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Distributor consolidation causing some reseller price concerns

The distribution world has been shrinking in terms of the number of players as the big get bigger and that has raised some reseller worries about price and procurement issues

Consolidation at a distribution level has caused some heartache for resellers worried that the reduction in choice will  have an impact on prices and procurement.

Numerous distribution deals have created a market landscape that features an increasing number of large pan-European or global players with vendors looking to work through a handful of relationships to reach much wider geographies.

But according to the latest Context ChannelWatch 2017 that M&A activity has led to distributors focusing on optimisation with some resellers

The Context survey of resellers operating across Europe and in Russia, Turkey, Brazil, Australia and New Zealand found that the average number of distributors they were buying from had dropped from 5-10 to just 2-3 this year.

As well as consolidation there were issues with other distributors pulling down the shutters as tough business conditions forced their demise.

The remaining players are not only getting larger but are better positioned to deal with moving the business towards a more cloud-based subscription payment world.

“The main concerns of resellers are focused around rising pricing and procurement costs, which many believe will be the natural outcome of a consolidating market”, said Adam Simon, global managing director at Context.

The survey also uncovered consolidation at a reseller level, which has caused a slight dip in the number of active partners operating year-on-year.

“Although most consolidation has occurred in the long tail of smaller players and those in consumer channels, larger resellers and retailers are merging too: ie, Dixons–Carphone Warehouse, Dominion–Phone House (Spain), and MediaMarkt buying a slice of Fnac”, said Simon.

“This activity can also be viewed in the context of increasing reseller churn, especially associated with transitioning business models linked to cloud adoption," he added.

Aside from the worries about pricing and procurement choices the overall response from the channel towards consolidation has been positive.

Context found that between March to May this year reseller revenue increased wth those emerging unscathed from the acquisitions and business failures finding it possible to pick up business.

18 months of consolidation

There have been various examples of consolidation in the distribution world in the last 18 months:

Tech Data acquiring Avnet

Synnex picking up Westcon's US operations

Ingram Micro being sold to the Chinese player HNA

The emergence of the Nuvias Group

Expanding geographical coverage of the Exclusive Group

Exertis snapping up Hammer and Promethean

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