-based Web2see. Alon Salpeter, CEO of Web2see said his company is the registered distribution partner for Milestone VMS and has maintained a close relationship with the manufacturer for several years. Since Milestone does not directly sell to the resellers and prefers to go through the distributor, Salpeter’s company feels protected by this business model.
 
“We have a contact person in milestone under the title Country Manager through whom all the communications between distributor and manufacturer go through (or with his awareness),” said Salpeter. “He also spends time coming over for seminars, meeting with clients and sets goals and targets for the distribution channel.
 
The country manager is also involved in project pricing and is very aware of competition and takes part in negotiations with clients. Such an approach from the manufacturer goes a long way in supporting the distributor enhance their business.
 

Distributors’ Worries on Margins and Attempts to Counter Them

 

In tandem with the weak global economic conditions and the dwindling demand in the security market in particular, a major concern that has hurt sentiments has been the sliding margins. For distributors, the lower prices of products have indeed brought in more customers from different verticals, but this has come at weaker profit margins.
 
To counter this situation, distributors are looking towards different strategies, with and without support from manufacturers. Yugai said that their business partners do understand that the conditions are difficult and extend adequate support. But the real concern is when it comes to taking in new suppliers as there is at present a very fine margin for error.
 
“We target as many markets as possible, some even by directly approaching clients with needs we know we can fulfill,” said Salpeter. “We also use our knowledge of capabilities as open platform to cooperate with various vendors of cameras, access control, command and control, and analytics manufacturers.”
 
To other distributors like Bardales, it is important not to restrict themselves to a single principal, as this will limit your possibilities when approaching the customers’ requirements. Also, cordial relations with manufacturers are important to get the best deal.
 
“Being not exclusive is important to avoid providing only one option to the customer,” Bardales said. “Close communication with manufacturers in big projects is vital as the factory can give special discount and get big projects”.
 
But to others like Rustu Arseven, GM of the Turkey-based distributor Tesan Iletisim, the tighter market conditions necessitate more measures that go beyond financial adjustments. To this end, they believe in providing end users with professional teams who can impart the adequate knowledge on the values that the company can offer.
 
“Our annual and local training programs also support this message and it is very important both for us and our manufacturers to have presence in these activities,” said Arseven. “This way we can create leads and projects together and build business on a solid foundation. Since our manufacturers have the opportunity to see our investments and capabilities as well as our difficulties firsthand, it becomes easier to communicate and motivate.”
 

Relations with Chinese Manufacturers

 

Perhaps the most obvious disruption that Chinese manufacturers have created among distributors is that it has divided them into those who support low cost products and those who don’t.
 
At the one end, there are some distributors who believe that connecting with Chinese manufacturers will not necessarily be advantageous for them, especially in terms of increasing the margins. Farzad Harandi, Sales Director of Iran-based Pooya Fara Negar Technology is of this opinion.
 
“We investigate our market continuously, and definitely know the weakness and problems of Chinese products, so we train our clients to become smarter and choose the right solutions even if they have to pay more,” Harandi said.
 
But there are others who have managed to successfully engage in business with Chinese manufacturers. Salpeter, for instance, said that they now import Chinese video surveillance cameras to be sold as part of their full solution and that they already have some integrators who are using them.
 
Yugai puts it down in concrete figures, stating that the sales of good quality products manufactured in China have increased by 15 percent over the last year. He indicated that the increase in quality has also been directly proportional to improvement in relations with companies from China.
 
“We don’t have any serious problems in our communications with the Chinese manufacturers’ staff,” Yugai said. “Our inquiries often get instant response. We can only point out that our interactions have been getting more satisfactory over time; shortcomings occur, but I guess, many have encountered this and it can happen to any company.”
 
Arsevan’s company collaborates with Chinese manufacturers for their own branded products. To him, communication is the most important part in these relations. Maintaining punctuality and high quality is expected, and to ensure this they periodically go to China for factory visits, while encouraging the Chinese manufacturers to visit them at their company and site.
 
“Open relationship with positive attitude only leads to growth,” Arsevan said. “We are happy to have built relations with our manufacturers on a family like foundation.”
 

Communication Concerns that Hurt Quality

 

But such positive sentiments cannot be seen with everyone. There are some who raise concerns that the language barrier often limits them to communication by email, which is not totally sufficient.
 
“We sell some Chinese products,” said Bardales. “Their quality is improving but there are still several defective products in each order. Communication is via email most of the time but it is better to have a person speaking the language of the distributor.”
 
But even if the two parties speak the same language misunderstandings can occur.
 
Marcus Ang, Vice President for Sales and Business Development at ADPSecuregroup said that his company does business with Chinese companies, but are extremely diligent in ensuring the products are manufactured at the best quality level. To this end the company insists on the manufacturers complying with their terms.
 
But semantic difficulties could still arise if the manufacturers’ idea of high quality differs from that of their partner.
 
“What they perceive as good and their definitions of it vary from our expectations,” Ang said. “We usually need to Skype with the Chinese manufacturers to communicate and ensure that our messages are conveyed correctly. We have a checklist and ensure that they comply with it. We need to summarize every discussion to ensure that we understand each other.”

An Urgent Need for Better Communication

 
The security manufacturing industry is increasingly moving in favor of China, as the low costs prompt more distributors to sell products from there. While this has helped them keep their heads above water in the weak economic climate, there is an urgent need to come up with a better communication mode to do business.
 
Cultural and language barriers are indeed a major cause of concern, but in a progressively globalized economy, business partners have to ensure they understand each other better. Mutual visits to each other’s’ facilities are one option, so is engaging multilingual employees who can assist in removing language barriers.
 
And for those who still favor non-Chinese brands, manufacturers might have to go out of their way to give a hand. At this point it is hard to ignore the impact of Chinese low-cost products, and if Western and non-Chinese Asian manufacturers still want distributors to be with them, more assistance is required. This would be in terms of reaching out to the end users and directing them to the distributors, and taking steps to improve the overall awareness of security needs.