Distribution comes through pandemic year strongly

Record sales and a rapid response to the changing demands caused by the coronavirus pandemic helped the channel get through 2020

The channel managed to not only get through last year but did so on a strong note, with distribution sales hitting record levels across Europe.

According to Context, distribution sales hit €26.3bn with year-on-year (YoY) growth of 10.2% for the fourth quarter. Full year sales were €83.3bn, and growth stood at 7.2%, compared to €77.8bn and 3.6% in 2019.

That positive momentum is set to continue, and the analyst house is predicting that 2021 will come close to being the first €100bn revenue year for the channel in Europe.

The trends driving growth were digital transformation along with increased demand for home working and home schooling technology.

Small and medium-sized resellers continued to dominate the channel, with a market share little changed from 2019 at 36.5%. Corporate resellers lost 2% of their share over the period, accounting for 26.4% of the market in 2020, while retail chain players saw their share increase by almost one percentage point to 23.3%.

“The IT channel in Europe has ended 2020 by once again outperforming expectations – we have not seen double-digit growth in a quarter in recent years. With the current level of demand for digital products, there’s more to come in 2021. We expect growth to restart in the early part of January,” said Context global managing director Adam Simon.

“Rather than start the year with an empty pipeline after the strong finish to 2020, we’ll see the opposite. There’s still huge demand that can’t be satisfied due in part to supply shortages, and this will continue to drive channel sales growth,” he added.

The analyst house has also shared its latest annual ChannelWatch report covering the distribution and reseller tiers and found that the coronavirus pandemic had accelerated the adoption of cloud services.

The report found that the channel had adapted in the face of Covid-19 and had come through 2020 evolving its proposition and was now set for a better 2021.  

There were increases in the numbers of firms offering cloud solutions. Context gave one example to highlight the shift, with the percentage of channel players providing cloud backup, disaster recovery and storage hitting 70% last year, compared to 40% in 2019.

There has also been an increase in the number of cloud services that individual resellers are prepared to offer. In the past, many simply provided one or two they were comfortable with.

“The results found in our ChannelWatch 2020 report are proof of the acceleration toward digital and XaaS [anything-as-a-service] solutions among channel companies,” said Simon. “The big difference in the past two years is the number of resellers that sell more than three services than a few years ago.”

Context also asked resellers if they were feeling positive about the services and support they received from distribution, and the feedback indicated that the perception of quality had increased. Billing, cloud services, field support, training, certification and lead generation all got the thumbs up on performance.

When it came to the support that resellers want from distributors this year, the resounding answer was for more help in delivering as-a-service solutions. More than half (55%) of those quizzed responded that training and education was the priority, with other demands including help with marketing, financial support and sales assistance.

“Each year, the results of the ChannelWatch report provide distribution companies invaluable information about reseller purchasing decisions and intentions, needs and challenges,” said Frank Vitagliano, CEO of the Global Technology Distribution Council (GTDC).

“That channel companies increased their opinion of distributors during the pandemic is no surprise to the GTDC, which tracked how members fortified their supply chains, expanded their cloud capabilities and increased the marketing and financing support provided to channel companies last year,” he added.

More findings from the ChannelWatch report will be included in the GTDC’s 2021 Tech distribution outlook report, which is coming out later this month.

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