The security distribution business has become a lot tougher these days. And the trend in which distributors move away from the traditional box-moving business model and transition into value-added distribution has definitely become more noticeable.
The security distribution business has become a lot tougher these days, and the trend in which distributors move away from the traditional box-moving business model and transition into value-added distribution has definitely become more noticeable.
A main reason for the cut-throat competition in the market is the prevalence of Chinese brands and products, which are offered at lower and lower prices. “The last few years, we saw Dahua, Hikvision, and many brands from China going into the Thai market. The last year I went to CPSE in China, I could buy a PTZ camera only for US$70 which was very cheap. For my main brand, the cheapest for PTZ is about $700,” said Bancherd Rachtapattanakul, Owner of Thai IP Camera.
The competition does not just come from China. It also has to do with the poor channel management by the vendor, especially the Asian ones, who deviate from the structured “two-tier” distribution approach and go directly to the systems integrator, leaving the distributor competing with the vendor.
“The distribution business is becoming more challenging, especially with the suppliers going more direct to the SIs,” said Max Chayco, GM of NET DOC based in the Philippines. “Before, most of the Chinese brands would rely on the distributors, and Taiwanese brands would rely on the distributors and have them market in the region. But because of the Internet, everyone can reach everyone anytime. Now, the distribution margin is getting smaller and smaller.”
Value-add is the Way to go
To guarantee success and profitability in the long-run in the more competitive security landscape, changing to a value-add mentality, giving customers something extra, is key. One way to add value is to provide solutions, not just single products, to fulfill customers’ needs. “The value is on the solution, not product. For example, I take Kaba products, and then I combine it with other products, say video surveillance, access control, or elevator control. Then I put software application on top of the devices and sell them as a solution,” said Hagus Santoso, Director of Thano based in Indonesia.
Providing value-added service is another approach. “We launched three years ago a program, a 9 a.m. to 9 p.m. customer service, providing free technical support, maintenance, and everything,” said Mohamed Salah, GM of Sudan-based Smart Home Safety Equipment.” We have four different technical teams, and we also have our call center to get all the reports from companies and the government as well.”
Giving integrators the necessary education, training, and support, meanwhile, is one way to keep them stick. “We need to give value to the SI; otherwise they will just go directly to the shows like these and buy directly,” said Chayco. “We provide training, the immediate support, and the solution. We give what manufacturers cannot give directly.”
“We do technical training because the more knowledgeable the systems integrator is, the better chance he will win projects and especially in introducing new technology,” one distributor said.
It’s obvious that distributors have transitioned to value-added distribution to beat the negative effects of competition and chaos in the market, which have become worse over the years. Selling standard, commoditized security equipment alone is no longer a viable option amid the changing tides. Only by offering solutions, providing technical service and support, and diversifying product lines to suit different customers can distributors add value to themselves in today’s competitive security scene, and that’s indeed how distributors of the future will be defined.