Distributor Offerings Cater to Local Taste
Distributor brands seem to compete with the nature of reselling. The reality is more complex and not always so mercenary. A&S talks to distributors about maintaining product lines and customers, while promoting represented partners.
Distribution is a fundamental part of the security industry. A manufacturer can significantly expand its reach into a new territory with a reliable channel partner. This enables makers to focus on product innovation, rather than set up costly branch offices in each target region. The distributor will navigate local customs and sales, working to find suitable buyers. This general model has worked well for manufacturers and channel players, enabling win-win operations.
While the two-tier distribution model is still beneficial, it requires manufacturers and distributors to split profits. Some makers choose to work with integrators directly on projects, eliminating the need for local representation and garnering greater income. Affordable products also drive profit margins down, resulting in smaller returns for the manufacturer and the distributor.
The financial crisis hit everyone throughout the supply chain hard. As demand slackened, vendors rushed to offer more budget-friendly solutions, and distributors could not set resale prices too high, resulting in competitive price wars. With the recession only abating now, distributors were forced to find new sources of income.
The distributor brand is by no means a novelty, but the gloomy economic climate accelerated development. British distributor Norbain has maintained its successful line of Vista products, adding a Xeno line developed for “cutting costs not corners” in late 2008. German reseller Videor has also done well with its Eneo brand of products. Norbain and Videor declined to comment for this feature, but exemplify success stories in both their distribution and manufacturing businesses.
Other distributors are shifting their core business from reselling to developing solutions. Malaysian Viewtech started out as a distributor with installation know-how and is now transitioning into a solution provider. “We acquired I-Pocket solutions and are now known as Viewtech,” said Alex Ng, MD. Its new business emphasizes software development, featuring hosted video services and integrated security management. The company is expanding in Southeast Asia with its own solutions, an investment which has paid off.
ABUS Security-Center is also embarking on a similar transition. The German catalog distributor began as a lock maker and is returning to its manufacturing roots. It purchased a Taiwanese camera supplier, maintains a dedicated product development team in Europe and plans to expand its branded product portfolio.
Dire financial straits are not the only reason why distributors launched their own brands. For Czech Koukaam, its line of NVRs was in response to customer demand. “They made inquiries about products which weren't on the market — user-friendly and economical IP surveillance devices, including NVRs, to manage network cameras,” said Lubomir Kadaně, Marketing Manager. “We decided to make our own brand to fill the gap. It fits our strategy, which is to offer user-friendly IP surveillance solutions.”
German Santec Video Technologies launched its video line in 1985, making branded products a long-term business. Development is core, with the company holding patents in hardware and software. “We started with OEM cameras, lenses and monitors,” said Lars Diestel, CEO. “Our strategy since then is to offer our customers products which have a high level of quality and fit together as a system.”
While having a product line seems directly in conflict with represented brands, it is not always the case. In Koukaam's case, it combined Taiwanese hardware and Czech software for a customized four-channel NVR. Koukaam develops its own hardware for video systems with more channel devices. Its strategy is suited for emerging markets, but does not hurt the camera brands it carries as well. The majority of its revenue is made from reselling products, although its branded products make up a larger share each year, Kadaně said.
Listening to the customer is beneficial for security. “Without distributors like us, a lot of Asian companies would never be able to sell and market their products,” Diestel said. “We are also much closer to the customer and know the demands and problems on the customer's side much better than the manufacturers do. So we consider ourselves very helpful for the industry because we also give feedback to the manufacturers.”
Distributor-branded products feature local service, offering an advantage. “In 2010, we sold under Santec for more than 75 percent of our total sales,” Diestel said. Santec does not make low-cost products, so it does not compete against budget manufacturers.
For the brands represented, Santec aims to make the partnerships as mutually beneficial as possible. This means that it does not add as many brands as possible, but focuses on a small number of quality manufacturing partners, Diestel said.
Koukaam works to offer a balanced product offering from other makers to serve customer needs, without undercutting them. “Our relationships with manufacturers are still in a good shape,” Kadaně said. “Also, we are concentrating on NVRs as our own products and reselling mainly network camera management systems, which are for different target groups.”
Distributor brands will flourish with careful product positioning, keeping in mind its resale partners. Koukaam will strengthen its brand marketing in 2011, with plans to attend worldwide exhibitions, Kadaně said.
Santec's branding demonstrates its commitment to its product line, launching a brand new logo in 2010. Despite the higher costs of R&D and branding, the company feels its investment has paid off. “We will definitely increase the profile of our Santec brand in the future because we see very good market success,” Diestel said. “With Santec, we can create our own products and market our own ideas.”
The way to market is hardly set in stone. While the phenomenon of distributor brands seems like an oxymoron, it reflects market needs. A distributor brand has evolved from slapping a label on a box at a marked-up price to a more thoughtful consideration of customer needs. As security matures, there is enough room for offerings from solution providers of different caliber.