- Find Unique, Useful and Quality Products. An electronic components distributor’s ultimate goal is to serve the needs of the electronics engineer. Finding that “killer” new product takes constant global market research. Making sure a product is suitable for the domestic marketplace (power supplies, correct broadcast frequencies, etc.) is essential. To effectively do this, a distributor must be willing to continuously evaluate new supplier opportunities, with the goal of finding products that are useful, easy to ship, and which require minimal technical support. Products also need to be high quality, competitively priced, and have features which may be presently unavailable in the local marketplace. A careful, upfront and “hands-on” evaluation is recommended for products. This “due diligence” also helps distributors filter out hard-to-use products, or ones with inadequate documentation, while adequately training technical staff to answer support questions. An analysis of competing product features and pricing are also essential. Monitoring product performance and customer satisfaction is also critical. Returns and field failures should trigger reassessment of the business case for relevant products.
- Procure Quality Supplier Partners. Finding trustworthy, reliable suppliers can be a challenge, especially since a typical electronics component distributor cannot usually visit each supplier before business decisions are made. A consistent, comprehensive evaluation process can help determine whether a supplier is a good fit for the distributor. Supplier partnerships need to be both mutually beneficial and trustworthy. For example, upon signing exclusive North American agreements, suppliers would be expected to forward relevant inquiries and sales opportunities within agreed upon sales territories to the distributor, instead of attempting to sell direct. Standing behind products when quality and reliability issues arise is another important aspect of partnership.
- Recruit and Maintain Good People/Facilities. Choosing the right distributor supporting team is also essential to presenting efficient, honest, knowledgeable service for customers and suppliers, as is having a well-maintained office infrastructure and properly networked equipment. Providing employees with a secure opportunity to earn a livelihood, with flexibility to pursue personal growth needs, must be balanced with consideration and accommodation to employees for individual family or other personal needs as they arise. Successful distributors treat both customers and employees with the same level of care and consideration.
- Effectively Position Products to Customers. Having already identified the ideal target end customer, finding correct venues for product placement and publicity are critical. Advertising and press release distribution are essential, and require constant awareness of an evolving print and online media world. Securing commitments from overseas suppliers to invest in such activities can be challenging, as suppliers frequently perceive a distributor’s responsibility to include shouldering such Marketing costs. That is tough to do on small margins, further eroded by credit card fees, shipping and duty payments and stock costs. Because of the North American market size, domestic distributors may be unable to visit most customers personally. Instead, they must be able to sell products via strong technical support, ease of ordering and shipment, good marketing, and good web support. It’s also important for distributors to have and exercise effective customer-retention strategies, and to keep suppliers, customers and other partners informed about the latest product developments.
- Enter into Mutually Beneficial and Protective Distribution Agreements. It is essential for distributors to have in place signed supplier agreements, not just to protect business and legal interests, but also to clearly set forth responsibilities and expectations of both parties. It is also vital to include a clearly communicated termination clause within each agreement. Having the ability at the time of termination to return remaining stock for reimbursement can be a life-saver!
- Manage Cash Flow and Finances. International currency fluctuations present a host of issues. Many goods are purchased with advanced payment in a given foreign currency, and the time between issuing a formal price quote and subsequent receipt of customer funds to pay for the goods can be up to three months, during which time, there may be a variation between paid price and received funds. Credit card fraud is another factor. Overseas webshop sales with foreign credit cards do not yield enough verification data to determine whether a credit card is genuine. Sound judgment is needed when deciding whether to fill an order. In addition, credit card “discount” fees can be 2 to 6.5% of total sale value, depending on card type, so a revenue reduction of up to 6.5% must be considered when pricing products. Another challenge is keeping pace with price changes from hundreds of suppliers, and to keep online webshop and internal accounting software prices current. Cash flow can also be a problem. Customers often pay Net 30 invoices late, requiring companies to chase payment. Yet the distributor is expected to buy on Net 30 terms and pay promptly, setting up a real cashflow deficiency scenario. Increasing business revenue therefore needs increasing cash to sustain, possibly requiring a bank loan.
- Understand the Importance of Good Technical Support. The ability for a distributor to accurately answer the most commonly asked technical questions about products, both before and after the sale, is vital to successful electronics distribution, as well as essential for good customer service and customer retention. In-depth technical questions often are best deferred to the supplier for handling, though a distributor’s initial advice can be the key to generating sales.
- Get a Handle on Shipping/Customs. It is also essential to have a thorough understanding of the costs and procedures associated with shipping and customs handling, so that customer deliveries may be accurately quoted, and so that products are certain to reach their intended destination as seamlessly as possible. This may involve extra paperwork, forms, and evaluating alternative shipping and freight forwarding options.
- Know That Success May Also Bring Failure. An electronic components distributor is often faced with the fact that if a Sales and Marketing job is done “too well” and generates record sales, a supplier will see real local market opportunity and will often terminate a distribution contract, in favor of going direct. This common industry occurrence can sometimes be perceived as a negative, when actually, it is a proverbial ‘feather in the cap’ of any successful distributor, as it illustrates marketplace effectiveness to other prospective supplier partners.
- Continuously Evaluate Process Efficiencies. Tools and processes for doing business are ever-changing, with new technologies and process efficiencies. Distributors need to be willing and able to continuously evaluate in-house activities for inefficiencies, operational improvements, product/supplier performance and customer feedback. Any overall change in the global economy requires careful assessment and balancing of resources.
- Balance Risk with Reward. Balancing risk with reward is a constant challenge for distributors. Judging which and how many products to stock, in order to be most profitable, can be a tricky process, with some inevitable guesswork. One method can be making decisions based upon recent stock turnover, as well as anticipation of known future preordered deliveries. Another method can be making initial determinations based upon supplier recommendations –though, in the case of a new product within a given market, this method may bring more risk than reward.
- Have Commitment to Unwavering Ethics/Integrity. A successful electronic components distributor is committed to doing what is right, even when it does not seem to be profitable, expedient, easy, or conventional. As recorded in Proverbs 22:1 of the Bible, “A good name is more desirable than great riches; to be esteemed is better than silver or gold.” There have been times when a supplier may refuse to take back product, which a customer has deemed faulty, and a distributor must lose money in the refund, a small price to pay for protecting their good reputation. There are also examples where customers may return product deemed to be faulty, for which analysis revealed customer misuse as the concluded cause of failure. In those instances, successful distributors take the standpoint of “the customer is always right”, and return the product for a refund, though inevitably, the distributor has again lost money –though not its reputation. Typically, few customers abuse such return policies. With unwavering ethics and integrity, a distributor can do what is best for the customer, knowing that in doing so, it has stayed true to its core values – which, ultimately, will form the cornerstone for growth and success.
By Alan Lowne
About the Author:
Alan J. Lowne B.Sc.(Eng) C.Eng. MIEE, is president of Saelig Co. Inc., an electronic components distributor which closely operates according to the twelve considerations detailed here. Mr. Lowne is a UK-born electronics design engineer with many years of medical, imaging and optoelectronics product design experience and six U.S. patents to his name. Founded in 1988 in Rochester, New York, Saelig is a North American distributor with a growing reputation for finding and sourcing unique, easy-to-use control and instrumentation products and related active components, for use in a variety of industries, including: automation, automotive, aerospace & defense, computers, controls, embedded systems, medical & pharmaceutical manufacturing, motion control, R&D, wireless, etc. Products lines are continuously added from sources across the globe, and are offered at highly competitive prices, accompanied by full in-house technical support, exceptional customer service, and fast delivery. For full details of available product lines, please visit www.saelig.com